FAQs on preferential issue of equity shares and convertible securities under SEBI ICDR

Anushka Vohra, Manager | corplaw@vinodkothari.com

Table of Contents
Governing provisions	Allotment
Issuer and Allottee – eligibility	Board’s approval
Conditions precedent	Shareholders’ approval
Relevant Date for determining the price	In-principle approval
Pricing	Listing approval
Lock-in requirement	Annexure-I
Consideration

Governing provisions

1. What are the governing provisions around preferential issue of securities?

Preferential issue of securities is governed by section 62(1)(c) of the Companies Act, 2013 (“Act’) r/w Rule 13 of Companies (Share Capital and Debenture) Rules, 2014 (“SHA Rules”) and section 42 of the Act r/w Rule 14 of Companies (Prospectus and Allotment of Securities) Rules, 2014 (“PAS Rules”).

This apart, the provisions of sections 55 and 71 of the Act are applicable in case of issue of preference shares and debentures, respectively.

For issue of specified securities (equity shares and convertible security) in case of listed companies, along with the above provisions of the Act, Chapter V of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR”) r/w SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 also becomes applicable.

In case of issue of non-convertible securities, which are to be listed, provisions of SEBI (Issue and Listing of Non-Convertible Securities), 2021 also need to be complied.

In these FAQs, we intend to cover preferential issue of equity shares and securities convertible into equity shares.

2. What is meant by the term ‘preferential offer’?

As per explanation to Rule 13(1) of SHA Rules, the expression ‘Preferential Offer’ means an issue of:

• shares or
• other securities to-
  • any select person or
  • group of persons

on a preferential basis and does not include shares or other securities offered through a public issue, rights issue, employee stock option scheme, employee stock purchase scheme or an issue of sweat equity shares or bonus shares or depository receipts issued in a country outside India or foreign securities;

As per Reg. 2(1)(nn) of ICDR, “preferential issue” means an issue of specified securities by a listed issuer to any select person or group of persons on a private placement basis in accordance with Chapter V of these regulations and does not include an offer of specified securities made through employee stock option scheme, employee stock purchase scheme or an issue of sweat equity shares or depository receipts issued in a country outside India or foreign securities.

In other words, a preferential offer is one where an issuer gives preference to a select group of person(s) to subscribe to the shares / other securities of the company. Due to the preference that is given to the person(s), the governing provisions provide for transparency w.r.t. pricing, disclosure to shareholders, etc in order to ensure interest of the existing shareholders of the company. While ESOPs are also issued to a select number of persons and therefore, in the nature of private placement, however, is not included in the meaning of preferential offer.

3. Is there any limit to the number of persons to whom preferential allotment of securities can be made?

Yes. Pursuant to section 42 r/w Rule 14 of PAS Rules, preferential allotment of securities can be made to a maximum of 200 persons in a particular financial year. There are some exclusions to this number.

4. During FY 2021-22, a company makes a preferential issue of equity shares to 200 persons,  and additionally, warrants to 50 persons. Will this be in compliance with the maximum limit of persons to whom preferential issue can be made?

Yes. As per explanation to Rule 14(2) of PAS Rules, the limit of 200 in a financial year has to be reckoned separately for each kind of securities, that is, equity shares, preference share, etc.

5. Will the above limit be considered in case allotment of equity shares is pursuant to conversion of loan / debt?

No. Where the increase in subscribed capital is caused by exercise of option attached to debentures / loan for conversion into equity, as prescribed under section 62(3) of the Act, other provisions of section 62 shall not apply and thus the limit of 200 shall also not apply.

However, the above is subject to a condition that the terms of issue of such debentures / loan should have been approved by members by means of a special resolution.

In the case of Canning Industries Cochin Ltd v. SEBI, the WTM, SEBI, held that the company issued equity shares as an option attached to fully convertible debentures without complying with the provisions of private placement and that the issuance of equity shares was made to more than 200 persons. The SAT on an appeal, held that the Appellant had complied with 62(3) i.e. special resolution was passed at the time of issuance of fully convertible debentures and thus the restrictions of subscription of shares to 200 persons or more is not applicable in the instant case as it is not a case of private placement.

