qwertyuiopasdfghjklzxcvbnmqwerty uiopasdfghjklzxcvbnmqwertyuiopasd fghjklzxcvbnmqwertyuiopasdfghjklzx cvbnmqwertyuiopasdfghjklzxcvbnmq PROJECT REPORT ON wertyuiopasdfghjklzxcvbnmqwertyui Preferential issue opasdfghjklzxcvbnmqwertyuiopasdfg hjklzxcvbnmqwertyuiopasdfghjklzxc vbnmqwertyuiopasdfghjklzxcvbnmq wertyuiopasdfghjklzxcvbnmqwertyui opasdfghjklzxcvbnmqwertyuiopasdfg hjklzxcvbnmqwertyuiopasdfghjklzxc

vbnmqwertyuiopasdfghjklzxcvbnmq wertyuiopasdfghjklzxcvbnmqwertyui opasdfghjklzxcvbnmqwertyuiopasdfg hjklzxcvbnmrtyuiopasdfghjklzxcvbn mqwertyuiopasdfghjklzxcvbnmqwert yuiopasdfghjklzxcvbnmqwertyuiopas

INDEX
Meaning of preferential issue

MEANING OF PREFERENTIAL ISSUE

Preferential issue means an issue of specified securities by a listed Company to any select person or group of persons under section 81 of the Companies Act, 1956 on a private placement basis and does not include an offer of specified securities made through a public issue, rights issue, bonus issue, employee stock option scheme, employee stock purchase scheme or qualified institutions placement or an issue of sweat equity shares or depository receipts issued in a country outside India or foreign securities REGULATORIY LAWS LISTED COMPANY Companies Act 1956 SEBI (ICDR) Regulations 2009 SEBI (SAST) 2011 Listing Agreement UNLISTED PUBLIC COMPANY Companies Act 1956 Unlisted Public Companies (Preferential Allotment) Rules 2011 CONDITIONS FOR PREFERENTIAL ISSUE A Listed Company may make a preferential issue of specified securities, if: i. ii. all the equity shares, if any, held by the proposed allottees in the Company are in dematerialised form; the Company is in compliance with the conditions for continuous listing of equity shares as specified in the listing agreement with the recognised stock exchange where the equity shares of the Company are listed; the Company has obtained the Permanent Account Number of the proposed allottees. The Company shall not make preferential issue of specified securities to any person who has sold any equity shares of the Company during the six months preceding the relevant date. Where any person belonging to promoter(s) or the promoter group has previously subscribed to warrants of an Company but failed to exercise the warrants, the promoter(s) and promoter group shall be not be issued specified securities of such Company on preferential basis for a period of one year from:

iii. iv.

v.

(a) the date of expiry of the tenure of the warrants due to non-exercise of the option to convert; or (b) the date of cancellation of the warrants, as the case may be. FORMLAITES FOR PREFERENTIAL ISSUE Board Meeting To fix the relevant date for the estimation of the price of the share to be issued and fix the date for the general meeting for obtaining shareholders approval for preferential issue. In principal Approval The company shall obtain in-principle approval for listing as per clause 24 (a) of listing agreement from the exchanges having nationwide trading terminals where it is listed, before issuing further shares or securities. Where the company is not listed on any exchange having nationwide trading terminals, it shall to obtain such 'in-principle' approval from all the exchanges in which it is listed before issuing further shares or securities. The company agrees to make an application to the Exchange for the listing of any new issue of shares or securities and of the provisional documents relating thereto. Special Resolution As per Section 81(1A) of the Companies Act, 1956 any public Company can issue the shares through private placement by passing a special resolution in the general meeting. Pricing of the Shares/convertible Securities: a) If shares are listed on stock exchange for more than twenty six weeks Shares i. The average of the weekly high and low of the closing prices of the related equity shares quoted on the recognised stock exchange during the 26[twenty six weeks] preceding the relevant date; or The average of the weekly high and low of the closing prices of the related equity shares quoted on a recognised stock exchange during the two weeks preceding the relevant date.

ii.

Shares arising out of Warrants/FCD/PCD

Same as above. Relevant Date = as above or as at Companys option a date 30 days prior to date of exercise of warrants/FCD

b) If shares are listed on stock exchange for less than twenty six weeks Shares Price should not be less than Higher of the following: i. the price at which equity shares were issued by the Company in its initial public offer or the value per share arrived at in a scheme of arrangement under sections 391 to 394 of the Companies Act, 1956, pursuant to which the equity shares of the Company were listed, as the case may be; or ii. the average of the weekly high and low of the closing prices of the related equity shares quoted on the recognised stock exchange during the period shares have been listed preceding the relevant date; or iii. the average of the weekly high and low of the closing prices of the related equity shares quoted on a recognised stock exchange during the two weeks preceding the relevant date.

