Date: 2024-03-13Category: Not ApplicableState: Union GovernmentCountry: India
Repeal of circular(s) outlining procedure to deal with cases where securities are issued prior to April 01, 2014, involving offer / allotment of securities to more than 49 but up to 200 investors in a financial year
**Summary:**
This circular, issued by the Securities and Exchange Board of India (SEBI) on March 13, 2024, announces the repeal of Circular No. CIRCFDDIL/3/182015 dated December 31, 2015, and Circular No. CFDDIL/3/CIR/P/2016/53 dated May 03, 2016. These earlier circulars outlined a procedure for companies to avoid penal action under the Companies Act, 1956, if they had issued securities to more than 49 but up to 200 investors in a financial year prior to April 1, 2014, by providing investors with an option to surrender their securities and receive a refund with a minimum of 15% interest per annum.
The repeal is effective six months from the date of the circular's issuance. After this period, all cases involving offers or allotments of securities to more than the permissible number of investors will be addressed according to extant applicable laws. The option to avoid penal action remains available only to companies that have completed the entire procedure and submitted the required certificate within this six-month period.
Recognized stock exchanges are advised to inform listed entities about this circular and disseminate it on their websites. The circular is available on the SEBI website under the "Legal Framework > Circulars" category.
For further information, contact Yogita Jadhav, General Manager, Corporation Finance Department, at +91 22 2644 9583 or yogitaj@sebi.gov.in.
Key Entities Referenced
Securities and Exchange Board of India (SEBI): A regulatory body for securities markets in India, responsible for investor protection and market regulation. SEBI issued the circular being analyzed.
Securities and Exchange Board of India Act, 1992: The act of parliament that established SEBI and defines its powers and functions.
Circular No. CIRCFDDIL3182015 dated December 31, 2015: A SEBI circular that outlined the procedure to deal with cases where securities were issued prior to April 01, 2014, involving offers to more than 49 but up to 200 investors in a financial year. This circular is being repealed.
Circular No. CFDDIL3CIR P201653 dated May 03, 2016: A SEBI circular that also outlined the procedure to deal with cases where securities were issued prior to April 01, 2014, involving offers to more than 49 but up to 200 investors in a financial year. This circular is being repealed.
Companies Act, 1956: A former law governing companies in India, which has been repealed. The circulars being rescinded provided a means to avoid penal action under this act.
Companies Act, 2013: The current law governing companies in India. The repeal of the circulars takes into account the provisions of this act.
Recognised Stock Exchanges: The entities to whom this circular is addressed. They are instructed to disseminate the circular to listed entities.
Yogita Jadhav: General Manager, Corporation Finance Department at SEBI. The signatory of the circular.
CIRCULAR
March 13, 2024
SEBI/HO/CFD/PoD-1/P/CIR/2024/ 016
To
All Recognised Stock Exchanges
Dear Sir/Madam,
Sub: Repeal of circular(s) outlining procedure to deal with cases where securities
are issued prior to April 01, 2014, involving offer / allotment of securities to more
than 49 but up to 200 investors in a financial year.
Ref: Circular No. CIR/CFD/DIL3/18/2015 dated December 31, 2015 and Circular
No. CFD/DIL3/CIR/ P/2016/53 dated May 03, 2016.
1. In exercise of the powers conferred under Section 11(1) of the Securities and
Exchange Board of India Act, 1992, SEBI had issued Circular No.
CIR/CFD/DIL3/18/2015 dated December 31, 2015 and Circular No. CFD/DIL3/CIR/
P/2016/53 dated May 03, 2016, stating that in respect of cases under the Companies
Act, 1956, involving issuance of securities to more than 49 persons but up to 200
persons in a financial year, the companies may avoid penal action if they provide the
investors with an option to surrender the securities and receive the refund amount at
a price not less than the amount of subscription money paid along with 15% interest
p.a. thereon or such higher return as promised to the investors. This opportunity to
avoid penal action was provided to the issuer companies considering the higher cap
for private placement provided in the Companies Act, 2013.
2. Given that considerable time has elapsed since the repeal of the Companies Act, 1956,
in exercise of the powers conferred under Section 11(1) of the Securities and
Exchange Board of India Act, 1992 to protect the interests of investors in securities
and to promote the development of, and to regulate the securities markets, it has now
Page 1 of 2been decided to repeal the aforesaid circulars and the same shall stand rescinded with
effect from 6 months from the date of issue of this circular, without prejudice to the
operation of anything done or any action taken under the said circulars.
3. The above said option shall be available under the circular only to those companies
who have completed the entire procedure and submitted the certificate in terms of
circular No. CIR/CFD/DIL3/18/2015 dated December 31, 2015 and Circular No.
CFD/DIL3/CIR/P/2016/53/dated May 03, 2016, within 6 months from the date of
issue of this circular.
4. Accordingly, all cases involving an offer or allotment of securities to more than the
permissible number of investors in a financial year shall be dealt with in line with the
provisions contained under the extant applicable laws.
5. The Stock Exchanges are advised to bring the provisions of this circular to the notice
of listed entities and also to disseminate the same on their websites.
6. A copy of this circular is available on SEBI website at www.sebi.gov.in under the
categories “Legal Framework → Circulars”.
Yours faithfully,
Yogita Jadhav
General Manager
Corporation Finance Department
+91 22 2644 9583
Email - yogitag@sebi.gov.in
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