Issuer and Allottee – eligibility

6. What are the eligibility requirements for the issuer?

As per Reg. 159 of ICDR, an issuer shall not be eligible to make preferential issue if:

• any of its promoters / directors is a fugitive economic offender;
• if it has outstanding dues to SEBI, stock exchange(s) or the depositories.

7. What are the eligibility requirements for the proposed allottee(s)?

As per Reg. 159 of ICDR, a person shall not be eligible to subscribe to securities of an issuer whose specified securities are listed on stock exchange(s) under preferential allotment, if such person has:

• sold / transferred any equity shares of the issuer during 90 trading days preceding the relevant date

Conditions precedent

8. Are there any conditions precedent for the issuer?

Yes. In terms of ICDR there are certain conditions precedent to the issue, the same are as under:

• the issuer has to ensure that the entire pre-preferential shareholding of the proposed allottee(s), if any, is in dematerialised form (this has to be ensured before filing of in-principle approval application) {ref: Reg. 160 of ICDR};
• the issuer has to be in compliance with the Minimum Public Shareholding (“MPS”) requirement before coming up with a preferential issue {ref: Reg. 160 of ICDR};
• the issuer has to ensure that no SOP / fine / other fees should be outstanding to be paid to stock exchange(s) / SEBI (this has to be ensured before filing of in-principle approval application) {ref: Reg. 159 of ICDR};
• the proposed allottees(s) should have a demat account on the date of allotment; {ref: Reg. 160 of ICDR};

9. Minimum Public Shareholding is ascertained at which stage for the purpose of determining eligibility?

The compliance w.r.t. MPS has to be ensured by the issuer at two stages.

Stage I is when the board proposes to come up with a preferential issue; and

Stage II is when the proposed preferential issue gets completed.

Basically, both stage I and II are to ensured in advance, where for:

1. stage I – public shareholding prior to issue is checked; and
2. stage II – anticipated public shareholding post the issue is checked, taking into account the dilution that might take place.

Suppose, X Ltd wants to come up with a preferential issue and its public shareholding is below MPS of 25%, in this case X Ltd will first have to increase its public shareholding to comply with MPS and then only it can come up with the issue.

This was observed in the case of Ashav Advisory LLP v. SEBI. In this case the stock exchange(s) rejected in-principle approval on the grounds that the issuer was not in compliance with Reg. 160(d) i.e. MPS. On an appeal made by the issuer, SAT upheld the view of the stock exchange(s) stating that, ‘Regulation 160 of the ICDR Regulations prescribes conditions for issuance of preferential allotment. These conditions are mandatory and are required to be strictly adhered to by the issuer Company. Regulation 160(d) clearly stipulates that the issuer Company must be in compliance with Regulation 160 of the LODR. Admittedly, the issuer Company was not in compliance as it held 98.87% of the total shareholding and only 1.13% was with the public.’

Now suppose X Ltd is in compliance with Reg. 160(d) before coming up with the preferential issue but the post allotment shareholding pattern indicates dilution in public shareholding, resulting in breach of MPS, can the issuer come up with the preferential issue? Two views can be taken here, first that the issuer can come up with the preferential issue and the MPS can be achieved within 12 months as specified in Rule 19A of SCRA Rules, 1957 and second that the issuer cannot bring preferential issue if the issue would possibly dilute the public shareholding to below 25%.

If we go with the latter, the words in Reg. 160(d), ‘the issuer is in compliance with the conditions for continuous listing of equity shares as specified in the listing agreement..’ will have to be interpreted in a way that continuous compliance would be required throughout the preferential issue.

Relevant Date for determining the price

10. What is the significance of the relevant date?

“Relevant date” is significant for determining the price of the equity shares that will be allotted pursuant to preferential issue or price of underlying equity shares where convertible securities are issued on a preferential basis.

