| July 2006 | ||
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This E-Newsletter has been published by India Juris, full service Indian law firm with special expertise in Business, Corporate & IP laws, on requests from clients and associates worldwide with an object to keep them abreast of latest legal & business developments in India. | |||
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Contents |
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| Corporate / Commercial Laws | |||
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Hike in Registration fee for Foreign Institutional Investors (FIIs) The Securities and Exchange Board of India (SEBI) has hiked registration fees for FIIs to $10,000 for five years from the earlier $5,000. It has also increased the fee for sub-accounts to $2,000 from the current $1,000. This has been done to increase revenues for the regulator as well as to modify the rates that have remained unchanged since long. SEBI is also considering to reduce the validity of the registration period to three years from the existing five years. Guidelines for “Qualified Institutions Placement”– Amendments to SEBI (Disclosure and Investor Protection) Guidelines, 2000 In order to make Indian markets more competitive and efficient, an additional mode has been introduced for listed companies to raise funds from domestic market in the form of “Qualified Institutions Placement” (QIP). Key features of the same are as under: Issuer: A company whose equity shares are listed on a stock exchange having nation wide trading terminals and which is complying with the prescribed requirements of minimum public shareholding of the listing agreement will be eligible to raise funds in domestic market by placing securities with Qualified Institutional Buyers (QIBs).
Securities:
Securities which can be issued through QIP are
equity shares or any securities other than warrants, which are convertible
into or exchangeable with equity shares (hereinafter referred to as
“specified securities”). A security which is convertible into or
exchangeable with equity shares at a later date, may be converted or
exchanged into equity shares at any time after allotment of security but not
later than sixty months from the date of allotment. The specified securities
shall be made fully paid up at the time of allotment.
Investors / Allottees: The specified securities can be issued only to Qualified Institutional Buyers (QIBs), as defined under sub-clause (v) of clause 2.2.2B of the SEBI (DIP) Guidelines. Such QIBs shall not be promoters or related to promoters of the issuer, either directly or indirectly. Each placement of the specified securities issued through QIP shall be on private placement basis, in compliance with the requirements of first proviso to clause (a) of sub-section (3) of Section 67 of the Companies Act, 1956. A minimum of 10% of the securities in each placement shall be allotted to Mutual Funds. For each placement, there shall be at least two allottees for an issue of size up to Rs.250 crores and at least five allottees for an issue size in excess of Rs.250 crores. Further, no single allottee shall be allotted in excess of 50 per cent of the issue size. Investors shall not be allowed to withdraw their bids / applications after closure of the issue.
Issue Size:
The aggregate funds that can be raised through
QIPs in one financial year shall not exceed five times of the net worth of
the issuer at the end of its previous financial year.
Placement Document: Issuer shall prepare a placement document containing all the relevant and material disclosures. There will be no pre-issue filing of the placement document with SEBI. The placement document will be placed on the websites of the Stock Exchanges and the issuer, with appropriate disclaimer to the effect that the placement is meant only for QIBs on private placement basis and is not an offer to the public. Pricing: The floor price of the specified securities shall be determined on a basis similar to that for GDR / FCCB issues and shall be subject to adjustment in case of corporate actions such as stock splits, rights issue, bonus issue etc. Other procedural requirements: The resolution approving QIP, passed under sub-section (1A) of Section 81 of the Companies Act, 1956 or any other applicable provision, will remain valid for a period of twelve months from the date of passing of the resolution. There shall be a gap of at least six months between each placement in case of multiple placements of specified securities pursuant to authority of the same shareholders’ resolution. Issuer and Merchant Banker shall submit documents / undertakings, if any, specified in this regard in the listing agreement, for the purpose of seeking in-principle approval and final permission from Stock Exchanges for listing of the specified securities. Involvement of Merchant Banker: QIP shall be managed by a SEBI registered merchant banker who shall exercise due diligence and furnish a due diligence certificate to Stock Exchanges stating that the issue complies with all the relevant requirements. The merchant banker shall file a copy of the placement document and post issue details with SEBI within thirty days of the allotment, for record purpose. Micro, Small & Medium Enterprises Development Act, 2006
The Indian Government has passed a new act on
June 16, 2006 - The Micro, Small and Medium Enterprises Development
Act,
2006. The Act also empowers the State Governments to specify by notification that provisions of Labour Laws will not apply to small and medium enterprises employing upto 50 people. This is intended to facilitate the graduation of small enterprises to medium enterprises. One of its primary objectives is to make provisions for ensuring timely and smooth flow of credit to small and medium enterprises to minimize the instance of sickness among them. The Act provides for the delayed payments to Micro and Small Enterprises. The buyer is liable to make the payment on or before the agreed date in writing or if there is no agreement in writing then the payment should be done before the appointed day provided that the the period agreed does not exceed forty-five days from the day of acceptance. The Act also enhances the objectives of such enterprises announced with the guidelines of the Reserve Bank of India. The Act empowers the Central and State Governments to notify preference policies for procurement of goods, services produced and provided by small enterprises by the Ministries, departments and public sector enterprises. | |||
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