• How can the investors redress their complaints against Alternative Investment Funds (AIFs)?

    SEBI has a web-based centralized grievance redress system called SEBI Complaint Redress System (SCORES) where investors can lodge their complaints against AIFs.

    For more information, click here.

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  • What is the system of getting enlistment as an Alternative Investment Fund from Securities and Exchange Board of India?

    To get enlisted as an AIF from SEBI, the applicant shall make an application in Form A as provided in the SEBI (Alternative Investment Funds) Regulations, 2012 along with necessary supporting documents.

    Application fees of INR 1,00,000/- must be paid along with the application to SEBI.

    On receipt of approval from SEBI, Registration/re registration fee/scheme fee as applicable, may be paid.

    The application in Form A shall be submitted to the below mentioned address:

    Investment Management Department
    Division of Funds- 1
    Securities and Exchange Board of India
    SEBI Bhavan, 3rd Floor A Wing,
    Plot No. C4-A, G Block,
    Bandra-Kurla Complex,
    Bandra (E), Mumbai - 400 051.

    For more information, click here

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  • What does Alternative Investment Funds stand for?

    Alternative Investment Fund or AIF means any fund established or incorporated in India which is a privately pooled investment vehicle which collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors.

    For more information, click here.

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  • Can an Alternative Investment Fund (AIF) launch schemes?

    Yes, an AIF may launch schemes subject to the filing of placement memorandum with SEBI. In terms of scheme fees, INR 1 lakh should be paid to SEBI by an AIF at least 30 days prior to the launch of a scheme. However, payment of scheme fees shall not be applicable in case of the launch of the first scheme by the AIF (other than angel fund) and to angel funds.

    For more information, click here

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  • Can the registration of Venture Capital Funds be done again under SEBI (AIF)?

    The venture capital funds (VCF) registered under the repealed SEBI (Venture Capital Funds) Regulations, 1996 shall continue to be regulated by the said regulations until existing fund is wound up and no new fund or scheme shall be launched after that under the said regulations.

    However, the existing VCF may seek re-registration under SEBI (Alternative Investment Funds) Regulations, 2012 subject to approval of two-third of its investors by the value of their investment.

    For more information, click here

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  • What is an Angel Investor?

    "Angel investor" means any person who proposes to invest in an angel fund and satisfies one of the following conditions, namely,

    •  Net tangible assets of at least INR 2 cr excluding value of his principal residence, and who:
      •  has early stage investment experience, or
      •  has experience as a serial entrepreneur, or
      •  is a senior management professional with at least ten years of experience
    • A body corporate with a net worth of at least INR 10 cr, or
    • An AIF/ VCF registered under these regulations.

    For more information, click here.

     

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  • What is the limit specified under AIF regulations for number of investors?

    No scheme of an AIF (other than angel fund) shall have more than 1000 investors. (Please note that the provisions of the Companies Act, 1956 shall apply to the AIF if it is formed as a company). In case of an angel fund, no scheme shall have more than two hundred angel investors. However, an AIF cannot make invitation to the public at large to subscribe its units and can raise funds from the sophisticated investors only through private placement.

    Please refer to section 4(b), 10(f) and 19E(4) of SEBI (Alternative Investment Funds) Regulations, 2012 at the link for more information

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  • What is the enrolment charge to be paid by an Alternative Investment Fund?

    Registration fee to be paid by an AIF is as under:
    Category I Alternative Investment Funds - INR 5,00,000
    Category II Alternative Investment Funds - INR 10,00,000
    Category III Alternative Investment Funds - INR 15,00,000
    Angel Funds - INR 2,00,000

    For more information, click here.

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  • What is included in fund of funds?

    Fund of Funds, in general, is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities. In the context of Alternative Investment Funds (AIF), a Fund of Fund is an AIF which invest in another AIF.

    For more information, click here

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  • Is an AIF allowed to make a solicitation to general society to buy in to its securities?

    No, AIFs are privately pooled investment vehicles. AIFs shall raise funds through private placement by issue of information memorandum or placement memorandum, by whatever name called. As an eligibility criterion for registration as an AIF, the applicant is required to be prohibited by its memorandum and articles of association/ trust deed/ partnership deed from making an invitation or solicitation to the public to subscribe to its securities.

    For more information, click here.

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  • What are the Reporting prerequisites for converting External commercial borrowing into equity?

