role of cs in managing sme ipo through bse sme stock exchange compatibility mode
TRANSCRIPT
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ROLE OF CS IN
MANAGING
SME IPO THROUGH
BSE SME STOCK
EXCHANGE
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Classification of Micro, Small and Medium
Enterprises
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SME and Indian Economy
Backbone to the economy of developingcountries
SME constitutes bulk of Industrial base, 40% ofexports and almost 8 % to the GDP
2.6 Crore in number, provide employment toabout 6 Crore people
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The Micro, Small and Medium Enterprises Development Act, 2006
An enactmentof Governmentof India
Provides for facilitation of promotion, development and
enhancing the competitiveness of MSMEs
Introduction of statutory consultative and recommendatorybodies on MSME polices
Statutory basis for purchase preference and creditpolicies
Improve realization of payments of MSMEs
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SME Exchange
J an 2010: The Prime Minister's Task Force recommended to set-up a dedicatedStock Exchange/ Platform for SMEs.
May, 2010: SEBI issued a f inal circular for setting up a stock exchange/ tradingplatform by a recognized Stock Exchange having nationwide trading terminals for
SMEs.
SEBI also laid down the Regulations for the governance of SME Exchange/Platform.Chapter XB has been inserted in the ICDR Regulations.
ModelEquity ListingAgreementhas been issued.
May 2011: Bombay Stock Exchange Ltd received an in-principle approval fromSEBI for launching the SME Exchange.
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SME EXCHANGE-
REGULATORY
ASPECTS
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SEBI Guidelines:Chapter XB of the SEBI (ICDR) Regulations
Post Issue Face Value of
Capital
Coverage
Up to Rs. 10 Crores Covered under the SME Platform
Rs. 10 Crores to Rs. 25
Crores
May get Listed at SME Platform
Above Rs. 25 Crores Necessarily Listed at Main Board
of the Exchange
Exchange Coverage
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Chapter XB of the SEBI (ICDR) RegulationsOther Provisions
Provision for Migration to/ from Main Board
Minimum Application Amount/ Trading Lot Rs. 1,00,000
Eligibility of Existing Members Without any further registration
100% underwritten issues
15% mandatory underwriting by Merchant Bankers
Minimum market making for 3 years by Merchant Banker through
Registered Stock broker
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Exempt from Regulations 25, 26 and 27 of ICDR Regulations
Reg. 25 provides for the reference dates on which theprovisions of Chapter III of the ICDR Regulations must be
satisfied.
Reg. 26 provides for the conditions of the Init ial Publ ic Offer. A
brief is as under:
Minimum Net tangible assets to be Rs. 3 Crores Track record of distributable profits for minimum 3 out of 5
years
Net worth of at least Rs. 1 Crore
Reg. 27 provides for the conditions which shall be satisfied in
case of Further Public Offer
Minimum 50 investors at the IPO Stage and no continuous
requirement of minimum shareholders.
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BSE Eligibility NormsNet Tangible Assets At least Rs. 1 Crore as per latest
audited financial results
Net Worth (Excluding
Revaluation Reserve)
At least Rs. 1 Crore as per latest
audited financial results
Track Record of
Distributable Prof its
in terms of Section
205 of Companies
Act, 1956
At least 2 years out of immediately
preceding 3 financial years (financial
year to be of 12 months) (Excluding
Extraordinary Income)
Other Requirements Post Issue Paid up capital of at least
Rs. 1 Crores
MandatorilyDEMAT trading facility
Website
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Chapter XB of the SEBI (ICDR) Regulations
..contd.Filing of Offer Document
and Due Diligence
Certificate
No requirement of filing of draft Offer
document with SEBI, in case filing of offer
document through Merchant Banker.
Filing is to be done with SEBI only for recordpurposes.
SEBI not to issue any Observations.
