Listing of
Specified Securities of Small and Medium Enterprises on the Institutional
Trading Platform in a SME Exchange without making an Initial Public Offer
CIRCULAR,
CIR/MRD/DSA/33 /2013, dated October 24, 2013
To All Stock
Exchanges
1. In order to facilitate capital raising
by small and medium enterprises including startup companies which are in their
early stages of growth and to provide for easier exit options for informed
investors like angel investors, VCFs and PEs etc., from such companies, it has
been decided to permit listing without an Initial Public Offer and trading of
specified securities of small and medium enterprises (SMEs) including start-up
companies on Institutional Trading Platform (ITP) in SME Exchanges.
2. The legal framework for such listing
and trading of the specified securities on the ITP was laid down vide SEBI
(Listing of Specified Securities on Institutional Trading Platform) Regulations,
2013(ITP Regulations) vide Gazette notification No. LAD-NRO/GN/2013-14/27/6720
dated October 08, 2013. In this regard, through said ITP Regulations, necessary
amendments have been made in the SEBI (Issue of Capital and Disclosure
Requirements) Regulations 2009 (ICDR Regulations) by inserting a "Chapter
XC" on "Listing and Issue of Capital by Small and Medium Enterprises
on Institutional Trading Platform without initial public offering".
Further, vide said ITP Regulations, consequential amendments have also been
made to SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,
2011 and SEBI (Delisting of Equity Shares) Regulations, 2009. The full text of
the Regulations is available at www.sebi.gov.in.
3. Salient features of those amendments
are as under:
a. The
Institutional Trading Platform (ITP).
(i) The ITP shall be a platform for listing
and trading of specified securities of small and medium enterprises including
start-up companies in a 'SME Exchange' as defined under regulation 106N(1)(c)
of ICDR Regulations;
(ii) The ITP shall be accessible only to
informed investors who are either individuals or institutions and the minimum
trading lot shall be ten lakh rupees on this platform;
(iii) Companies listed on ITP shall not make
a public issue of its securities.
b. Eligibility
for listing.
A public company
seeking listing on ITP should comply with the following requirements:
(i) the company, its promoter, group
company or director does not appear in the wilful defaulters list of Reserve
Bank of India as maintained by Credit Information Bureau (India) Limited;
(ii) there is no winding up petition against
the company that has been admitted by a competent court;
(iii) the company, group companies or
subsidiaries have not been referred to the Board for Industrial and Financial
Reconstruction within a period of five years prior to the date of application
for listing;
(iv) no regulatory action has been taken against
the company, its promoter or director by SEBI, Reserve Bank of India, Insurance
Regulatory and Development Authority or Ministry of Corporate Affairs within a
period of five years prior to the date of application for listing;
(v) the company has atleast one full year’s
audited financial statements, for the immediately preceding financial year at
the time of making listing application;
(vi) the company has not completed a period
of more than 10 years after incorporation and its revenues have not exceeded
one hundred crore rupees in any of the previous financial years;
(vii) the paid up capital of the company has
not exceeded twenty five crore rupees.
(viii) In addition to the above requirements,
the company should have received certain minimum investment from atleast any
one of the following categories of investors as specified below in order to
qualify for listing on ITP:
(i) Atleast one
alternative investment fund, venture capital fund or other category of
investors/lenders approved by SEBI, has invested a minimum amount of fifty lakh
rupees in the equity shares of the company.
(ii) One or more
angel investor who is a member of an association / group of angel investors
which fulfils the criteria laid down by the recognised stock exchange, has
invested a minimum amount of fifty lakh rupees in the equity shares of the
company through the association/group.
(iii) The company has
received finance from a scheduled bank for its project financing or working
capital requirements and a period of three years has elapsed from the date of
such financing and the funds so received have been fully utilized.
(iv) A registered
merchant banker has exercised due diligence and has invested not less than
fifty lakh rupees in equity shares of the company which shall be locked in for
a period of three years from the date of listing.
(v) A qualified
institutional buyer has invested not less than fifty lakh rupees in the equity
shares of the company which shall be locked in for a period of three years from
the date of listing.
(vi) A specialized
international multilateral agency or domestic agency or a public financial
institution under section 2(72) of the Companies Act, 2013 has invested in the
equity capital of the company.
For the purposes
of sub-clause (ii) above, investments as facilitated through the angel
association/group after due process followed by such association alone shall be
eligible. Investments made by the angel investor on his own individual
initiative shall not be eligible.
For the purposes
of sub-clause (vi) above, domestic agency means a domestic developmental
institution like Small Industries Development Bank of India (SIDBI) or National
Bank for Agriculture or Rural Development (NABARD).
c. Process of
listing.
