Disclosure in case of violation
Loan conditions agreed by promoters which impact Listed Entity :covered under PFUTP
NDTV promoter group entity RRPR Holdings had entered into a loan agreement with ICICI in October 2008. It had entered into two loan agreements with VCPL in 2009 and 2010 for borrowing Rs. 350 crores and Rs. 50 crores respectively.
SEBI was investigating the above transactions and in the final ruling it held that the ICICI loan agreement and two VCPL loan agreements contained clauses and conditions which substantially affected the functioning of NDTV.
Additionally it noted that the VPCL loan agreements also warranted transfer of shares of NDTV by the promoters which was carried out off market by way of various inter se bulk transactions.
"Consequently, information about the said agreements and off-market transactions were essentially material, price sensitive information which would have influenced decision of investors about trading in shares of NDTV," SEBI concluded.
Non-availability of such information unjustly deprived shareholders of informed participation while dealing with shares of NDTV, it added.
Roys had vehemently argued that NDTV was not a party to the loan agreements and hence there was no requirement to make disclosure of the agreements to the stock exchange.
SEBI while agreeing that NDTV was not a party to the agreements noted that the agreements contained certain crucial, onerous and hostile stipulations pertaining to NDTV including its capital restructuring. The promoter were able to push them through since they were majority shareholders and enjoyed dominant position as Chairman and Managing Director.
"The loan agreements were structured in such a manner that clauses pertaining to NDTV, which were material and price sensitive information, were concealed from minority shareholders, thereby inducing investors to trade in shares of NDTV oblivious about such shift in de facto control over NDTV," the order said.
Besides the above, Roys had also contended that at the time of execution of the loan agreements, there was no statutory or regulatory duty cast upon promoters of listed companies to disclose loan agreements either to the concerned listed entity or to the stock exchange.
This argument was also turned down by SEBI citing clause 49 (I)(D) of the Listing Agreement introduced in 2004 as well as the Code of Conduct of NDTV itself.
"As per the provisions of the Code of Conduct framed by NDTV itself, Board members and senior management of NDTV were required to make full disclosure of all facts and circumstance before making any investment, accepting any position or benefits, participating in any transaction or business arrangement or acting in a manner that creates or appears to create any conflict of interest," SEBI said.
SEBI imposed a total penalty of Rs. 27 crore on the three NDTV promoters, Prannoy Roy, Radhika Roy and RRPR Holding Limited for failing to disclose price sensitive information to the shareholders of NDTV.While Rs. 25 crores have been imposed jointly and severally on all three promoters, Rs. 1 crore each has to be paid separately by Prannoy and Radhika Roy.
The order passed by Adjudicating Officer Amit Pradhan ruled that the Roys acted in violation of Section 12A of the SEBI Act and the relevant rules of SEBI (Prohibition of Fraudulent Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations) by failing to disclose information relating to three loan agreements entered into by them with Vishvapradhan Commercial Private Limited (VCPL) and ICICI bank.
SAST : Takeover Code
Take Over Bid
How about buying an distressed /undervalued firm than starting from scratch.Undervaluation is possible in listed companies.But the moment take over bids cropup the managments become defensive. Case in point in IVRCL take over bid by Zee Subhash which was defended.
Loan conditions agreed by promoters which impact Listed Entity :covered under PFUTP
NDTV promoter group entity RRPR Holdings had entered into a loan agreement with ICICI in October 2008. It had entered into two loan agreements with VCPL in 2009 and 2010 for borrowing Rs. 350 crores and Rs. 50 crores respectively.
SEBI was investigating the above transactions and in the final ruling it held that the ICICI loan agreement and two VCPL loan agreements contained clauses and conditions which substantially affected the functioning of NDTV.
Additionally it noted that the VPCL loan agreements also warranted transfer of shares of NDTV by the promoters which was carried out off market by way of various inter se bulk transactions.
"Consequently, information about the said agreements and off-market transactions were essentially material, price sensitive information which would have influenced decision of investors about trading in shares of NDTV," SEBI concluded.
Non-availability of such information unjustly deprived shareholders of informed participation while dealing with shares of NDTV, it added.
Roys had vehemently argued that NDTV was not a party to the loan agreements and hence there was no requirement to make disclosure of the agreements to the stock exchange.
SEBI while agreeing that NDTV was not a party to the agreements noted that the agreements contained certain crucial, onerous and hostile stipulations pertaining to NDTV including its capital restructuring. The promoter were able to push them through since they were majority shareholders and enjoyed dominant position as Chairman and Managing Director.
