Compliance with Listing
Agreement by
Small and Medium
Enterprises.
Neelam Bhardwaj
Introduction
 How SMEs are defined ?
 What provisions to comply ?
 Penal Provisions
An issuer is considered a SME
• whose post issue face value capital does not
exceed ten crore rupees
• whose post issue face value capital is
between ten crore rupees and twenty five
crore rupees
Chapter X- B of SEBI (ICDR)
regulations
Model Equity Listing Agreement
of SMEs
Penal Provisions
Contained in section 23(2), 23A and 23 E of SCRA and
section 15 of SEBI Act
SCRA
For any non compliances – on conviction be punishable
with imprisonment for a term which may extend to 10
years or with fine which may extend to 25 cr or with both.
For failure to furnish information within specified time or to
maintain books : Penalty of up to Rs 1 lakh for each day
or 1 cr whichever is less, for each such failure.
Suspension or withdrawal of admission to dealing in
securities or delisting for non compliance with Listing
conditions
Penal Provisions
SEBI Act 1992
Section 15 A©For failure to furnish information within specified time or
maintain books of accounts : Penalty of 1 lakh for each
day or 1 cr whichever is less for each failure.
ICDR Regulations
• Procedure– Offer doc to SEBI/ Ses. No observations from SEBI. Offer doc on
websites of SEs, SEBI
•
•
•
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Mandatory 100% underwriting of the issue
Min application value of Rs 1 lakh
Minimum no. of allottees – 50
Migration to SME Exchange– If Post issue FV capital of a listed company is between
Rs 10-25 cr, can migrate to SME exchange subject to
its shareholders’ approval where consent in favor is at
least 2 times that of votes against the proposal.
ICDR Regulations
• Migration to Main Board
o If post issue face value capital is between Rs 10- 25 cr, it is
optional for the issuer to migrate to Main Board subject to its
shareholders’ approval where consent in favor is at least 2 times
that of votes against the proposal
o If post issue face value capital of the Issuer exceeds Rs 25 crmandatory to migrate to Main Board
• Market Making
• Compulsory market making for min 3 years from the date of
listing, to be ensured by Merchant Banker.
Compliances under Listing
Agreement
• Appointment of Company Secretary as a
compliance Officer – Clause 50(a)
• Issue letters of allotment, regret, certificate
etc as soon as possible
• Unclaimed shares to be put in suspense
account.
• Give details of these unclaimed shares in
annual report.
Compliances under Listing
Agreement
• No charging of fees exceeding those agreed
by SEs- issue of new certificate,
consolidation , split etc
• Register transfer of securities if documents
in order.
• Notify SEs promptly about prohibition /
attachment order.
Compliances under Listing
Agreement
• Declare and disclose dividend on per share
basis.
• Notify SEs, at least 21 days in advance
about the date on which dividend, interest ,
redemption etc is payable.
• Within 15 minutes of the closure for Board
mtg, inform SEs about any decisions
affecting the capital of the company.
Compliances under Listing
Agreement
• In case of rights issue-offer shares to all
shareholders on pro rata basis , fix the
record date, supply renunciation form, to
give at least 4 weeks to shareholders to
record their interest and exercise their rights
• To obtain in- principle approval for further
issue of capital
Compliances under Listing
Agreement
• Compulsory migration to main board if post
issue face value capital exceeds Rs 25 cr.
• True and fair disclosures in all documents
• Filing of scheme of arrangements at least 30
days in advance, to SEs
– Disclosure of pre and post scheme capital and shareholding pattern
in the notice and the “fairness opinion”
– File an auditors’ certificate certifying compliance with Accounting
Standards
Compliances under Listing
Agreement
• Promptly inform change in general nature of
character of business
• Promptly inform change in Board of directors
• Promptly submit to SEs and display on websites:
• Annual report, complete balance sheets, Profit and loss
account
• Notices and resolutions circulars , call letters etc.
• Proceedings at AGM or EGM
• Maintain a website.
Compliances under Listing
Agreement
• Promptly inform any price sensitive information
• Maintain at least 25% of total number of shares with
public
• Deposit 1% of the issue amt with SE while making an
issue
• At least once in a year at the time of AGM, transfer
books shall be closed.
• Inform at least 2 working days in advance of the
board mtg where decisions regarding dividend or
redemption or conversion of debentures will be taken.
Compliances under Listing
Agreement
• Disclosures in Annual report
• If delisted or suspension from trading- reasons
• Names of SEs where shares are listed
• Filing on half yearly basis:
Shareholding pattern.
Financial results – unaudited subject to limited review
or audited, Unaudited within 45 days and audited within
60 days.
Compliances under Listing
Agreement
• Intimation of board mtg at least 7 days in advance
where financial results are being considered .
• Where there is variation more than 10% in Net
Profit or loss or in extraordinary items or Rs 10
lakhs whichever is higher, explanation to Ses, after
approval from the Board.
• If there are qualifications, disclose its impact on
profit or loss and also include a note as to how the
same has been resolved and if not , why not.
Compliances under Listing
Agreement
• Half yearly and annual results shall be prepared in
accordance with principles laid down in AS.
• Disclose change in accounting policy, if any
• Disclose any material event which can impact the
financials of the issuer.
• Disclose details of investor complaints in half
yearly disclosure
• Display Financial results in website
Compliances under Listing
Agreement
• Disclose variation between projected and actual
utilization of issue proceeds on half yearly basis.
• Ensure Board composition with at least 1/3
independent directors if chairman is non executive
and at least ½ if chairman is executive
• Board to have code of conduct which shall be
conformed by every director
Compliances under Listing
Agreement
• Set up a audit committee to be chaired by
independent director . CS to act as a secretary of
the committee, at least 4 mtgs in a year with a gap
of not more than 4 months between 2 mtgs.
• If issuer has a subsidiary, at least one independent
director of holding company shall be a director in
board of Material non listed Indian subsidiary
company.
• Financial statements of sub co to be reviewed by
Board of holding co esp investments by unlisted
subsidiary.
Compliances under Listing
Agreement
• Disclosures in Annual report
- Basis of related Party disclosures
- Accounting treatment
- Risk Management
- Proceeds from public issue
- Remuneration of directors
- shareholders
Compliances under Listing
Agreement
• Report on Corporate Governance- within 15 days
of each quarter to SEs
• Certificate about compliance with CG conditions to
be annexed with Directors report and to be sent to
SEs.
• If the issuer has not commenced operations,
disclose amt raised, spent, status of project etc.
• If the issuer’s business is seasonal , disclosure
seasonal nature of its activities
Thank you