SEBI has vide its amendment to the SEBI (Issue of Capital and Disclosure Requirements), Regulations, bestowed a recognition upon Practising Company Secretary to certify that an issuer who is coming out with a preferential issue in accordance with the Companies Act, 2013 and the SEBI regulations, that the issue is being made in accordance with these regulations.
This appears in clause 163(2) of the aforesaid regulations which are reproduced hereunder, before the amendment.
The words “statutory auditors” as appearing above, is replaced with “practising company secretary”
ICSI should prepare a guidance note for these certifications and hold workshops for us to understand these compliances better.
SEBI issued circular SEBI/HO/DDHS/DDHS/CIR/P/2019/143 dated November 27, 2019 providing guidelines for preferential issue and institutional placement of units by listed InvITs. The said circular stands modified as under: 1.1.Clause 4.1 of Annexure I is modified as under: “4.1. Preferential issue of units shall not be made to any person who has sold or transferred any units of the issuer during the six months preceding the relevant date. Explanation: Where any person belonging to sponsor(s) has sold/ transferred their units of the issuer during the six months preceding the relevant date, the sponsor(s) shall be ineligible for allotment of units on preferential basis.”
The highlighted portion i.e the explanation has been added by this amendment.
SEBI has issued two circulars, both dated 28th September, 2020 in respect of amendments to guidelines for preferential issue and institutional placement by a listed InvIT and REIT. The amendments are identical in all respects except of course for the clause nos. in the respective guidelines.
The amendments are as follows:
Clause 2.6 of the Guidelines is modified as under: “The REIT shall not make any subsequent institutional placement until the expiry of two weeks from the date of the prior institutional placement made pursuant to one or more special resolutions.”
After clause 2.1 and before clause 2.2 of sub-paragraph (A) of paragraph 2 of Annexure-I, the following provisos shall be inserted: “Provided that, for any preferential issue made between the date of this circular and December 31, 2020, the REIT may opt for a pricing method where the price of the units to be allotted pursuant to the preferential issue shall not be less than the higher of the following: (a) the average of the weekly high and low of the volume weighted average price of the related units quoted on the recognised stock exchange during the twelve weeks preceding the relevant date; or (b) the average of the weekly high and low of the volume weighted average prices of the related units quoted on a recognised stock exchange during the two weeks preceding the relevant date. Provided further that, units allotted on a preferential basis using the pricing method set out in the first proviso shall be locked-in for a period of three years: Provided further that, all allotments arising out of the same unitholders approval shall follow the same pricing method.”
After clause 3.1 of paragraph 3 of Annexure-I, the following explanation shall be inserted: Explanation: For the computation of the lock-in requirement, the units held by the sponsor(s) and locked-in for three years, in the past in terms of Regulation 11 (3) of the REIT Regulations shall be taken into account. The units locked-in pursuant to Regulation 11(3) of the REIT Regulations shall not be put under fresh lock-in again, even though they are considered for computing the lock-in requirement, in case the said units are free of lock-in at the time of the preferential issue.
SEBI has vide its notification dated 1st July, 2020 carried out an amendment to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 as follows:
In the case of preferential issue of shares, due to the ongoing covid, pricing could be average of the weekly high and low volume weighted average price of the related equity shares quoted on a recognised stock exchange during 12 weeks/ 2 weeks preceding the relevant date, whichever is higher.
In respect of private placement/ preferential allotment of shares under section 42 of CA 2013, the allotment has to be done within 60 days of the receipt of application money, whereas FEMA gives 180 days time for allotment of shares in case of receipt of inward remittance from foreign shareholders. This is apparently a dichotomy because normally in case of foreign inward remittances companies normally wait for one or more tranches and then allot the shares within 180 days of the first remittance received. Also how do we treat that companies act 2013 gives one time limit for allotment and FEMA regulations gives another time limit for allotment.
Moreover where one remittance has been received before April 2013 and the second one after April, 2013, which law should be applied, the 1956 Act or the 2013 Act, because for private placement under section 42 requires previous approval of the shareholders by way of special resolution for each of the private offers. So in case do we have to treat each remittance as a separate offer then take separate special resolutions for each offer.
Moreover, rights issue, ESOP issue and preferential allotment appears in Chapter IV relating to share capital and debentures whereas private placement under section 42 appears in Chapter III relating to Prospectus and Allotment.
Moreover what is the form to be used for filing allotment under section 62 in respect of rights issue or preferential allotment. Form PAS 3 refers to allotment made under sections 39 and 42 only.