"The loan agreements were structured in such a manner that clauses pertaining to NDTV, which were material and price sensitive information, were concealed from minority shareholders, thereby inducing investors to trade in shares of NDTV oblivious about such shift in de facto control over NDTV," the order said.
Besides the above, Roys had also contended that at the time of execution of the loan agreements, there was no statutory or regulatory duty cast upon promoters of listed companies to disclose loan agreements either to the concerned listed entity or to the stock exchange.
This argument was also turned down by SEBI citing clause 49 (I)(D) of the Listing Agreement introduced in 2004 as well as the Code of Conduct of NDTV itself.
"As per the provisions of the Code of Conduct framed by NDTV itself, Board members and senior management of NDTV were required to make full disclosure of all facts and circumstance before making any investment, accepting any position or benefits, participating in any transaction or business arrangement or acting in a manner that creates or appears to create any conflict of interest," SEBI said.
While Rs. 25 crores have been imposed jointly and severally on all three promoters, Rs. 1 crore each has to be paid separately by Prannoy and Radhika Roy.
The order passed by Adjudicating Officer Amit Pradhan ruled that the Roys acted in violation of Section 12A of the SEBI Act and the relevant rules of SEBI (Prohibition of Fraudulent Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations) by failing to disclose information relating to three loan agreements entered into by them with Vishvapradhan Commercial Private Limited (VCPL) and ICICI bank.
SAST : Takeover Code
Take Over Bid
How about buying an distressed /undervalued firm than starting from scratch.Undervaluation is possible in listed companies.But the moment take over bids cropup the managments become defensive. Case in point in IVRCL take over bid by Zee Subhash which was defended.
- The disclosures under this Chapter shall be of the aggregated shareholding and voting rights of the acquirer or promoter of the target company or every person acting in concert with him.
- For the purposes of this Chapter, the acquisition and holding of any convertible security shall also be regarded as shares, and disclosures of such acquisitions and holdings shall be made accordingly.
- For the purposes of this Chapter, the term “encumbrance” shall include a pledge, lien or any such transaction, by whatever name called.
- Upon receipt of the disclosures required under this Chapter, the stock exchange shall forthwith disseminate the information so received.
The open offer for minority shareholders would need to be made even if the ‘control’ has been acquired without crossing the threshold shareholding limit of 25 % stake
Who is a Promoter? - See the definitions below under Companies Act and under SEBI
Reclassification of Promoter Holding as Public
Securities and Exchange Board of India (Sebi) in the December 2014 had issued a discussion paper in the matter of promoter reclassification in this regard.
The regulations were cleared by the regulator in the recent board meeting However, as regulations on reclassification of promoters as public shareholders are yet to be notified.
As per the new regulations Sebi would allow the reclassification after the signing of a separation agreement and promoter holding falling below five per cent. The regulator will also allow reclassification on a case-to-case basis if it feels the move is appropriate.
More than two dozen companies including Mindtree, Indiabulls Real Estate, Infosys, Hindustaan oil exploration, Sun Pharma and Pennar Industries had to re-classify certain shareholders as promoters or had to put their plans of reclassification on hold.
These companies had classified or proposed to classify some of their shareholders as an ordinary shareholder as in certain cases the promoters holding had fallen below five per cent.
Some of these companies had received letters by the National Stock Exchange (NSE) asking the companies to maintain a status quo on the promoter reclassification, pending the regulations from the markets regulator.
Complaince Requirements for Listed Cos under SEBI (LODR) Regulations (earlier Listing Agreement) - Disclosures, CG practices
SEBI (Listing Obligations and Disclosure Requirements) Regulations
1. Material disclosures
2. Stricter governance requirements on board of directors
3. Related Party Transactions
4. Corporate governance for listed start-ups
Conclusion
Regulation No.
|
Nature of Compliance
|
Compliance
|
6
|
COMPLIANCE OFFICER
|
A listed entity shall appoint a qualified Company Secretary as the Compliance Officer. The Compliance officer so appointed shall be responsible for ensuring conformity with regulatory compliance, co-ordination and reporting to the Board, ensuring that correct procedures have been followed that would result in correctness of information filed by listed entity under the regulations and monitoring email address of grievance redressal division.
|
7
|
SHARE TRANSFER AGENT
|
The listed entity shall appoint a share transfer agent or manage the share transfer facility in house. Where the facility is managed in house then as and when the total number of holders exceeds one lakh, then the listed entity has 2 options:-
Either to register with the Board as Category II Share transfer agent
OR to appoint Registrar to an Issue and Share Transfer Agent registered with the Board.
