Issue Management: Activities/Procedures

Establishment of Disclosure and Investor Protection (DIP) guidelines

The SEBI has issued Disclosure and Investor Protection (DIP) guidelines as ground rules relating to new issue procedure/activities. The purposes for which SEBI has framed the DIP guideless are

To protect the interest of investors

For the orderly growth and development of the securities market.

For removing inadequacies and deficiencies in the system.

These guidelines are in addition to the company law requirements in relation to issues of capital/securities.

Applicability

These procedures/activities are applicable to all

Public issues and offers for sale by listed/unlisted companies and

Rights issue (i.e., an issue of capital under sec.81 (1) of the companies act to the existing shareholder through a letter of offer) by listed companies, except in cases where the aggregate value of securities including premium is less than ` 50 lakh.

Note

Letter of offer in compliance with the disclosure requirement specified in these guidelines should be prepared by the issuing company in respect of rights issue with aggregate value less than ` 50 lakh. The letter of offer should be filed with the SEBI.

Public issue means an invitation by a company to the public to subscribe to the securities offered through a prospectus.

Existing share holders of a company offer securities to the public for subscription through an offer document. This is said to be offer for sale.

Subject Matter of DIP Guidelines

The issue procedure, the subject matter of DIP guidelines deals with the following:-

Eligibility norms

Pricing of issues

Promoters contribution and lock-in requirements

Indian Depository Receipts (IDR)

Issue advertisement

Issue of Debt Instruments

Book building

Green shoe option

Initial Public offer through stock exchange online system (EIPO)

Preferential issues

Qualified Institutional Placement

Filing of Offer Document

In the following cases, a draft prospectus/letter of offer should be filed with the SEBI through a merchant Banker at least 30 days prior to filing it with the Registrar of companies:-

Public issue of securities by any company

Any type of securities by a listed company through a rights issue in excess of ` 50 lakh

Before filing the draft prospectus with the Registrar of companies, the lead merchant banker/issuer should carry out any changes specified by the SEBI on the draft prospectus/letter of offer. The SEBI may specify changes only after receipt of in principle approval from the exchanges on which the proposed securities are to be listed.