The Security and Exchange Board of India (SEBI) on Monday notified the Issue of Capital And Disclosure Requirements (Second Amendment) Regulations, 2020, whereby new proviso has been inserted which states pricing norms in the preferential issue of shares of companies having stressed assets.
The Board seeks to amend the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018.
After Regulation 164 the new Regulation 164A shall be inserted which relates to Pricing in the preferential issue of shares of companies having stressed assets.
“In case of frequently traded shares, the price of the equity shares to be allotted pursuant to the preferential issue shall not be less than the average of the weekly high and low of the volume-weighted average price of the related equity shares quoted on a recognized stock exchange during the two weeks preceding the relevant date,” Regulation 164A(1) says.
No allotment of equity shares shall be made unless the issuer company meets any two of the 3 criteria that are fulfilled.
Firstly, the issuer has disclosed all the defaults relating to the payment of interest/ repayment of principal amount on loans from banks / financial institutions/ Systemically Important Non-Deposit taking Non-banking financial companies/ Deposit taking Non-banking financial companies and /or listed or unlisted debt securities in terms of SEBI Circular dated November 21, 2019, and such payment default is continuing for a period of at least 90 calendar days after the occurrence of such default.
Secondly, there is an Intercreditor agreement in terms of Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions 2019 dated June 07, 2019.
Lastly, the credit rating of the financial instruments (listed or unlisted), credit instruments/borrowings (listed or unlisted) of the listed company has been downgraded to “D”.
The resolution for the preferential issue an exemption from the open offer shall provide for the “The votes cast by the shareholders in the „public‟ category in favor of the proposal shall be more than the number of votes cast against it. The proposed allottee(s) in the preferential issue that already holds specified securities shall not be included in the category of „public‟ for this purpose.
Provided that where the company does not have an identifiable promoter; the resolution shall be deemed to have been passed if the votes cast in favor are not less than three times the number of the votes, if any, cast against it.”
The proceeds of such preferential issues shall not be used for any repayment of loans taken from promoters/ promoter group/ group companies. The proposed use of proceeds shall be disclosed in the explanatory statement sent for the purpose of the shareholder resolution.
“The allotment made shall be locked-in for a period of three years from the last date of trading approval,” the notification said.
Subscribe Taxscan Premium to view the Judgment