Compliance Certificate:
The Listed entity shall ensure that it submits a Compliance Certificate to the exchange duly signed by the listed entity and authorised representative of the Share Transfer Agent within one (1) month of end of each half Financial Year, certifying that the entity has ensured all activities in relation to both physical and electronic share transfer facility that are maintained either in house or by Registrar to an issue and share transfer agent registered with the Board.
Manner of Appointment of New Share Transfer Agent:
Incase of any change or appointment of new share transfer agent, the listed entity shall enter into tripartite agreement between the existing share transfer agent , the new transfer agent and the listed entity.
Intimation of Appointment of New Share Transfer Agent:-
The listed entity shall inform about the appointment of New Share Transfer Agent within Seven (7) days of entering into Agreement.
The Agreement referred herein-above shall be placed at the subsequent Board Meeting.
|
9
|
PRESERVATION OF DOCUMENTS.
|
The listed entity has to bifurcate and categorise policy into 2 types:-
Documents whose preservation shall be permanent in nature
Documents whose preservation shall be of not less than 8 years.
Provided that listed entity may preserve the documents in electronic mode.
|
24
|
COMPLIANCE WITH RESPECT TO UNLISTED MATERIAL SUBSIDIARY
|
Atleast one Independent Director on Board shall be a Director on Board of Unlisted Material Subsidiary.
The management of the unlisted subsidiary shall periodically bring to the notice of the board of directors of the listed entity, a statement of all significant transactions and arrangements entered into by the unlisted subsidiary
A listed entity shall not dispose of shares in its material subsidiary resulting in reduction of its shareholding (either on its own or together with other subsidiaries) to less than fifty percent or cease the exercise of control over the subsidiary without passing a special resolution in its General Meeting except in cases where such divestment is made under a scheme of arrangement duly approved by a Court/Tribunal.
Selling, disposing and leasing of assets amounting to more than twenty percent of the assets of the material subsidiary on an aggregate basis during a financial year shall require prior approval of shareholders by way of special resolution, unless the sale/disposal/lease is made under a scheme of arrangement duly approved by a Court/Tribunal.
|
Regulation No.
|
Time Limit
|
Compliance / Intimation to Stock Exchange about
|
13(3)
|
Within 21 days from end of Quarter
|
A statement giving the number of investor complaints pending at the beginning of the quarter, those received during the quarter, disposed of during the quarter and those remaining unresolved at the end of the quarter
|
27(2)
|
Within 15 days from close of quarter
|
A listed entity shall submit quarterly compliance report on corporate governance in the format as specified by the Board from time to time to the recognised stock exchange(s)
|
31(1)
|
Within 21 days from end of each quarter;
1 day prior to listing of its securities on the stock exchange(s);
within 10 days of any capital restructuring of the listed entity resulting in a change exceeding two per cent of the total paid-up share capital
|
A listed entity shall submit a statement showing holding of securities and shareholding pattern separately for each class of securities
|
33(3)
|
Within 45 days from end of quarter
|
The listed entity shall submit quarterly and year-to-date standalone financial results to the stock exchange within forty-five days of end of each quarter, other than the last quarter.
|
32(1)
|
A listed entity shall submit to the stock exchange the following statement(s) on a quarterly basis for public issue, rights issue, preferential
issue etc. ,-
(a) indicating deviations, if any, in the use of proceeds from the objects stated in the offer document or explanatory statement to the notice for the general meeting, as applicable;
(b) indicating category wise variation (capital expenditure, sales and marketing, working capital etc.) between projected utilisation of funds made by it in its offer document or explanatory statement to the notice for the general meeting, as applicable and the actual utilisation of funds
|
Regulation No.
|
The Board Meeting at which following agendas are to be discussed:
|
Compliance / Intimation to Stock Exchange about
|
29(1)
|
Financial Results
|
atleast 5 days in advance (excluding date of meeting and date of intimation)
|
29(2)
|
proposal for buyback of securities
|
at least 2 working days in advance, excluding the date of the intimation and date of the meeting:
|
proposal for voluntary delisting by the listed entity from the stock exchange(s);
| ||
fund raising by way of further public offer, rights issue, American Depository Receipts/Global Depository Receipts/Foreign Currency Convertible Bonds, qualified institutions placement, debt issue, preferential issue or any other method and for determination of issue price
| ||
declaration/recommendation of dividend, issue of convertible securities including convertible debentures or of debentures carrying a right to subscribe to equity shares or the passing over of dividend
| ||
the proposal for declaration of bonus securities where such proposal is communicated to the board of directors of the listed entity as part of the agenda papers
| ||
29(3)
|
any alteration in the form or nature of any of its securities that are listed on the stock exchange or in the rights or privileges of the holders thereof
|
at least 11 working days in Advance
|
any alteration in the date on which, the interest on debentures or bonds, or the redemption amount of redeemable shares or of debentures or bonds, shall be payable
| ||
42(2)
|
A listed entity shall give notice in to stock exchange(s) of record date specifying the purpose of the record date
|
Advance notice of atleast 7 working days (excluding the date of intimation and the record date)
|
42(3)
|
A listed entity shall recommend or declare all dividend and/or cash bonuses
|
Atleast 5 working days (excluding the date of intimation and the record date) before the record date
|
46(3)
|
A listed entity shall update any change in the content of its website
|
Within 2 working days from the date of such change in content
|
Regulation No.