    In case of partial or full conversion of ECB into equity, the reporting to the RBI will be as under:

    • For partial conversion, the converted portion is to be reported to the concerned Regional Office of the Foreign Exchange Department of RBI in Form FC-GPR prescribed for reporting of FDI flows, while monthly reporting to DSIM in ECB 2 Return will be with suitable remarks "ECB partially converted to equity".
    • For full conversion, the entire portion is to be reported in Form FC-GPR, while reporting to DSIM in ECB 2 Return should be done with remarks ECB fully converted to equity. Subsequent filing of ECB 2 Return is not required.
    • For conversion of ECB into equity in phases, reporting through ECB 2 Return will also be in phases.

    For more information, click here

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  • Can External Commercial Borrowing be used for funding real estate?

    No, no activity under real estate is permitted as eligible end use for raising ECB.

    For more information, click here.

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  • What are the routes ECB can be raised in?

    Under the (External Commercial borrowing) ECB/Trade Credit (TC) framework, ECB/TC can be raised either under the automatic route or under the approval route. Under the approval route, the prospective borrowers are required to send their requests to the RBI through their banks for examination. 

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  • Who are the eligible borrowers under ECB framework?

    All entities except a Limited Liability Partnership are allowed to obtain ECB as per the prescribed guidelines.

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  • What is the earliest when an External Commercial Borrowing can be matured?

    Minimum average maturity period (MAMP) is three years for all external commercial borrowings (ECB). However, for ECB raised from foreign equity holder and utilised for specific purposes, as detailed in sub-section 2.1 of the Annex, the MAMP is five years. Similarly, for ECB up to INR 3.5 b per financial year raised by manufacturing sector, which has been given a special dispensation, the MAMP is one year.

    For more information, click here

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  • What is the procedure of raising ECB?

    Entities looking to raise ECB may approach the RBI with an ECB application form in prescribed format for examination through their AD Category I bank. Cases shall be considered keeping in view the overall guidelines, macroeconomic situation and merits of the specific proposals.

    ECB proposals received by the RBI above certain threshold limit (re-fixed from time to time) would be placed before the Empowered Committee set up by the Reserve Bank. The Empowered Committee will have external as well as internal members and the Reserve Bank will take the decision based on the recommendation of the Empowered Committee.

    Entities desirous to raise ECB under the automatic route may approach an AD Category I bank with their proposal along with duly filled Form 83. Formats of ECB Form and Form 83 are available at Annex I and II respectively of Part V of the Master Directions Reporting under Foreign Exchange Management Act, 1999.

    For more information, click here

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  • What are the reporting requirements under ECB?

    Borrowings under ECB Framework are subject to following reporting requirements apart from any other specific reporting required under the framework:

    • Loan Registration Number (LRN): Any draw-down in respect of an ECB should happen only after obtaining the LRN from the RBI. To obtain the LRN, borrowers are required to submit duly certified Form ECB, which also contains terms and conditions of the ECB, in duplicate to the bank
    • Changes in terms and conditions of ECB: Changes in ECB parameters in consonance with the ECB norms, including reduced repayment by mutual agreement between the lender and borrower, should be reported to the DSIM through revised Form ECB at the earliest, in any case not later than seven days from the changes effected. While submitting revised Form ECB the changes should be specifically mentioned in the communication 
    • Monthly reporting of actual transactions: The borrowers are required to report actual ECB transactions through Form ECB 2 Return (Annex II) through the AD Bank on monthly basis so as to reach DSIM within seven working days from the close of month to which it relates. Changes, if any, in ECB parameters should also be incorporated in Form ECB 2 Return

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  • Are the shipping/airline companies allowed to raise External Commercial Borrowing for import of second hand vessels?

    Yes, shipping and airline companies can raise external commercial borrowings (ECB) for import of vessels and aircrafts, however, only under Track I of the ECB framework.

    For more information, click here

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  • Who are eligible lenders under ECB framework?

    Lender for ECB purposes should be:

    • A resident of Financial Action Task Force (FATF) [or International organization of Securities commissions (IOSC) compliant country
    • Multilateral and regional financial institution where India is a member country
    • Individuals, if they are foreign equity holders or for subscription to bond/debentures listed abroad
    • Foreign branches / subsidiaries of Indian Banks – only for FCY ECB except FCCBs and FCEBs

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  • What does External Commercial Borrowing (ECB) denote?

    ECBs are commercial loans raised by eligible resident entities from recognised non-resident entities conforming to parameters such as minimum maturity, permitted and non-permitted end-uses, maximum all-in-cost ceiling, etc.

    For more information, click here.

