SEBI has issued an informal guidance to Strides Arcolabs in connection with the company’s eligibility to issue securities to its promoters on a preferential allotment basis. The information guidance essentially pertains to the interpretation of Reg. 72(2) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR), which reads as follows: The issuer shall not make...
Facebook’s Capital Structure and Governance
In the wake of Facebook’s mega-IPO, the Deal Professor examines the capital structure of the company, whereby it has decided to follow suit from the earlier high-profile Internet IPO of Google and go with a dual-class share structure. He notes: … an investment in Facebook is really an investment in Mr. Zuckerberg: Facebook’s offering documents show he will retain control over Facebook even when...
Preferential Allotments Liberalized for Certain Institutional Investors
Over the years, SEBI has gradually tightened the regime relating to preferential allotment of shares in order to prevent possible abuse of the process and to thereby protect the interests of minority shareholders in listed companies. One of the requirements pertains to lock-in on shares of allottees. There are currently three types of lock-in applicable to persons who are allotted shares on a...
SEBI Prescribes Additional Methods to Meet Free Float Requirement
In addition to the existing methods available for listed companies to meet the public shareholding (free float) requirements of 10% for public sector undertakings (PSUs) and 25% for other companies, SEBI has recently prescribed two other methods. These are (i) the institutional placement programme (IPP) under which a company can increase its public shareholding up to 10% through an offer to...
Amendments to Preferential Allotment Rules
(I would like to thank my colleague, Mr. Saiyam Chaturvedi for his invaluable research.) The Sahara case has led to certain amendments being made to the Unlisted Public Companies (Preferential Allotment) Rules, 2003 (the “Rules”). While the Sahara case itself has seen itself being argued and debated across various judicial fora over the last couple of years, the Government of India...
Crowd-Funding and Its Regulation
The concept of crowd-funding seems to have caught on. In one form, it involves small and medium-sized companies raising funding from investors using the Internet (usually social networking sites or specialist crowd-funding websites). While the concept itself is quite wide and allows for fund raising in many different contexts, it is particularly useful for small entrepreneurs and start-ups. But...
SEBI Decisions on Public Offerings, Responsibility Reporting
SEBI’s board has taken decisions on certain matters involving public offerings and business responsibility reporting. As far as the public offering process is concerned, some reforms have been introduced to promote the capital markets (e.g. increasing the minimum allotment for anchor investors and creating a separate category of disclosures for venture capital funds and other funds that own...
Commentary on the SEBI Act
Taxmann has just published a legal commentary on the SEBI Act titled “Agrawal & Baby on SEBI Act”. The book has been authored by two serving officers of SEBI, and has been edited by Amit Agrawal (who also occasionally contributes to this Blog as a guest). Bar & Bench has this report.
SAT Order in the Sahara Case
(This post has been contributed by Amit Agrawal, a legal practitioner practicing before Rajasthan High Court, Jaipur and an alumnus of the National Law School of India University, Bangalore) The Securities Appellate Tribunal (SAT) delivered its judgment yesterday in the case involving issue of securities by certain companies within the Sahara group. The judgment has come after many rounds of...
Issue of GDRs and Market Manipulation
Last week, SEBI issued an order relating to a specific transaction structure that involved the use of global depository receipts (GDRs) to allegedly manipulate the stock price of several companies. The modus operandi was as follows. The companies issued GDRs, which were acquired by various foreign institutional investors (FIIs) or their sub-accounts. The GDRs were all soon thereafter converted...
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