Issue of Share Warrants to promoters

[Pooja Agrawal]

 Hi,

Please help me out with these queries -

Is there a limit upto which share warrants can be issued to Promoters ? If so where is it specified? I couldn't find the same in SEBI Guidelines.

Also in case of a listed company, is it necessary to intimate to SE about the BM in which the such preferential allotment of issue of Share warrants is to be considered? Clause 19 doesn't specify share warrants.

Regards,
Pooja Agrawal

[Pooja Agrawal]

[Ratti Wahal]

please refer to chapter vii of icdra.

 

u will get answers of ur most of the questions from that chapter.

 

Regards,

 

Ratti Wahal

--
Find eNewsletters of ICSI Mysore at: http://www.icsi.edu/NewsEvents/enewsletters/tabid/1757/Default.aspx AND www.esnips.com/web/icsimysore
 
You received this message as you are subscriber. To unsubscribe email to: csmysore-u...@googlegroups.com

[madhuri hegde]

Dear Pooja,

 

As per my knowledge, there is no limit for issue of share warrants to promoters on preferential basis in SEBI guidelines.

 

 But in case after conversion of warrants if it results in increase in the shareholding of promoters above the threshold limits under Takeover regulations then disclosures needs to be made as per SAST regulations.

 

i agree with you that, as per clause 19, there is no requirement for prior intimation to stock exchange regarding the BM held only to consider the issue of share warrants.

 

But as per sub-clause (a) of clause 22 of listing agreement - the outcome of the BM held even to consider or decide, any increase in capital, in any way shall be intimated to Stock Exchage within 15 minutes from end of meeting.

 

but warrants only upon conversion shall result in increase in capital therefore i interpret that even it is not mandatory to intimate stock exchange regarding the outcome of the board meeting held just to consider issue of warrants

 

Practically, as a prudent listed company although its not mandatory it is always better to  intimate the stock exchange in as it is a matter of public interest.

 

 kindly correct me if am wrong.

 

 

[

 

Clause 22 :

The Company will, immediately on the date of the meeting of its Board of Directors held

to consider or decide the same, intimate to the Exchange within 15 minutes of the

closure of the Board Meetings by Letter/fax (or, if the meeting be held outside the City

of Mumbai, by fax/ telegram)

(a) short particulars of any increase of capital whether by issue of bonus shares

through capitalization, or by way of right shares to be offered to the

shareholders or debenture holders, or in any other way;

]

--

[Pooja Agrawal]

Thanks Madhuri .....

Could u please clarify one more thing.......If post conversion the promoters SH increases beyond 75%, then its violation of the SAST regulations...and also the condition of continuous listing of equity shares as specified in  SCRA (which requires min 25% to be public SH)

So we can say that the limits within which the warrants can be issued to promoters is that the total SH of promoters post conversion doesn't go beyond 75% of the issued capital. Is this understanding of mine correct?

So if current promoters SH is 74.75%, can we issue share warrants to the promoters?

Regards,
Pooja Agrawal

[bhavani prasad]

Pooja

Promoters holding should not increase beyond 75% of post issued capital.Otherwise SAST regulations get attracted and the promoters are forced to go for open offer.

As you said if current SH of promoters is 74.75% you can issued more 0.25% of post issued capital.

But at all circumstances its better to restrict the holding of promoters to less than 25%.

CS Bhavani Prasad C N
Company Secretary

[madhuri hegde]

Dear Pooja,

 

As per my knowledge, if the current promoters shareholding is 74.75% then one can issue warrants to promoters  untill their share holding reaches 74.99%.

 

but if its below 54% or 74% and it is exceeding 55% or 74% now upon issuing warrants then SAST has to be adhered to.

 

members kindly correct me if am wrong.

 

Regards

 

 Madhuri Hegde

[pavithra madhwesh]

Dear Members,

 

I would like to add to the points of other members.

 

The situation is summarised as under:

 

1. The company is a listed company

2. The promoters presently hold 74.75% shares in the company.

3. The company wants to issue convertible warrants to promoters.

 

As per Regulation 11(2) of Takeover Code, if acquirer is holding between 55% to 75% and acquires additional shares (even 1 share) then, he should make public announcement and open offer.

 

In the present case, since the acquirer (promoter) is already holding 74.75%, and on conversion of warrants - he will acquire additional shares, then, on such conversion the acquirer should make the open offer.

 

Now, coming back to the minimum public shareholding criteria; post conversion and post open offer, the public shareholding will fall below 25% for sure. In this case, there are three options available to the company / acquirer:

 

1. Promoter can offload his holding in the company to come below 75% OR

2. The company can issue further shares to the public (excluding promoters) to raise the public holding to 25% or more OR

3. The company do not opt for any of the above, then it should be delisted.

Member's views solicited.

Thanks and regards,

 

Pavithra and Madhwesh

 

9535574123 / 9972072349 / 9980672126