ISSUE OF NON-CONVERTIBLE REDEEMABLE PREFERENCE SHARES

ISSUE OF NON-CONVERTIBLE REDEEMABLE PREFERENCE SHARES :

A Company cannot make any public issue of non-convertible redeemable preference shares unless the following
conditions are fulfilled –

1. The Company or its promoter has not been restrained or prohibited or debarred by SEBI from accessing the securities market or dealing in securities and such direction or order is in force.

2. It has made an application to one or more recognized stock exchanges for listing of such securities therein. If the application is made to more than one recognized stock exchanges, the issuer must choose one of them which has nationwide trading terminals as the designated stock exchange.

3. It has obtained in-principle approval for listing of its non-convertible redeemable preference shares.

4. Credit rating including the unaccepted ratings obtained from more than one credit rating agencies, registered with SEBI shall be disclosed in the offer document.

5. The minimum tenure of the non-convertible redeemable preference shares shall not be less than three years.

6. The issue has been assigned a rating of not less than “AA-” or equivalent by a credit rating agency registered with SEBI.

7. The Company shall create a capital redemption reserve in accordance with the provisions of the Companies Act, 2013.

8. The issuer shall not issue non-convertible redeemable preference shares for providing loan to or acquisition of shares of any person who is part of the same group or who is under the same management, other than to subsidiaries of the issuer.

APPOINTMENT OF INTERMEDIARIES

1. It shall enter into an arrangement with a depository registered with SEBI for dematerialization of the non-convertible redeemable preference shares in accordance with the Depositories Act, 1996 and regulations made there under.

2. In case of public issue of non-convertible redeemable preference shares, the Company shall appoint one or more merchant bankers registered with SEBI at least one of whom shall be a lead merchant banker.

DISCLOSURES OF MATERIAL INFORMATION

1. The offer document must contain all material disclosures which are necessary for the subscribers of the nonconvertible redeemable preference shares to take an informed investment decision. The offer document contains the following:

(a) the disclosures specified in Section 26 of the Companies Act, 2013;

(b) disclosure specified in Schedule I of these regulations;

2. The amount of minimum subscription which the issuer seeks to raise and underwriting arrangements shall be disclosed in the offer document.

FILING

The company shall file draft offer document with the designated stock exchange through the lead merchant banker and also forwarded a copy of draft and final offer document to SEBI for its records, along with fees as specified in regulation.

RESPONSIBILITIES OF MERCHANT BANKER

The lead merchant banker must ensure that –

– The lead merchant banker shall ensure that the draft offer document clearly specifies the names and contact particulars of the compliance officer of the lead merchant banker and the issuer including the postal and email address, telephone and fax numbers.

– All comments received on the draft offer document are suitably addressed and shall also furnish to SEBI a due diligence certificate as per these regulations prior to the filing of the offer document with the Registrar of Companies.

MODE OF DISCLOSURE

The draft offer document shall be:-

ADVERTISEMENTS

– The Company should make an advertisement in one English national daily newspaper and one Hindi national daily newspaper with wide circulation on or before the issue opening date and such advertisement, amongst other things must contain the disclosures specified in these regulations.

– A Company should not issue an advertisement –

– which is misleading in material particular or which contains any information in a distorted manner or which is manipulative or deceptive or extraneous matters.

– which contain a statement, promise or forecast which is untrue or misleading and the advertisement shall be truthful, fair and clear.

– during the subscription period any reference to the issue of non-convertible redeemable preference shares or be used for solicitation.

– The advertisement shall urge the investors to invest only on the basis of information contained in the offer document.

ABRIDGED PROSPECTUS AND APPLICATION FORMS

The issuer and lead merchant banker shall ensure that:

The issuer may provide the facility for subscription of application in electronic mode.

ON-LINE ISSUANCES

A Company proposing to issue of non-convertible redeemable preference shares to the public through the online system of the designated stock exchange shall comply with the relevant applicable requirements as may be specified by SEBI.

ISSUE PRICE

A Company may determine the price of non-convertible redeemable preference shares in consultation with the lead merchant banker and the issue may be at fixed price or the price may be determined through book building process in accordance with the procedure as may be specified by SEBI.

MINIMUM SUBSCRIPTION

The Company may decide the amount of minimum subscription which it seeks to raise by public issue of nonconvertible redeemable preference shares in accordance with the provisions of Companies Act, 2013 and disclose the same in the offer document.

In the event of non-receipt of minimum subscription, all application moneys received in the public issue shall be
refunded forthwith to the applicants. In the event the application monies are refunded beyond 8 days from the
last day of the offer, then such amounts shall be refunded together with interest at such rate as may be set out
in the offer document which shall not be less than 15% per annum.

OPTIONAL UNDERWRITING

A public issue of non-convertible redeemable preference shares may be underwritten by an underwriter registered with SEBI and in such a case adequate disclosures regarding underwriting arrangements shall be made in the offer document.

PROHIBITION OF MIS-STATEMENTS IN THE OFFER DOCUMENT

– The offer document shall not omit disclosure of any material fact which may make the statements made therein , in light of the circumstances under which they are made, misleading.

– The offer document or abridged prospectus or any advertisement issued by an issuer in connection with a public issue of non-convertible redeemable preference shares shall not contain any false or misleading statement.

MANDATORY LISTING

– A Company desirous of making an offer of non-convertible redeemable preference shares to public shall make an application for listing to one or more recognized stock exchanges in terms of section 40 of the Companies Act, 2013.

– It must comply with conditions of listing of such non-convertible redeemable preference shares as specified in the Listing Agreement with the stock exchange where such non-convertible redeemable preference shares are sought to be listed.

– Where the Company has disclosed the intention to seek listing of non-convertible redeemable preference shares issued on private placement basis, it shall forward the listing application along with the disclosures specified in Schedule I to these regulation to the recognized stock exchange within fifteen days from the date of allotment of such non-convertible redeemable preference shares

LISTING AGREEMENT

Every issuer desirous of listing its non-convertible redeemable preference shares, or perpetual non-cumulative preference shares or innovative perpetual debt instruments on a recognized stock exchange, shall execute an
agreement with such stock exchange.

Every issuer who has previously entered into agreements with a recognized stock exchange to list non convertible redeemable preference shares, or perpetual non-cumulative preference shares or innovative perpetual debt instruments shall execute a fresh listing agreement with such stock exchange within 6 months of the date of notification of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

SECURITY DEPOSIT

The issuer shall deposit, before the opening of subscription list, and keep deposited with the stockexchange(s) an amount calculated at the rate of 1% of the amount of securities offered for subscription to the public. The amount stipulated in above shall be deposited and refundable or forfeitable in the manner specified by SEBI.

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