(i) A company which meets the requirements
of the Regulations may apply to the recognised stock exchange for listing along
with the information document containing disclosures as specified under
Schedule XIX A of ICDR Regulations. This Information document shall be made
available to public through the website of the recognised stock exchange.
(ii) The concerned recognised stock exchange
may issue an in-principle approval to companies eligible for listing on ITP.
(iii) A company which has received
in-principle approval from a recognised stock exchange for listing of its
specified securities on ITP shall be deemed to have been waived by SEBI from
rule 19(2)(b) of Securities Contracts (Regulation) Rules, 1957 for the limited
purpose of listing on ITP.
(iv) Such listing shall not be accompanied
by any issue of securities or capital raising from public in any manner.
d. Capital
raising.
(i) A company listed on ITP shall not make
an initial public offer while being listed on the platform.
(ii) Such a company may raise capital
through private placement or through a rights issue.
(iii) In case of a rights issue, there shall
be no option for renunciation of rights and the company seeking to get listed
on ITP shall agree to make necessary amendments to its articles of association
to this effect.
(iv) Such companies raising funds through
private placement shall be governed by the specific requirements in this regard
such as, obtaining in-principle approval of the recognised stock exchange prior
to allotment, obtaining shareholders approval under section 81(1A) of the Companies
Act, 1956, completing allotment within two months of such approval, disclosures
to be made in explanatory statement to the notice to shareholders and pricing norms
as elaborated in Chapter XC of ICDR Regulations.
(v) the company making a rights issue shall
send a letter of offer to its shareholders through registered post or speed
post or electronic mode and the same shall be made available on the website of
the company and the recognised stock exchange.
e. Minimum promoter
shareholding and lock-in.
Not less than
twenty per cent. of the post listing capital of the company shall be held by
the promoters at the time of listing and the same shall be locked-in for a period
of three years from date of listing.
f. Exit from
the platform.
(i) A company listed on ITP may exit the
platform voluntarily after obtaining approval of its shareholders as below:
(a) its
shareholders approve such exit by passing a special resolution through postal
ballot where ninety per cent. of total votes and the majority of nonpromoter votes
have been cast in favor of such proposal;
(b) it shall also
obtain the SME Exchange's approval.
(ii) In the event of any of the following,
the company would be required to exit the platform within 18 months from the
occurrence of such event:
a. the company has
been listed on ITP for a period of 10 years;
b. the company has
paid up capital of more than twenty five crore rupees;
c. the company has
revenue of more than three hundred crore rupees in the last audited financial statement;
d. the company has
market capitalization of more than five hundred crore rupees:
For the purposes
of clause (d) above, the market capitalization shall be calculated based on the
average closing price of the shares for the previous three months.
(iii) A company listed on ITP shall be
delisted and permanently removed from that under any of the following
circumstances:
(a) failure to file
periodic filings with the recognised stock exchange for more than one year;
(b) failure to
comply with corporate governance norm(s) for more than one year;
(c) notwithstanding
(a) and (b) above, non-compliance of the condition of listing as may be specified
by the recognised stock exchange.
g. Liabilities.
(i) The draft and final information
memorandum shall be approved by the board of directors of the company and shall
be signed by all directors, the Chief Executive Officer, i.e., the Managing
Director or Manager within the meaning of the Companies Act, 1956 and the Chief
Financial Officer, i.e., the whole-time finance director or any other person
heading the finance function and discharging that function.
(ii) The signatories shall further certify
that all disclosures made in the information document are true and correct.
(iii) In case of mis-statement in the
information document or any omission therein, any person who has authorized the
issue of information document shall be liable in accordance with the provisions
of the SEBI Act, 1992 and regulations made thereunder.
4. A company seeking listing on ITP shall
enter into an agreement with the recognized stock exchange. The Model listing
agreement for the said purpose is given at Annexure A. Provisions regarding minimum public
shareholding do not apply to companies listed on this platform since they are
not allowed to make public issues while being listed on ITP and hence the same
has been excluded from this listing agreement.
5. All recognised stock exchanges are
advised to:
(i) execute a
listing agreement with companies seeking listing on ITP in line with the Model
listing agreement specified in Annexure B, without limiting or diluting any of the
requirements thereof;
(ii) make necessary
and consequential amendments, if any, to their bye-laws for the implementation
of Regulations;
(iii) disseminate the
contents of this circular on their website for easy access to the small and
medium enterprises and informed investors; and
(iv) communicate to
SEBI, the status of the implementation of the provisions of this circular in
the Monthly Development Report.
6. This circular is issued in exercise of
the powers conferred under section 11 read with section 11A of the Securities
and Exchange Board of India Act, 1992.
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