11. How does one determine the relevant date?

Relevant date is defined under Reg. 161 of the ICDR to mean a date 30 days prior to the date on which AGM / EGM / postal ballot will be done to consider the proposed preferential issue.

To illustrate the same, suppose a company proposes to conduct its AGM on 29.08.2022, the relevant date will be the date 30 days prior to 29.08.2022 which is 29.07.2022.

12. How is the relevant date determined in case of convertible securities?

In case of convertible securities the issuer has the option to either choose the date as mentioned in ans no. 11 or a date 30 days prior to the date on which the holders of convertible securities become entitled to apply for the underlying equity shares.

13. What is the interpretation of the term, ‘entitled to apply’?

Two viewpoints can be taken in interpreting the term, ‘entitled to apply’:

1. to mean the date on which the board of directors pass resolution for allotment of convertible securities; or
2. to mean the date on which the holder of convertible securities makes an application to exercise the option of conversion.

The justification of a. could be that the holder of convertible securities becomes eligible to apply for the conversion option when the convertible securities are allotted to him. However, the same would not be true where optionally convertible debentures / preference shares are offered as the option to convert or to not convert lies with the allottee.

The justification of b. seems to be more rational in case of optionally convertible debentures / preference shares.

This issue has been discussed in the case of Nath Seeds Ltd v. SEBI. This case involved issuance of optionally convertible debentures where the issuer had taken the relevant date to be as per b. above. SEBI took the view that the conversion price should be fixed by taking the relevant date as 30 days prior to the date of AGM. The issuer filed an appeal to SAT, SAT agreed with the interpretation of the Appellant.

14. In case of preferential issue of convertible securities, if the issuer opts for the relevant date as per Reg. 169(a) i.e. date mentioned in response to q. 11, can the issuer subsequently change the date to be as per Reg. 169(b) i.e. date mentioned in response to q. 12?

No. The relevant date is important for determining the price. In case the relevant date is changed the price will also get changed. Further, the relevant date is to be disclosed to the shareholders as a part of the explanatory statement so that there is transparency w.r.t. pricing.

This issue has been discussed in the case of Blue Chip Tex Industries Ltd v. SEBI. In this case the issuer had chosen the relevant date to be 30 days prior to the date of shareholder’s meeting and the price was calculated at Rs. 14.63. On the date the warrant holder exercised the right to convert warrants into equity shares, the Appellant took the relevant date as that date and the price was calculated as Rs. 10. The Appellant applied to stock exchange(s) for listing of equity shares at the reduced price of Rs. 10. The listing approval was not granted by the stock exchange(s) and reaffirmed by SEBI. On an appeal to SAT, SAT held that, ‘merely because the company had the option at the time of EGM would not justify the subsequent change. This is clearly contrary to the mandate given by the shareholders in the EGM…’

Pricing

15. What is meant by frequently traded shares?

As per Reg. 164 of ICDR, frequently traded shares means shares of the issuer in which the traded turnover (i.e. volume) on any recognised stock exchange during the 240 trading days preceding the relevant date is at least 10% of the total number of shares of such class of the issuer. Further, ‘traded turnover of shares’ means the total number of shares traded on any recognized stock exchange during the specified period. To understand this, let us take an illustration, the volume of shares traded during the period of 240 days preceding the relevant date is say 13,25,000 and the total number of shares of the said company of the same class is say 62,00,000 shares. In this case, the traded turnover comes to 21.37% [(1325000/6200000)*100]. Therefore, the shares of this company will come under the category of being frequently traded.