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  • Who is a Foreign Venture Capital Investor (FVCI)?

    FVCI refers to an investor incorporated and established outside India, which is registered under the Securities and Exchange Board of India (Foreign Venture Capital Investor) Regulations, 2000 {SEBI (FVCI) Regulations} and proposes to make investments in accordance with FDI Regulations.

    For more information, click here.

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  • Are foreigners allowed to invest in India?

    A non-resident entity can invest in India, subject to the prevailing FDI Policy, except in those sectors which are prohibited. Foreign Institutional Investor (FII) and Foreign Portfolio Investors (FPI) may invest in the capital of an Indian Company under the Portfolio Investment Scheme, subject to FEMA provisions.

    For more information, click here.

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  • What documents to be submitted by a person resident in India for transfer of shares to a person resident outside India by way of gift?

    Documents to be submitted by a resident person for transfer of shares to a person resident outside India by way of gift:

    i) Name and address of the transferor (donor) and the transferee (donee).

    ii) Relationship between the transferor and the transferee.

    iii) Reasons for making the gift.

    iv) In case of Government dated securities and treasury bills and bonds, a certificate issued by a CA on market value of such security.

    v) In case of units of domestic mutual funds and units of Money Market Mutual Funds, a certificate from the issuer on the Net Asset Value of such security.

    vi) In case of shares and convertible debentures, a certificate from a Chartered Accountant on the value of such securities according to the guidelines issued by Securities & Exchange Board of India or as per any internationally accepted pricing methodology on arm’s length basis for listed companies and unlisted companies, respectively.

    vii) Certificate from the concerned Indian company certifying that the proposed transfer of shares/convertible debentures by way of gift from resident to the non-resident shall not breach the applicable sectoral cap/ FDI limit in the company and that the proposed number of shares/convertible debentures to be held by the non-resident transferee shall not exceed 5 per cent of the paid up capital of the company.

    viii) An undertaking from resident transferor that value of security to be transferred together with any security already transferred by transferor, as gift, to any person residing outside India does not exceed the rupee equivalent of $ 50,000during a financial year*.

    ix) A declaration from donee accepting partly paid shares or warrants that donee is aware of the liability as regards calls in arrear and consequences thereof.

    Please refer to 'section 2' of Annexure-3 Consolidated FDI Policy at link for more information.

    *RBI’s A.P. (DIR Series) Circular No. 14 Dated 15.09.2011

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  • What is a ‘Foreign Institutional Investor’ ?

    An entity established or incorporated outside India which proposes to make investment in India and which is registered as a FII in accordance with the Securities and Exchange Board of India (SEBI) (Foreign Institutional Investor) Regulations 1995.

    For more information, click here.

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  • Is transfer of shares to non-residents/ NRIs permitted as per the FDI policy?

    General permission is granted to non-residents/ NRIs for acquisition of shares by way of transfer in the following situations:

    1) Transfer of shares in the investee company from one non-resident to another non-resident in sectors which are under automatic route. Government approval is required for transfer of stake from one non-resident to another non-resident in sectors which are under Government approval route

    2) NRIs may transfer by way of sale or gift shares or convertible debentures to another NRI

    3) Person resident outside India can transfer any security to a person resident in India by way of gift

    4) A person resident outside India can sell shares and convertible debentures of an Indian company on a recognized Stock Exchange in India through a registered stock broker or a registered merchant banker

    5) A person resident in India can transfer by way of sale, shares/ convertible debentures (including transfer of subscriber’s shares), of an Indian company under private arrangement to a person resident outside India, subject to the FDI Policy guidelines

    6) Transfer of shares/convertible debentures, by way of sale under private arrangement by a person resident outside India to a person resident in India, subject to the FDI guidelines

    7) The above mentioned situations also covers transfer by a resident to a non-resident of shares/convertible debentures of an Indian company, engaged in an activity earlier covered under the Government Route but now falling under Automatic Route, as well as transfer of shares by a non-resident to an Indian company under buyback and/or capital reduction scheme of the company.

    Please refer to section 4 of Annexure-3 of Consolidated FDI Policy at link for more information.

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  • What are the project funding options available in India?

    Projects in India can be financed through sources such as Bank loans, Private equity, Public subscriptions, Debt instruments and Government bonds.
    If you are a start-up or a SME, then you can register on Startup India. You can also register on India Investment Grid, which is our repository of investible projects.
     

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  • What is Sponsored American Depository System/ Global Depository System issue?