|
Time Limit
|
Compliance / Intimation to Stock Exchange about
|
33(3)
|
Within 60 days from end of Financial Year
|
listed entity shall submit audited standalone financial results for
the financial year, along with the audit report and either Form A (for audit report with unmodified opinion) or Form B (for audit report with modified opinion)
|
34
|
Within 21 working days of it being approved and adopted in the Annual General Meeting as per the provisions of the Companies Act, 2013
|
A listed entity shall submit the annual report to the stock exchange
|
36(2)
|
Not less than 21 days before the Annual General Meeting.
|
A listed entity shall send annual report to the holders of securities
|
Particulars
|
Board
|
Audit Committee
|
Nomination & Remuneration Committee
|
Stakeholder Relationship Committee
|
Risk Management
|
Applicability
|
All Listed Entities
|
All Listed Entities
|
All Listed Entities
|
All Listed Entities
|
Top 100 Listed Entities
|
Min. No. Of Members
|
Atleast 3
|
Atleast 3
|
Atleast 3
|
Atleast 3
|
Atleast 3
|
Kind of Directors (Executive (E) / No-Executive) (NE)
|
Both [E & NE]
|
Both [ E & NE]
|
Only NE
|
Both [E& NE]
|
Both [E & NE]
|
No. of Independent Directors Required
|
Depends upon the Chairperson. (C.P.)
If C.P. is executive or non-executive but related to promoter then atleast 50% of Members shall be Independent otherwise atleast 1/3rd of Directors shall be Independent.
|
Atleast 2/3 rd of Members shall be Independent Directors.
|
Atleast 50% of Members shall be Independent Directors.
|
No such criteria and condition is essential.
|
No such criteria and condition is essential
|
Chairperson
|
C.P. may be Independent and may not be Independent
|
C.P. Shall be Independent.
|
C.P. Shall be Independent and also that C.P. of Company shall not chair the Committee.
|
C.P. Shall be a non-executive director and may or may not be Independent Director.
|
C.P. shall be a member of the board of directors and senior executives of the listed entity may be members of the committee
|
Presence at AGM
|
All directors shall be present at AGM, if any Director is absent the Chairman shall explain the absence of directors.
|
C.P. of ACM shall be present at AGM.
|
C.P. may be present at AGM
|
No Such criteria or essential condition.
|
No Such criteria or essential condition.
|
Other Members
|
–
|
–
|
–
|
The Board shall decide composition of other members of the Committee
|
The Board shall decide composition of other members of the Committee But majority shall be members of the Board
|
Sample Disclosure
- Regulation 6 provides that a listed entity shall appoint a qualified Company Secretary as the compliance officer.
- Regulation 7 (3) requires that the listed entity shall submit a compliance certificate to the exchange, duly signed by both the compliance officer of the listed entity and the authorised representative of the share transfer agent, wherever applicable, within one month of end of each half of the financial year, certifying that all activities in relation to both physical and electronic share transfer facility are maintained either in house or by Registrar to an issue and share transfer agent registered with SEBI.
- Regulation 40 (9) requires that the share transfer agent and/ or the in-house share transfer facility, as the case may be, produces a certificate from a practicing company secretary within one month of the end of each half of the financial year, certifying that all certificates have been issued within thirty days of the date of lodgement for transfer, sub-division, consolidation, renewal, exchange or endorsement of calls/allotment monies.
- Regulation 56 (1) (d) provides that a half-yearly certificate regarding maintenance of hundred percent asset cover in respect of listed non convertible debt securities, by either a practicing company secretary or a practicing chartered accountant, along with the half yearly financial results.
- Schedule V, Clause E requires compliance certificate from either the auditors or practicing company secretaries regarding compliance of conditions of corporate governance to be annexed with the directors’ report.
|
Employee Stock Option Scheme allowable by SEBI in India
In October 2014 SEBI had notified new ESOP regulations, including for purchase of shares by employee welfare trusts from the secondary market .It had allowed companies to have employee stock option Trusts, where they can buy their own company shares subject to certain conditions.