16. What is the methodology for determining the price?

The equity shares / the underlying equity shares (in case of convertible securities) under preferential issue shall be offered at a price determined in accordance with Reg. 164 of ICDR. Such price is termed as floor price i.e. the minimum price and the same shall be:

• VWAP of the related equity shares quoted on recognised stock exchange for
  1. 90 trading days preceding the relevant date or
  2. 10 trading days preceding the relevant date;

whichever is higher among 1 or 2

• if the data for 90 trading days is not available i.e. the equity shares have been traded on a recognised stock exchange for a period less than 90 trading days preceding the relevant day, the price shall be:
  1. average of the VWAP of the related equity shares quoted on the recognised stock exchange during the period the equity shares have been listed, being less than 90 trading days or
  2. average of the VWAP of the related equity shares quoted on the recognised stock exchange during two weeks preceding the relevant date or
  3. price at which equity shares were issued by the issuer in its IPO or
  4. value per share arrived at in a scheme of compromise, arrangement and amalgamation under sections 230 to 240 of the Act pursuant to which equity shares have been listed.

17. What is the formula for Volume Weighted Average Price?

The formula for Volume Weighted Average Price (“VWAP”) is:

Total turnover for 90 trading days / 10 trading days preceding the relevant date divided by total volume of shares traded during 90 trading days / 10 trading days preceding the relevant date.

To illustrate further: for 90 trading days

T1+T2+T3+….+T90 / V1+V2+V3+….+V90

where, T refers to turnover and V refers to volume.

Similarly for 10 trading days

T1+T2+T3+….+T10 / V1+V2+V3+….+V10

For the purpose of computing VWAP, the issuer has to open the trading data on the stock exchange(s), enter the date upto which the data is required (i.e. 90 trading days preceding the relevant date), download excel as required above and apply requisite formula.

18. Who can determine the floor price as mentioned in Reg. 164?

Reg. 164 provides only the methodology for determining the floor price and does not state who shall determine the same. The in-principle approval checklist of BSE and NSE provides for a reasonable assurance certificate to be obtained from a practicing company secretary, practicing chartered accountant or statutory auditor of the issuer along with calculation of floor price.

19. Is valuation report from Registered Valuer required to be obtained?

Valuation report from a Registered Valuer is required in the following cases:

• specified securities issued for consideration other than cash; {ref. first proviso to Reg. 163(3) of ICDR}
• preferential issue results in allotment of more than 5% of the post issue fully diluted share capital of the issuer; {ref. Reg. 166A of ICDR}
• preferential issue is likely to result in change in control of the issuer. {ref. Reg. 166A of ICDR}

20. What is taken as the denominator while calculating the post allotment shareholding?

While calculating the post allotment shareholding, the denominator shall be the paid-up share capital of the issuer post the preferential allotment taking into consideration the paid-up share capital on a fully diluted basis. In other words, the increase in paid-up share capital that will be caused pursuant to conversion of convertible securities shall also be taken into account.

21. How does one determine change in control?

The term ‘control’ has to be understood from the meaning assigned to it under the Act as well as the SEBI Takeover Regulations which are on similar lines. Since, we are dealing specifically with preferential issue of equity and other convertible securities here, any change in the holding or any other controlling aspect (for instance, entering into management agreement  or any other agreement so as to get the right to take part in the policy making decision) in the issuer company which either introduces  a new investor(s) along the existing shareholder or ceases the controlling stake of the existing shareholder in a manner that the new or the incoming acquirer obtains controlling rights by any means including that by way of shareholding.

22. Does ICDR have provisions for mandating formation of committee of independent directors for preferential issue?

As per Reg. 166(A)(2), in case a preferential issue is likely to result in change in control of the issuer, the issuer will have to form a committee of independent directors before calling a general meeting for the proposed preferential issue.

The committee of independent directors shall provide reasoned recommendation after considering all aspects of the proposed preferential issue. These recommendations shall form part of the explanatory statement to the notice of the AGM / EGM.

It is important to note that any change in control would trigger Reg. 4 of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 (“SAST”). SAST anyways provides for mandatory formation of a committee of independent directors.