Disclosures As per the guidelines of SEBI (ICDR) 2009 the following disclosures shall be made in the explanatory statement of the notice of general meeting I. II. III. IV. the objects of the preferential issue; the proposal of the promoters, directors or key management personnel of the Company to subscribe to the offer; the shareholding pattern of the Company before and after the preferential issue; the time within which the preferential issue shall be completed;

V.

VI.

VII.

VIII.

IX.

X. XI.

the identity of the proposed allottees, the percentage of post preferential issue capital that may be held by them and change in control, if any, in the Company consequent to the preferential issue; an undertaking that the Company shall re-compute the price of the specified securities in terms of the provision of these regulations where it is required to do so; an undertaking that if the amount payable on account of the recomputation of price is not paid within the time stipulated in these regulations, the specified securities shall continue to be locked- in till the time such amount is paid by the allottees. The Company shall place a copy of the certificate of its statutory auditor before the general meeting of the shareholders, considering the proposed preferential issue, certifying that the issue is being made in accordance with the requirements as specified in the SEBI (ICDR) 2009 guidelines Where specified securities are issued on a preferential basis to promoters, their relatives, associates and related entities for consideration other than cash, the valuation of the assets in consideration for which the equity shares are issued shall be done by an independent qualified valuer, which shall be submitted to the recognised stock exchanges where the equity shares of the Company are listed if the stock exchange is not satisfied with the appropriateness of the valuation, it may get the valuation done by any other valuer. The special resolution shall specify the relevant date on the basis of which price of the equity shares to be allotted on conversion or exchange of convertible securities shall be calculated

Time limit The allotment of shares/ convertible securities shall be done within 15 days of passing such resolution If the allotment of specified securities is not completed within fifteen days from the date of special resolution, a fresh special resolution shall be passed and the relevant date for determining the price of specified securities will be taken with reference to the date of latter special resolution. Payment of consideration Full consideration of specified securities other than warrants issued shall be paid by the allottees at the time of allotment of such specified securities. In case of warrants, an amount equivalent to at least twenty five per cent of the consideration shall be paid on the date of allotment of warrants and the balance amount shall be paid shall be paid at the time of allotment of equity shares pursuant to exercise of option against each such warrant by the warrant holder.

In case the warrant holder does not exercise the option to take equity shares against any of the warrants held by him, the consideration already paid by such warrant holder in respect of such warrant shall be forfeited by the Company. Tenure of Conversion The tenure of the convertible securities of the company shall not exceed eighteen months from the date of their allotment. Lock-in of specified securities
Situation Allotment to promoters is to be locked in. Subject to maximum of 20% of the total capital (including the preferential issue) Equity shares allotted in excess of 20% specified securities allotted on preferential basis to persons other than promoter and promoter group and the equity shares allotted pursuant to exercise of options attached to warrants issued on preferential basis The lock-in of equity shares allotted pursuant to conversion of convertible securities other than warrants, issued on preferential basis . The entire pre-preferential capital held by the allottees Lock-in Period 3 years from allotment of the specified securities or equity shares allotted pursuant to exercise of the option attached to warrant 1 year from allotment pursuant to the exercise of the option. one year from the date of their allotment

shall be reduced to the convertible securities have already been locked-in

extent

the

6 months from the relevant date.

PROCEDURE

[Link]
1.

Points to consider
Hold Board Meeting as per the provisions of Companies Act, 1956 to consider the preferential issue and to fix the date, time, place and agenda for calling a general meeting for getting shareholders approval. Inform the Stock Exchange by fax/ letter/telegram within 15 minutes of conclusion of Board meeting as per the Listing Agreement.

2. 3.

The Company shall apply for in principal approval in terms of clause 24(a) of the listing Agreement along with the requisite fees.
Dispatch the general meeting notice together with explanatory statement at least 21 clear days before the date of general meeting. Explanatory statement shall state the following: Object of the Issue Intention of the Promoters/directors/key management personnel to subscribe to the offer. Shareholding pattern before and after the offer. Proposed time within which the allotment shall be completed Identity of the proposed allottees and the percentage of post-preferential issue capital that may be held by them. Price at which the preferential issue is proposed to be done shall be specified in the resolution. 3 copies of notice of the meeting should be sent to Stock Exchange at the same time of dispatch to shareholders. General meeting shall be held to pass a Special resolution for issue of securities on preferential basis. The Statutory auditors shall certify that the issue of said instruments is being made in accordance with the requirements of ICDR guidelines. Copies of the auditors certificate shall also be laid before the meeting of the shareholders convened to consider the proposed issue. The copy of the proceedings of the general meeting shall be forwarded to Stock exchanges promptly. Form no 23 shall be filed to ROC within 30 days of passing of resolution along with the requisite fees. Allotment pursuant to resolution passed at a meeting of shareholders of a co granting consent for preferential issues shall be completed within 15 days from the date of passing of resolution If pending on account of any approval by any regulatory authority or Central Govt, 15 days will be extended accordingly. In case of preferential allotment to promoters, their relatives, associates and related entities, for consideration other than cash, valuation of assets in consideration for the shares are proposed to be issued shall be done by an independent valuer and the Valuation report shall be submitted to Stock Exchange on which the shares of the Company are listed. Within 15 days from the date of general meeting, conduct the board meeting to allot the specified securities A return of allotment in Form No. 2 shall be filed within 30 days of allotment with the concerned Registrar of Companies after paying the requisite fees. Disclosure in Balance Sheet:

4.

5. 6. 7. 8.

9. 10. 11.

12.

13. 14. 15.

16.

The details of the money utilized out of the preferential issue shall be disclosed under the appropriate head in the balance sheet of the Company indicating the purpose for which such monies have been utilized. The details of unutilized monies shall be disclosed under a separate head in the balance sheet of the company indicating the form in which such unutilized monies have been invested. File documents for listing of shares with the Stock Exchange

CHECKLIST OF DOCUMENTS REQUIRED FOR IN PRINCIPAL APPROVAL AT BSE [Link] Checklist of Documents
1. 2. 3. A certified true copy of the resolution passed by the Board of Directors in which the company has propose to issue securities on a preferential basis. Details of the end use of the proceeds to be raised through the preferential issue. Companys intimation as to that the proposed equity shares to be issued on preferential basis would be ranking parri-passu in all respect including dividend with the existing equity shares of the company. Certificate from the auditors of the Company certifying that the pricing of the shares issued on preferential basis, is as per the SEBI (ICDR) guidelines. The auditors should specifically mention in detail about the relevant date, average of weekly high and low of the closing price of the shares quoted on the Stock Exchange during 26 weeks and two weeks preceding the relevant date. A certification from a Managing Director of the company that the proposed allotment of securities does not violate clause 40A of the Listing Agreement and the Company continue to maintain the non-promoter holding in the Company as per clause 40A. Certified true copies of the proposed allottee(s) letter addressed to the Company in which they have given consent for subscribing to the proposed issue of aforesaid securities should be submitted. The company should obtain the confirmation letters from the NSDL/CDSL specifically mentioning that they have frozen/kept the entire pre-preferential allotment shareholding of the allottees of the aforesaid securities as lock-in as per SEBI (ICDR) 2009 guidelnes and the certified true copies of the same should be filed with the Exchange. A certificate from the Managing director as well as the Auditors of the Company should be submitted specifically that: - The proposed allottees of the aforesaid securities are holding their existing shares only in the dematerialized form. - The proposed allottees of the aforesaid securities have not sold/transferred any equity shares during the six months period prior to the relevant date. - The company has complied with the lock-in requirements as required under Clause 13.3.1(g) of Amendments to SEBI (DIP) Guidelines, dated the 8 April, 2004 and the details of the lock in equity shares are as under: The certificate should be in the following Proforma: Name of Allottees Total No of shares Date of Lock in From To
th

4.

5.

6.

7.

8.

9.

The Managing Director of the Company shall certify the following: That the proposed preferential issue to be made by the company is in accordance with the provisions of the SEBI (SAST) Regulations, 1997 of the SEBI. The proposed preferential issue of shares and allotment made does not/ does require (strike off which is not applicable) the acquirer to make an open offer under the said regulations. A printed copy of the notice issued to the shareholders of the Company convening the EGM/AGM alongwith with Auditors Certificate regarding pricing of submitted at the time of the EGM/AGM for shareholders approval should be submitted.

10.

11.

Names of the Companies, firms of other parties listed in the register maintained under section301 of the Companies Act, 1956.

12.

Names of the Companies under same management within the meaning of section370 of the Companies Act, 1956.

13.

Name and addresses of the Directors of the allottee company should be submitted.

14.

Latest profile including business activities as well as a latest annual report of the company shall be submitted.

15.

Name, address together with their PAN/GIR Numbers of the allottees of these shares should be submitted

16.

Name of the Stock Exchanges where the shares of the company are listed.

17.

Resolution passed under section 81(1A) of the companies act, passed by the shareholders of the Company.

18.

A certificate from the Managing Director as well as Auditors of the Company should be submitted certifying that the company has complied with all the provisions/guidelines issued by SEBI under the preferential issue guidelines and further the company has complied with all the legal and statutory formalities and no statutory authority has restrained the company from issuing the propose shares.