    An Indian company can sponsor an issue of ADR/ GDR. Under this mechanism, the company offers its resident shareholders a choice to submit their shares back to the company so that on the basis of such shares, ADRs/ GDRs can be issued abroad. The proceeds of the ADR/ GDR issue are remitted back to India and distributed among the resident investors who had offered their Rupee denominated shares for conversion.

    For more information, click here.

     

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  • Are NRIs(Non-Resident Indians) allowed to invest in sole proprietorship in India?

    NRI or a person of Indian origin (PIO) can invest in sole proprietorship / partnership firm on non-repatriable basis, except those in agricultural or plantation or real estate business, or in the print media sector. NRIs/PIO may seek prior permission of Reserve Bank for investment in sole proprietorship concerns/partnership firms with repatriation option.

    For more information, click here.

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  • Are Non-Resident Indians allowed to make investments in India?

    An NRI can invest in capital of Indian companies on non-repatriation basis provided:

    • The amount is invested by inward remittance or out of NRE/FCNR(B)/NRO account maintained with Authorized Dealers/Authorized banks. 
    • The entity is not engaged in agricultural/plantation or real estate business or construction of farmhouses or dealing in Transfer of Development Rights.
    • Amount invested not eligible for repatriation outside India. For investments on a repatriable basis, provisions of FDI policy apply.

    For more information, click here.

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  • What documents are required for sale of shares by a person resident in India?

    The following documents are required for sale of shares by a person resident in India:

    (i) Consent letter duly signed by the seller and buyer or their duly appointed agent indicating the details of transfer i.e. number of shares to be transferred, the name of the investee company whose shares are being transferred and the price at which shares are being transferred. In case there is no formal Sale Agreement, letters exchanged to this effect may be kept on record.

    (ii) Where consent letter has been signed by their duly appointed agent, the Power of Attorney Document executed by the seller/buyer authorizing the agent to purchase/sell shares.

    (iii) The shareholding pattern of the investee company after the acquisition of shares by a person resident outside India showing equity participation of residents and non-residents category-wise (i.e. NRIs/OCBs/foreign nationals/incorporated non-resident entities/FIIs, FPIs) and its percentage of paid up capital obtained by the seller/buyer or their duly appointed agent from the company, where the sectoral cap/limits have been prescribed.

    (iv) Certificate indicating fair value of shares from a Chartered Accountant.

    (v) Copy of Broker’s note if sale is made on Stock Exchange.

    (vi) Undertaking from the buyer to the effect that he is eligible to acquire shares/convertible debentures under FDI policy and the existing sectoral limits and Pricing Guidelines have been complied with.

    (vii) Undertaking from the FII/sub account to the effect that the individual FII/ Sub account ceiling as prescribed by SEBI has not been breached, till it gets registered as FPI.

    Please refer to subsection 5.1 of 'section 1' of Annexure-3 of Consolidated FDI Policy at link for more information.

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  • What is the grievance mechanism available against bank officials, in the event of non sanction of loan?

    Any grievance against non consideration of MUDRA loan can be registered with the higher authorities in the respective Bank like Regional Manager/Zonal Manager of the Bank, provided there is any lapse from the bank officials in sanctioning the loan.

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  • Is there any standard format of application to avail MUDRA loans?

    Yes. In respect of Shishu category, an one page application format has been designed which has been posted in MUDRA website. In respect of Kishor and Tarun category, a 3 page indicative application format has been designed and the same is also posted in MUDRA website.

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  • What does the MUDRA scheme entail?

    MUDRA, which stands for Micro Units Development & Refinance Agency Ltd, is a financial institution being set up by the Government of India under Pradhan Mantri Mudra Yojana (PMMY) for development and refinancing micro unit enterprises. It was announced by the Hon’ble Finance Minister while presenting the Union Budget for 2015-16. The purpose of MUDRA is to provide funding to the non-corporate small business sector through various last-mile financial institutions like banks, non-banking financial institutions (NBFC) and micro finance institutions (MFI).

    For more information, click here.

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  • Is there any requirement for a life insurance for MUDRA scheme?

    Life insurance is not required for loans under PMMY.

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  • Who are the objective customers of MUDRA/ What sort of borrowers are qualified for help from MUDRA?

    Non–Corporate Small Business Segment (NCSB) comprising of millions of proprietorship / partnership firms running as small manufacturing units, service sector units, shopkeepers, fruits/ vegetable vendors, truck operators, food-service units, repair shops, machine operators, small industries, artisans, food processors and others, in rural and urban areas.

