Well Vidya! Major part of the liberalisation process was the repeal of the Capital Issues
(Control) Act, 1947 in May 1992. With this, Government’s control over issue
of capital, pricing of the issues, fixing of premia and rates of interest on
debentures etc. ceased and the market was allowed to allocate resources to
competing uses. In the interest of investors, SEBI issued Disclosure and
Investor Protection (DIP) guidelines in June 1992. The guidelines contain a
substantial body of requirements for issuers/intermediaries, the broad
intention being to ensure that all concerned observe high standards of
integrity and fair dealing, comply with all the requirements with due skill,
diligence and care, and disclose the truth, whole truth and nothing but truth.
The guidelines aim to secure fuller disclosure of relevant information about
the issuer and the nature of the securities to be issued so that investors can
take informed decisions. For example, issuers are required to disclose any
material ‘risk factors’ and give justification for pricing in their prospectus. The
guidelines cast a responsibility on the lead managers to issue a due diligence
certificate, stating that they have examined the prospectus, they find it in
order and that it brings out all the facts and does not contain anything wrong
or misleading. Issuers are now required to comply with the guidelines and
then access the market. The companies can access the market only if they
fulfill minimum eligibility norms such as track record of distributable profits
and net worth. In case they do not do so, they can access the market only
through book building with minimum offer of 50% to qualified institutional
buyers. The norms for continued disclosure by listed companies also improved
availability of information. The information technology helped in easy
dissemination of information about listed companies and market
intermediaries. Equity research and analysis and credit rating improved the
quality of information about issues.
SEBI has been issuing clarifications to these guidelines from time to time
aiming at streamlining the public issue process. In order to provide a
comprehensive coverage of all DIP guidelines, SEBI issued a compendium
series in January 2000, known as SEBI (DIP) Guidelines, 2000. The guidelines
provide norms relating to eligibility for companies issuing securities, pricing of
issues, listing requirements, disclosure norms, lock-in period for promoters’
contribution, contents of offer documents, pre-and post-issue obligations, etc.
These Guidelines are applicable to all public issues by listed and unlisted
companies, all offers for sale and rights issues by listed companies whose
equity share capital is listed, except in case of rights issues where the
aggregate value of securities offered does not exceed Rs.50 lakh. In case of
the rights issue where the aggregate value of the securities offered is less
than Rs.50 Lakh, the company shall prepare the letter of offer in accordance
with the disclosure requirements specified in these guidelines and file the
same with the Board for its information and for being put on the SEBI
website. Unless otherwise stated, all provisions in these guidelines are
applicable to public issues by unlisted companies and also apply to offers for
sale to the public by unlisted companies.
Eligibility Norms for Companies Issuing Securities
The companies issuing securities offered through an offer document, should
satisfy the following at the time of filing draft offer document with SEBI and
also at the time of filing the final offer document with the Registrar of
Companies (ROC)/Designated Stock Exchange:
A company making a public issue of securities should file a draft
prospectus with SEBI, through an eligible Merchant Banker, at
Answered by
Kumaar
at
4:47 PM on October 21, 2008