Matters requiring Specialist
Expert guidance
·
Designing and
Documentation of ESOP Schemes taking care of the corporate objectives and
management perspective.
·
Grant Letters, Notice
of Grant Letters.
· Compliance under Companies Act 2013 including providing resolutions, secretarial services for ESOP, communication letters between the Employee & Company.
ESOP Grant Letter Fromat
To: Employee
Sub: Offer of Stock Options under CTEL ESOP Scheme - 2011
VESTING PERIOD:
Quiet period:
Elaborate rules
Games investors play
Games companies play
The way forward
Vedanta
Delisting Offer Fails
10th Oct 2020 Vedanta Ltd.'s delisting offer is
deemed to have failed as per terms of the delisting regulations, the company
said in an exchange filing. A large number of unconfirmed bids and some
technical glitches in the tender process are likely to have contributed to the
failure.
The post offer public
announcement of the company said that 125.47 crore shares were validly tendered
by public shareholders. The reverse book building process for public
shareholders to tender their shares, which began on October 5 had concluded on
Friday. For successful delisting of the shares, 134.12 crore shares needed to
have been validly tendered for the promoter shareholding to cross the 90%
shareholding threshold as per regulations.
"Accordingly, the
acquirers will not acquire any equity shares tendered by the public
shareholders in the delisting offer and the equity shares will continue to
remain listed on the stock exchanges," the statement said. The offer
failure could put the Vedanta stock price under pressure, said Deven Choksey,
managing director of financial services firm KRChoksey. “In the short-term the
problem would be on the traders’ side who have acquired shares in the hope of
an arbitrage play. They may want to come up for sale. That could put the
price under pressure, that possibility can't be ruled out." But, the share
price may recover in the medium term, Choksey said, as the higher-than-market
prices at which shares were tendered indicate the fair price of the stock. The
fundamentals of the business have not changed, he pointed out.
“The cash generating business of Cairn India Ltd. and Hindustan Zinc Ltd. distribute handsome dividend and that is where the argument is for recovery in the stock price along with the recovery in the metal cycle." A large number of shares were bid at Rs 320 a piece, a substantial premium to Vedanta’s Friday closing price of around Rs 120.
Shareholders that tendered their shares in the reverse book building process will get them back within 10 working days, according to regulation.
The new rule
Room for flexibility
Prohibition of Insider Trading (PIT) Regulations
Prannoy Roy was the
chairman and whole time director and Radhika Roy was the managing director
during period under investigation and were part of the decision making chain
that had led to crystallization of the UPSI.
Discussions pertaining
to reorganisation of the company started on September 7, 2007 and the
disclosure was made on April 16, 2008. Hence, September 7, 2007 to April 16,
2008 was UPSI period.
Prannoy Roy and Radhika
Roy sold shares on April 17, 2008, when the trading window for them was closed
and made a profit of Rs 16,97,38,335. By doing so, they violated PIT norms and
also acted in contravention of NDTV's code of conduct for prevention of insider
trading which prohibited them from trading at least till 24 hours after the
information was disclosed to the stock exchanges.
Sebi noted that Prannoy
Roy and Radhika Roy together made a gain of Rs 16.97 crore while indulging in
insider trading in the shares of New Delhi Television Ltd (NDTV) while in
possession of UPSI relating to the proposed reorganization of the company.
The
amount has to be paid jointly or severally by them along with 6 per cent
interest from April 17, 2008 till the date of actual payment. All the entities
have violated Prohibition of Insider Trading (PIT) Regulations, Sebi said in
three separate orders passed late on 27Nov 2020.Roys have been restrained from
accessing the securities market for two years and directed to disgorge illegal
gains along with 6 per cent interest per annum.
Regulator Sebi has barred NDTV promoters, Prannoy Roy and Radhika Roy, from the securities market for two years and also directed them to disgorge illegal gains of more than Rs 16.97 crore for indulging in insider trading more than 12 years ago.
Besides, the watchdog
has barred seven individuals and entities for insider trading in the shares of
the company for a period varying from one to two years. Also, some of them have
been asked to disgorge illegal gains made from trading in the shares when they
were in possession of Unpublished Price Sensitive Information (UPSI).
Dec 2020
: SEBI has done away with the applicability of minimum
promoters’ contribution norm and the subsequent lock-in requirements for the
issuers making FPO
At
present, promoters are mandated to contribute 20 per cent towards FPO. Besides,
in case of any issue of capital to the public, the minimum promoters
contribution needs to be locked-in for three years.