Filing of Due Diligence Certificate and
additional confirmations along with offerdocument, by the Merchant Banker to SEBI
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Chapter XB of the SEBI (ICDR) Regulations
Migration
In case of issue by a listed issuer in accordancewith the provisions of this chapter, it shall migrate
the existing securities to the SME Exchange
Post issue face value less than Rs. 25 Crores
then, may migrate to SME Exchange if:
Approved by Special Resolution through Postalballot
Votes cast by Shareholders other than promoters
in favour to at least two times the number of votes
cast by shareholders other than promoters against
the proposal Fulfills the eligibility criteria as laid down by SME
Exchange
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Chapter XB of the SEBI (ICDR) Regulations
Migration Post issue face value more than Rs. 10 Crores and upto Rs. 25
Crores may migrate to main boards if:
Approved by Special Resolution through Postal bal lot
Votes cast by Shareholders other than promoters in favour to at least two
times the number of votes cast by shareholders other than promoters
against the proposal
Fulfills the eligibility criteria as laid down by main Board
In a case, where the Post issue face value is likely to increasebeyond Rs. 25 Crores by virtue of right issue, bonus issue,
preferential i ssue etc., then it shall m igrate to Main Board subject to
fulfillment of eligibility criteria laid down by the Main Board
Provided no further issue of capital be made unless:
The shareholders approval by way of special resolution through postal
ballot
Votes cast by Shareholders other than promoters in favour to at least two
times the number of votes cast by shareholders other than promoters
against the proposal
The issuer has obtained in principle approval from the main board
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Chapter XB of the SEBI (ICDR) Regulations
Obligations andFunctions of
Merchant Bankers
The issue shall be 100% underwritten. Merchant Bankers shall underwrite atleast 15 %
of the issue size in their own account.
The issuer in consultation with the Merchant
Banker may appoint underwriters.
Merchant Banker may enter into an agreement
with the nominated investor(s) indicating the
number of securities which they agree to
subscribe at issue price.
Obligation of Merchant Banker to fulfill
underwriting obligations in case of failure of
other underwriters.
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Chapter XB of the SEBI (ICDR) Regulations
Obligations andFunctions of
Merchant Bankers
Merchant Banker to be responsible for minimum 3
years market making through a Stock Brokerwho is
registered as market maker with the SME Exchange
May enter into an agreement with nominated investors
for receiving or delivering securities subject to prior
approval of SME Exchange
Minimum inventory of Market maker to be 5 %
Merchant Banker/s with responsibility of market makingat their option, be represented on the Board of the
Issuer subject to the agreement.
Complete particulars of any transaction for
acquisition of securities made in pursuance of
underwri ting or market making shall be submit ted
to the Board on quarterly basis.
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Chapter XB of the SEBI (ICDR) Regulations
Marketmaker
Obligations
Market makers are required to providetwo way quotes for 75% of the time in a
day
There can not be more than 5 market
makers for a scripDuring the compulsory market makingperiod the promoter holding shall not be
eligible for offering to market makers
Market makers allowed to deregister onone months notice
Trading system may be either order-driven or quote driven
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ModelEquityListi
ngAgreement
Applicability of sub-clause (iv) of clause (b)
of proviso to Sec. 219 of the Companies
Act, 1956 i.e. a statement containing the
salient feature of all the documents can be
sent to shareholders instead of a full AnnualReport
Submission of Half Yearly Results instead
of Quarterly Results
No requirement of Publishing of FinancialResults
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Model Listing AgreementObligations and
Functions of
Merchant bankers
Fairness Opinion on valuation of
assets/ shares done by valuer of
the issuer, required from a
Merchant Banker in case proposed
resolution u/s 393 or u/s 100 of the
Companies Act, 1956
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Benefit of listing at SME Exchange
Equity Financing Opportunities Growth of Business
Expanded Investors Base
Enhancement of CompanysVisibility
Market Coverage
Increased Value of the Shares
Venture Capital Participation
Exit Options
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Distribution of Risk Eligibility for Transfer of Risk
Increased Financing Funds from Banking as well as
Capital Markets
Diversification of Resources ofFinance
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Liquidity for Shareholders
Becoming a listed public limited company establishes a market for acompany's shares, providing its investors with an efficient and regulatedvehicle in which to trade their shares. Greater liquidity in the stock marketcanlead to better valuation of shares than would be seen through privatetransactions.