    For more information, click here.

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  • What are the various types of loan options available under Pradhan Mantri MUDRA Yojana?

    Under MUDRA scheme, the following loans are available to eligible company:

    • Shishu: covering loans upto INR 50,000
    • Kishor: covering loans above INR 50,000 and upto INR 5 lakh
    • Tarun: covering loans above INR 5 lakh and upto INR 10 lakh

    For more information, click here

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  • What is the rate of interest on MUDRA loans?

    The interest rates are deregulated and the banks have been advised to charge reasonable interest rates within the overall RBI guidelines.

    Please refer to link for more information.

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  • What is Pradhan Mantri Mudra Yojana?

    Pradhan Mantri Mudra Yojana (PMMY) is a scheme launched by the Hon’ble Prime Minister for providing loans upto INR 10 Lakhs to non-corporate, non-fam small/ micro enterprises.

    For more information, click here.

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  • Under PMMY-Shishu loans, what is the turn around time for processing the loan proposal?

    For Shishu loans, normally 7 to 10 days is the turn around time for processing the loan proposals on receipt of complete information.

    Please refer to link for more information

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  • How much interest rate is charged on a Micro Units Development and Refinance Agency (MUDRA) loan?

    The interest rates are deregulated, and the banks have been advised to charge reasonable interest rates within the overall RBI guidelines.
    For more information, click here.

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  • What does composite issue of shares mean?

    A Composite Issue is an issue of shares or Convertible Securities on Public-cum-Right basis, wherein the allotment in both Public Issue and Rights Issue is proposed to be made simultaneously.

    For more information, click here.

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  • What does private placement of shares mean?

    A Private Placement is the issue of shares or convertible securities to a select group of persons not exceeding 49%.

    For more information, click here.

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  • What does rights issue of shares mean?

    A rights issue is an issue of shares or convertible securities to existing shareholders as on a record date fixed by the issuer. The rights are offered in a ratio to the number of shares or convertible securities held as on the record date.

    For more information, click here.

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  • What do offer documents imply?

    An offer document contains all the relevant information about the company, promoters, projects, financial details, objects of raising the money, terms of the issue, etc. and is used for inviting subscription to the issue being made by the issuer. Offer document is called a ’Prospectus’ in case of a Public Issue and ’Letter of Offer’ in case of a Rights Issue.

    For more information, click here

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  • What happens if a shareholder does not receive the letter of offer in time?

    The Public Announcement contains procedure for such cases i.e. where the shareholders do not receive the letter of offer or do not receive the letter of offer in time. The shareholders are usually advised to send their consent to Registrar to offer, if any or to MB on plain paper stating the name, address, number of shares held, Distinctive Folio No, number of shares offered and bank details along with the documents mentioned in the Public Announcement, before closure of the offer.

    The public announcement and the letter of offer along with the form of acceptance is available on the SEBI website.

    For more information, click here.

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  • What is a Draft Offer Document, Red Herring Prospectus, Prospectus and Letter of Offer? How are they different from one another?

    Draft Offer Document, Red Herring Prospectus, Prospectus and Letter of Offer are all types of offer documents. Since 1992, entire IPO/ FPO of companies is driven by disclosures, i.e., informing the investors as much as possible to enable them to take informed decision. The offer documents contain all the relevant information about the company, promoters, projects, financial details, objects of raising money, forms of the issue, etc.

    For more information, click here.

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  • What is SEBI takeover code?

    SEBI has notified the Takeover Regulations namely SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (hereinafter referred to as “SEBI (SAST) Regulations, 2011”). Acquisition or sale of shares of Listed Company shall be governed by provisions of SEBI (SAST) Regulations, 2011.

    For more information, click here.

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  • Is a listed company making a rights issue required to satisfy any entry norm?

    No, there is no entry norm for a listed company making a Rights Issue.

    For more information, click here

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  • Are there any mandatory provisions which an issuer is expected to comply before making an issue?

    Yes, there are mandatory provisions which an issuer is expected to comply before making an issue w.r.t. Minimum Promoter’s contribution and lock‐in period:

    • Public issue by an Unlisted Issuer: Promoters shall contribute not less than 20% of the post-issue capital which should be locked in for a period of 3 years. The remaining pre-issue capital of the promoters should also be locked in for a period of 1 year from the date of listing.
    • Public issue by a Listed Issuer: Promoters shall contribute not less than 20% of the post-issue capital or 20% of the issue size.

    For more information, click here.

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