Board’s approval

23.  What are the preparatory steps required before the board meeting?

 Following are the preparatory steps required before the board meeting:

a.   preparation of list of the proposed allottee(s);

b.   obtaining PAN of all the proposed allottee(s);

c.    where proposed allottee is a body corporate, obtaining PAN of Ultimate Beneficial Owners (“UBOs”) of the allottee(s);

d.   ensuring that the proposed allottee(s) have a demat account or else sensitizing them to take steps for opening a demat account;

e.   obtaining Beneficial Position (BenPos) from the RTA on the date preparation of list of allottees to check whether the proposed allottee(s) have pre-preferential shareholding;

f.     in case proposed allottee(s) are already holding shares of the issuer, making application to NSDL / CDSL; as the case may be for lock-in of such pre-preferential shareholding {refer lock-in};

g.   determination of relevant date. The entire pre-preferential shareholding of the proposed allottee(s), if any shall be under lock-in as on the relevant date;

h.   obtaining transaction statement(s) of all the proposed allottee(s) having demat account for a period of 90 trading days prior to the relevant date.

24.  What agenda(s) are to be taken to the board for the process of preferential issue?

Approval of board is required for issuance of securities and for matters incidental to the issuance of securities under preferential issue, which are as under:

• increase of authorized share capital – section 61 of the Act;
• issuance of securities – section 179 of the Act;
• appointment of Registered Valuer – section 247 of the Act;
• taking note of the relevant date;
• taking note of private placement cum application letter
• approving the notice of AGM / EGM  for considering the preferential issue

Shareholders’ approval

25. What information / documents are required to be placed before the shareholders for considering the preferential issue?

Rule 13 of SHA Rules, Rule 14 of PAS Rules r/w Reg. 163 of ICDR provides for the information / documents that are required to be placed before shareholders for considering the preferential issue. The same is provided as Annexure-I to the FAQs.

In-principle approval

26. What is the timeline for filing the in-principle application with the stock exchanges?

The in-principle application has to be filed on the day of dispatch of notice of the AGM / EGM for consideration of the proposed issuance.

27. What documents are required to be submitted with the exchange(s) for making in-principle application?

The following documents as mentioned in the checklist of BSE and NSE are required to be submitted to the exchange(s):

• Certified true copy of board resolution passed by board of directors approving the preferential issue;
• Certified copy of resolution passed by the shareholders at the general meeting approving the issue;
• Confirmations from issuer;
• NSDL / CDSL confirmation for corporate action for lock-in of pre-preferential holding;
• Certificate from practicing company secretary / practicing chartered accountant confirming the pricing methodology;
• transaction statement of all allottees issued by NSDL / CDSL reflecting lock-in of pre-preferential shareholding, if any;
• valuation report from in case Reg. 166A is getting attracted / the preferential issue is for consideration other than cash;

Lock-in requirement

28. What are the provisions with respect to lock-in of equity shares?

As per Reg. 167 of ICDR, there are two lock-in provisions, one is w.r.t. lock-in of pre-preferential shareholding and the other is w.r.t. lock-in of shares allotted pursuant to the issue. The same is explained as under:

Proposed allottee	Pre-preferential shareholding	Shares allotted pursuant to the issue
	start date	end date	start date	end date
Promoter / promoter group	from the relevant date	upto 90 trading days from trading approval	–	upto 18 months from the date of trading approval
Non promoters	from the relevant date	upto 90 trading days from trading approval	–	upto 6 months from the date of trading approval

29. What are the provisions with respect to lock-in of convertible securities?

In terms of Reg. 167 of ICDR, in case of convertible securities, provisions w.r.t. lock-in is applicable to both i.e. convertible securities and the equity shares (post conversion).

1. w.r.t. convertible securities:

Proposed allottee	Pre-preferential shareholding	Convertible securities allotted pursuant to the issue
	start date	end date	start date	end date
Promoter / promoter group	from the relevant date	upto 90 trading days from trading approval	–	upto 1 year from the date of allotment approval
Non promoters	from the relevant date	upto 90 trading days from trading approval	–	upto 1 year from the date of allotment approval

2. w.r.t. equity shares (post conversion):

Same as mentioned in response to q. 27.