Facilitate Growth Through Strategic Investments, Mergers AndAcquisi tions
Listed SMEs are more likely to getstrategic investments fromboth, domesticand international investors as well as companiesAs a listed public limited company, its shares can be utilized as anacquisition currency to acquire target companies, instead of a direct cash
offering. Using shares for an acquisition can be a cost- effective vehicle tofinance such a transaction.
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Other Aspects
Transparency, Efficiency and Liquidity
Involvement of Market Participants
Minimum Regulation and compliance requirements
Attraction to high Net Worth Investors
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SME Exchange - Attributes
Membership to the Existing Members Trading based on Quote/ Order/ Hybrid
Dealers Market
Based on Automatic Order Matching
T + 2 Rolling Settlement Period DEMAT connectivity
Trading System based on BSE Online Trading System
(BOLT)
Quotes by market makers and orders by investors
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SME Exchange: Key Players
Venture Capital Funds/ Banks/ Registrars/ Qualified
Sponsors/ Merchant bankers/ Market Makers
Cells for Technical & Non technical queries
Time to time mock trading Advisory:
o Preparation of Balance Sheets
oTimely Filling of Listing Requirements
o Offering Process whether IPO or Private Placement
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SME EXCHANGE & THE
COMPANYSECRETARY!!
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COMPANY POLICIES
OPERATIONAL PLANNING AND EXECUTION
DIR A DIR B DIR C DIR D DIR E
BOARD OF
DIRECTORS
CORPORATEPLANNING
LEGALFINANCE ANDACCOUNTS
HUMANRESOURCES
CORPORATECOMMUNICATION
PRODUCTIONAND OPERATIONS
MARKETINGINFORMATION
TECHNOLOGY
DEPARTMENTS IN A COMPANY
EXTERNAL STAKEHOLDERSCOMPANY
SECRETARY
INVESTORSINVESTORS
GOVERNMENT ANDREGULATORS
GOVERNMENT ANDREGULATORS
SOCIETYSOCIETY
SUPPLIERSSUPPLIERS
CUSTOMERSCUSTOMERS
LENDERSLENDERS
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Knowledge
of Securities &
Other Laws
LeadershipCommunication
Skills
Entrepreneurship
SKILLS OF A COMPANY SECRETARY.
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Keypoint between
Company &Stakeholders
StrategicPlanner
Face ofManagement
COMPANY SECRETARY
navigates the
CORPORATE GROWTHwith
GOOD GOVERNANCE
ROLE IN A LISTED COMPANY
EventManager
VigilanceOfficer
Knowledge ofVarious Securities
Laws
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Approvals
Required
By Company
Due Diligence
& Compliance
Appointment
of
Intermediaries
By
Intermediaries
Eligibility
Norms
Pricing of
securities
Contents of
Prospectus
COMPANY SECRETARY & SME
Post Issue
obligations
Compliance of
various Rules &
Regulations
Promoters
Disclosures
Migration
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ROLE IN AN UNLISTED COMPANY
Unlisted
Company
Object :
SME IPO
SME
ListedCompany
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AS PRACTISING COMPANY SECRETARY
Appearance
before :
SEBI SAT
CLB
Consent Orders
Brokers Audit
Securities
Audit
Corporate
Restructuring Capital
Restructuring
Unlocking
companys real
value
Certifications
as per Listing
Agreement
Certifications
required for
Corporate
Actions
As
PCS
As
Advisor
As
Represen
tator
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Corporate Professionals Capital Pvt. Ltd
SEBI Registered Category I Merchant Banker
D-28, South Extension -I,
New Delhi-110 049
Ph: +91.11.40622200; FAX: +91.11.40622201Contact: Anjali Aggarwal
Mobile: + 91 9971673336; Tel: +91.11.40622230
Email: [email protected]
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