Securities and Exchange Board of India (“SEBI”) on 12 June 2013 notified SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013 (“Regulations”) and bestowed the much needed clarity on the issuance and listing of the non-convertible redeemable preference shares (“NCRPS”). While before notification of these Regulations, SEBI (Issue and Listing of Debt Securities) Regulations, 2008[1] and SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009[2] (“Pre-existing Regulations”) were in place to deal with issuance and listing of certain securities, the Pre-existing Regulations did not cover the issuance and listing of NCRPS. Notification of the Regulations therefore bridges this gap. Given that in the last 3 (three) years, more than INR 250,000,000,000 (Indian Rupees Two hundred and fifty billion) has been raised through preference share issuance by 295 companies and that in 2011-12 alone, 147 issuers have tapped this market to raise INR 100,000,000,000 (Indian Rupees One hundred billion)[3], the notification of these Regulations is a very welcome step primarily because they offer (a) an additional opportunity to companies to raise funds by providing for listing of NCRPS and; (b) transparency in the process for issuance of NCRPS, giving the investors an opportunity to make an informed investment. The Regulations are applicable to public issue of NCRPS, listing of NCRPS issued through public issue or on a private placement basis and issue of perpetual non-cumulative preference shares and perpetual debt instrument issued by banks on private placement basis. The key features of the Regulations are as follows:

1. Lays down the procedure, conditions and compliances for issue of NCRPS in a public issue;
2. Makes the listing of NCRPS desired to be offered in a public issue mandatory and sets out the conditions for such listing;
3. Makes the listing of NCRPS issued on private placement basis optional and sets out conditions for such listing;
4. Lays down the conditions for continuous listing and trading of NCRPS;
5. Lays down the conditions for issuance of perpetual non-cumulative preference shares and perpetual debt instrument issued by banks on private placement basis; and
6. Lists down the powers of SEBI with regard to all of the above.

This update was released on 08 Jul 2013.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.

Legal Update Team
MANSUKHLAL HIRALAL & COMPANY
Advocates, Solicitors and Notaries
T: +91 22 40565252
Mumbai Office: Surya Mahal, 2nd Floor, 5, Burjorji Bharucha Marg, Fort, Mumbai-400 023, India
Delhi Office: Block C-9, Lower Ground Floor, Jangpura Extension, New Delhi - 110 014, India
www.mhcolaw.com

"Noted lawyer in the Real Estate practitioner from India" - Chambers & Partners

Please consider the environment before printing this email

The information contained in this communication is intended solely for the use of the individual or entity to whom it is addressed and others authorized to receive it. This communication may contain confidential or legally privileged information. If you are not the intended recipient, any disclosure, copying, distribution or action taken relying on the contents is prohibited and may be unlawful. If you have received this communication in error, or if you or your employer does not consent to email messages of this kind, please notify the sender immediately by responding to this email and then delete it from your system. No liability is accepted for any harm that may be caused to your systems or data by this message.