SEBI (Issue & Listing of Non Convertible Redeemable Preference Shares) Regulations, 2013.

SEBI notifies Regulations for issuance and listing of Non-Convertible Redeemable Preference Shares

Ms. Anjali Aggarwal
Vice President
With a view to foster the fund raising options for Corporates and Banks and at the same time ensuring transparency and interest of investors, the Capital Market Regulator, SEBI, has notified a new set of Regulations to govern issuance and listing of Non-Convertible Redeemable Preference Shares(NCRPS), to be called SEBI (Issue and Listing of Non Convertible Redeemable Preference Shares) Regulations, 2013.

SEBI’s initiative is surely a welcoming step that ensures lucidity in the regulatory framework of NCRPS on one hand and widens the avenues for raising funds for the companies including Banks.

The key features of these Regulations are:

    1. The Regulations are applicable for listing of NCRPS raised through public issues as well as by way of private placements.

    2. For Public Issues of NCRPS:

      2.1 The Promoters/ the issuer should not have been restrained/ debarred from dealing in securities.
      2.2 Credit Rating is mandatory for such issues.
      2.3 Minimum tenure of the NCRPS should be 3 years.
      2.4 The Issuer shall create a Capital Redemption Reserve, as per the provisions of Companies Act, 1956.
      2.5 One very important condition is that the object of the issue cannot be giving loans or acquisition of shares of companies in the same management.
      2.6 The issuer shall appoint a Merchant Banker, who shall conduct a Due Diligence into the Company.
      2.7 A detailed Offer Document is needed to be prepared and filed with the Designated Stock Exchange. Copy of the final Offer Document shall also be needed to be filed with SEBI for its records.
      2.8 On or before the date of opening of issue, the Issuer shall issue detailed Advertisements in 1 English & 1 Hindi national daily newspaper.
      2.9 The issue may be a fixed price issue or through Book Built process.
      2.10 The redemption shall take place as per the terms of the offer document.
      2.11 The Issuer has the liberty to decide upon the Minimum Subscription, but the same is to be disclosed in the Offer Document.
      2.12 The Issue may be underwritten.
      2.13 Listing Application for the same is needed to be filed as per the provisions of Sec 73(1) of the Companies Act.

    3. For listing of NCRPS issued on Private Placement basis:

      3.1 Even NCRPS issued on private placement basis can be listed on the Stock Exchanges, subject to fulfillment of specified conditions.
      3.2 Provisions of Companies Act have to be complied with.
      3.3 Mandatory Credit Rating to be obtained.
      3.4 The NCRPS should be issued only in Demat mode.
      3.5 The minimum Application size for each investor, in case of a private placement, shall not be less than Rs 10 Lacs each.

    4. The listings of NCRPS (whether by way of public issue or on private placement) shall be subject to such continuous listing conditions, as may be specified in the Listing Agreement for NCRPS.

    5. The Regulations also apply to issuance and listing of Perpetual Non Cumulative Preference Shares and Innovative Perpetual Debt Instruments issued by Banks, in compliance with the Guidelines issued by RBI.

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