I.P.O.'s
(INITIAL PUBLIC OFFER) A Company proposing to raise resources
by a public issue should first select the type of securities i.e. share and /or
debentures to be issued by it. The decision regarding the issue of shares to be
made at par or premium should be decided keeping in view the SEBI guidelines. The
whole process of issue of shares can be divided into two parts: - Pre issue
activities, and
- Post issue activities All activities beginning with
the planning of capital issues, till the opening of the subscription list are
pre issue activities, while all activities subsequent to the opening of the subscription
list may be called post issue activities. The various steps involved in
public issue of shares are enumerated below: 1. COMPLIANCE WITH THE SEBI
GUIDELINES
Before making any issue of capital, it is to be ensured that
the proposed issue complies with the provision of the SEBI guideline for disclosure
and investor protection with regards to Pricing of issue, promoters, Contribution,
lock in period, reservation, etc. 2. HOLDING OF GENERAL MEETING
If
it is required by the Articles of Association, that consent of shareholder is
to be obtained, then meeting of the shareholder will be called. 3 INTIMATION
TO STOCK EXCHANGE
A copy of the Memorandum and Articles of Association
of the company is to be sent to the Stock Exchanges where the shares are to be
listed, for approval. 4. APPOINTMENT
A Company, which
issues shares, has to appoint one or more Merchant Bankers, who act as Lead Managers
to the public issue. The company may, also appoint Registrars, underwriter, brokers
etc 5. DRAFTING OF PROSPECTUS
Apart from the notice of offer to
issue shares to public prospectus should also disclose: - Justification
of Premium, if called.
- Net Asset value (NAV)
- High and Low price of the
shares of the company for the last two years.
- Highlights of the issue, as
well as the "Risk Factors".
- A clause that company shall refund
the entire application money if minimum subscription is not received.
- A statement
by the lead managers that in their opinion the assets of the underwriters are
adequate to meet their obligations.
6. APPROVAL OF PROSPECTUS
The
draft prospectus alongwith the application form for issue of shares should be
approved by the solicitors/legal advisors/stock exchange & [where application
has been made seeking permission for shares to be draft in] of the company to
ensure that it contains all disclosures and information as required by various
statutes, rules, notifications, etc.
7. APPROVAL OF BOARD OF DIRECTORS
After
the concerned parties / agencies have approved the draft prospectus and the application
form, the board of directors of the company should approve the final draft, before
filing with the Registrar of companies.
8. REGISTRATION OF PROPECTUS
WITH ROC
Before the prospectus is issued to the public it must be filed
with the Registrar of companies, duly signed thereon by every director or proposed
director of the company.
The prospectus must be registered with ROC within
3 months of vetting by SEBI. 9. APPLICATION TO STOCK EXCHANGE TO LIST
SHARES
Before filing prospectus with the Registrar of companies, the company
should submit on application to the Stock Exchange (s) for enlistment of securities
offered to the public by the said issue. The fact that an application has / have
been made to the stock exchange must be stated in the prospectus.
10.
PRINTING AND DISTRIBUTION OF PROSPECTUS AND APPLICATION FORMS
After Receipt
of Acknowledgement card from the SEBI and the intimation from Registrar of Companies
regarding registration of prospectus, the company should take steps to issue the
prospectus within 90 days of it's registration with ROC For this compliance,
requisite steps for printing and distribution amongst Banker, Underwriter public
etc. should be made. 11. ANNOUNCEMENT AND ADVERTISEMENT
Announcement
regarding the proposed issue should be made at least ten (10) days before the
subscription list opens.
No advertisement should include Brand Names for
the issue except the normal commercial name of the company or commercial brand
names of the company or commercial brand names of it's products already in use. 12.
SUBSCRIPTION LIST
As stipulated by SEBI guidelines the subscription list
for public issue is to be kept open for atleast 3 working days and for a total
period of not exceeding 10 working days, which is to be disclosed in prospectus
as well. 13. SEPARATE BANK ACCOUNT
A SEPARATE Bank account is
opened for the purpose of collecting the proceeds of the issue.
Further, the
date of opening and closing of the subscription list should be intimated to all
the collecting and controlling branches of the bank with whom the company has
entered into an agreement for the collection of application forms. 14.
MINIMUM SUBSCRIPTION As per the SEBI guidelines, if the company does
not receive 90% of the issue amount from the public subscription including development
from underwriters within 120 days from the date of the issue, the amount of subscription
received is required to be refunded to the applications. In case of disputed development
also, subscription is required to be refunded if 90% of the issued amount plus
accepted Development from underwriters if any is not received within 120
days of the issue of prospectus. All money received from the applicants for shares
is required to be repaid forthwith without interest and if any such money is not
so repaid in the next 10 days (after the expiry of 120 days), the directors of
the company are jointly and severally liable to repay that money, with interest
from the expiry of the 130 days. The company should refund the amount within
10 weeks of the closing of the subscription list and pay interest, if refunds
are delayed by more than 8 days after this period. 15. ALLOTMENT OF SHARES
A return of allotment in Form no.--- 2 of the companies (central government's)
General Rules and Form, 1956 should be filed with Registrar of companies within
30 days of the date of allotment alongiwith the fees payable, as prescribed in
schedule X of the Act. In case, the issue is over-subscribed, the basis
of allotment has to be decided in consultation with the stock exchange authorities
as per the guidelines laid down by the stock exchanges.
16. OVER
SUBSCRIPTION
The Over-subscribed amount should after the finalisation
of allotment, be refunded to the applicants within 10 weeks of the closure of
subscription list. If the money is not so refunded, the company is liable to refund
the money with interest as specified from the expiry of the 8 days after 10 weeks
of the closure of subscription list.
17. COMPLIANCE REPORT
As
stipulated by SEBI guidelines within 45 days of the closure of issue, a report
in the prescribed form alongwith a compliance certificate from statutory auditor/
practicing charted accountant or by a company secretary in practice is to be forwarded
to SEBI by the lead managers.
18. ISSUANCE OF SHARE CERTIFICATES
As
per section 113, the company should deliver the share certificate within 3 months
after the allotment of shares.
| 