30. In case the proposed allottees have pre-preferential shareholding which has to be put to lock-in, what shall be the lock-in end date?

As per Reg. 167 of ICDR, the lock-in of pre-preferential shareholding shall start from the Relevant Date and shall be upto a period of 90 trading days from:

• trading approval – in case of equity shares / convertible securities(if listed)
• allotment date – in case of convertible securities / warrants which will not be listed since there will be no trading approval.

The same has also been clarified by SEBI vide its Informal Guidance in the matter of Jindal Steel & Power Limited

31. If pre-preferential shareholding of a proposed allottee(s) are under pledge, how will compliance of Reg. 167(6) be ensured?   

As per Reg. 167(6), the entire pre-preferential shareholding of the allottees shall be under lock-in from the relevant date upto a period of 90 trading days from trading approval. In case the pre-preferential shareholding of the allottee(s) are under pledge, the proposed allottee(s) will have to obtain an undertaking from the banks / financial institution that they shall not sell / transfer the pledged shares inorder to comply with Reg. 167(6).

This declaration forms part of the in-principle approval checklist of the stock exchange(s) and has to be submitted to the exchange(s).

32. Is there any exemption to the provisions of lock-in?

As per Reg. 168(1) of ICDR, the promoters inter-se can transfer the equity shares during the lock-in period.

Consideration

33. What are the forms of consideration accepted for allotment of equity shares under preferential issue?

The equity shares can be allotted for cash or for consideration other than cash i.e. in kind.

34. How is consideration other than cash defined?

Consideration other than cash has not been defined in the Act and the Regulations. The word has been interpreted by SAT in the matter of Jct Limited v. SEBI. In this case, SAT referred to Ramaiah’s compilation in terms of Departments clarification -II, which reads as: ‘allotment of shares by a company to a person in lieu of a genuine debt due to him is in perfect compliance of the provisions of section 75(1)”^[1]

In this case Jct Limited had availed loan from Phoenix ARC at an interest rate of 19% p.a. The interest rate being at a higher side, Jct Limited entered into agreement with Phoenix ARC for allotment of equity shares in lieu of 3% interest. SAT held that allotment of equity shares against payment of interest was for consideration other than cash.

35. In case the proposed allottee pays the consideration by way of cheque and the same is received by the Company on the date of allotment. In other words, the cheque has not been deposited by the Company on the date of allotment. Will receipt of cheque be considered as sufficient form of consideration in compliance with Reg. 170 of ICDR

The consideration can be paid in the form of cheque or other banking channels. In case the consideration is made in the form of cheque, the Company has to ensure that the cheque gets deposited and the amount gets credited to the bank account on the date of allotment. This is to be ensured to avoid instances of cheque getting bounced and be in compliance with the Reg. 170 of ICDR.

Allotment

36. What is the timeline of allotment of securities issued through preferential offer?

Allotment of securities is within the power of the board of directors. The board resolution for allotment has to be passed within 15 days from:

1.  the date of passing a special resolution or
2. the last date on which approval(s) from authorities, if any, has been received by the issuer.

37. In case the allotment is not made within the timelines specified, what remedy is available to the issuer?

Refer 170 (2) of ICDR, in case allotment of securities offered by way of preferential issue is not completed within the specified time, the issuer will have to pass another special resolution approving the preferential issue and the relevant date will change accordingly.

38. As per section 42(8) of the Act, return of allotment in e-Form PAS-3 has to be filed with the ROC. The e-Form does not provide for warrants as a field. Is e- Form PAS-3 required to be filed for warrants?

Ans: As per section 42(8) of the Act r/w Rule 14 of PAS Rules, companies have to file return of allotment of securities issued by way of private placement in e-Form PAS-3 within 15 days from the date of allotment of securities.

The definition of securities is as provided under clause 2(h) of Securities Contracts (Regulation) Act, 1956 which states as under:

“(h) “securities”— include

(i)   shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities  of  a  like  nature  in or  of  any  incorporated company…”

Therefore, for the purpose of compliance u/s 42(8), company may file e-Form PAS-3 by attaching a clarification letter in this regard.

Listing approval

39. What is the timeline for filing the application for listing with the stock exchanges?

The application for listing approval has to be filed with the stock exchange(s) within 20 days of allotment of specified securities.

40. What is the remedy in case there is delay in filing the listing application with the stock exchange(s)?

In case listing application is not filed within 20 days from the date of allotment, penalty of Rs. 20,000 per day shall be levied as per the SEBI circular dated 19.08.2019.

41. What documents are required to be submitted with the exchange(s) for making listing application?

The following documents as mentioned in the checklist of BSE and NSE are required to be submitted to the exchange(s):

• certified true copy of the resolution of the board meeting for approving the preferential issue;
• certified true copy of the resolution of the general meeting for approving the preferential issue;
• certified true copy of shareholding pattern of the company, pre and post in the format given under Reg. 31(1) of LODR;
• transaction statement of all allottees issued by NSDL / CDSL reflecting lock-in of pre-preferential shareholding, if any;
• certificate from statutory auditor certifying the receipt of consideration;
• certificate from practicing company secretary / practicing chartered accountant / statutory certifying compliance;
• confirmation from issuer

42. If the issuer proposes to issue unlisted convertible securities and only the equity shares post conversion will be listed. Is the listing application required to be submitted?

No. If the issuer proposes to issue unlisted convertible securities, listing approval would not be applicable.

In this case, the issuer has to only mention the details of convertible securities outstanding on the interface of the stock exchange(s).

Annexure-I

Information required to be placed before the shareholders:

1. particulars of the offer including date of passing of Board resolution;
   • objects of the issue;
   • total number of shares or other securities to be issued;
   • price or price band at/within which the allotment is proposed;
   • basis on which the price has been arrived at along with report of the registered valuer;
   • name and address of valuer  who performed valuation;
   • amount which the company intends to raise by way of such securities;
   • relevant date with reference to which the price has been arrived at;
   • class or classes of persons to whom the allotment is proposed to be made;
   • intention of promoters, directors or key managerial personnel to subscribe to the offer;
   • proposed time within which the allotment shall be completed;
   • names of the proposed allottees and the percentage of post preferential offer capital that may be held by them;
   • change in control, if any, in the company that would occur consequent to the preferential offer;
   • number of persons to whom allotment on preferential basis have already been made during the year, in terms of number of securities as well as price;
   • justification for the allotment proposed to be made for consideration other than cash together with valuation report of the registered valuer;
   • pre issue and post issue shareholding pattern of the company in the format provided;
   • allotment of securities on a preferential basis made pursuant to the special resolution passed pursuant to sub-rule (2)(b) shall be completed within a period of twelve months from the date of passing of the special resolution;
   • the price of the shares or other securities to be issued on a preferential basis, either for cash or for consideration other than cash, shall be determined on the basis of valuation report of a registered valuer;
   • identity of the natural persons who are the ultimate beneficial owners of the shares proposed to be allotted and/or who ultimately control the proposed allottees;
   • the percentage of post preferential issue capital that may be held by the allottee(s) and change in control, if any, in the issuer consequent to the preferential issue;
   • undertaking that the issuer shall re-compute the price of the specified securities in terms of the provision of these regulations where it is required to do so;
   • undertaking that if the amount payable on account of the re-computation of price is not paid within the time stipulated in these regulations, the specified securities shall continue to be locked- in till the time such amount is paid by the allottees;
   • the current and proposed status of the allottee(s) post the preferential issues namely, promoter or non-promoter;
   • material terms of raising such securities, proposed time schedule, purposes or objects of offer, contribution being made by the promoters or directors either as part of the offer or separately in furtherance of objects; principle terms of assets charged as securities.

---

^[1] Section 75 of Companies Act, 1956 (39 of 2013)