Regulation 158 - Provisions of this chapter not to apply in certain cases - Securities and Exchange Board of India (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2018

CHAPTER V PREFERENTIAL ISSUE Provisions of this chapter not to apply in certain cases 158. (1) The provisions of this Chapter shall not apply where the preferential issue of equity shares is made pursuant to: a) conversion of a loan or an option attached to convertible debt instruments in terms of sub-sections 4 [ **** ] (3) and (4) of section 62 of the Companies Act, 2013, whichever is applicable; 5 [ Provided that the provisions of this chapter shall apply to conversion of a loan or an option attached to convertible debt instruments into equity shares as mentioned in clause (a) subject to the provisions of the proviso to sub-section (3) of section 62 of the Companies Act, 2013 ] b) a scheme approved by a High Court under section 391 to 394 of the Companies Act, 1956 or approved by a tribunal or the Central Government under sections 230 to 234 of the Companies Act, 2013, as applicable; Provided that the pricing provisions of this Chapter shall apply to the issuance of shares under schemes mentioned in clause (b) in case of allotment of shares only to a select group of shareholders or shareholders of unlisted companies pursuant to such schemes; c) a qualified institutions placement in accordance with Chapter VI of these regulations. (2) The provisions of this Chapter, except the lock-in provisions, shall not apply where the preferential issue of specified securities is made in terms of the rehabilitation scheme approved by the Board of Industrial and Financial Reconstruction under the Sick Industrial Companies (Special Provisions) Act, 1985 [1 of 1986] or the resolution plan approved under Section 31 of the Insolvency Bankruptcy Code, 2016 [No. 31 of 2016], whichever is applicable. (3) The provisions of this Chapter relating to pricing and lock-in shall not apply to equity shares allotted to any financial institution within the meaning of sub-clauses (ia) and (ii) of clause (h) of section 2 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (51 of 1993). (4) The provisions of regulation 163 and sub-regulations (1), (2), (3) and (4) of regulation 164 shall not apply to a preferential issue of equity shares and compulsorily convertible debt instruments, whether fully or partly, where the Board has granted relaxation to the issuer in terms of regulation 11 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, if adequate disclosures about the plan and process proposed to be followed for identifying the allottees are given in the explanatory statement to notice for the general meeting of the shareholders. (5) The provisions of sub-regulation (1) of regulation 159 and sub-regulation (6) of regulation 167 shall not apply to a preferential issue of specified securities where the proposed allottee is a mutual fund registered with the Board or insurance company registered with Insurance Regulatory and Development Authority of India or a scheduled commercial bank or a public financial institution. (6) The provisions of this Chapter shall not apply where the preferential issue of specified securities is made to the lenders pursuant to conversion of their debt, as part of a debt restructuring 1 [******] implemented in accordance with the guidelines specified by the Reserve Bank of India, subject to the following conditions: a) guidelines for determining the conversion price have been specified by the Reserve Bank of India in accordance with which the conversion price shall be determined and which shall be in compliance with the applicable provisions of the Companies Act, 2013; b) conversion price shall be certified by two independent valuers; c) specified securities so allotted shall be locked-in for a period of one year from the date of their allotment Provided that for the purpose of transferring the control, the lenders may transfer the specified securities allotted to them before completion of the lock-in period subject to continuation of the lock-in on such securities for the remaining period, with the transferee; d) the lock-in of equity shares allotted pursuant to conversion of convertible securities issued on preferential basis shall be reduced to the extent the convertible securities have already been locked-in; e) the applicable provisions of the Companies Act, 2013 are complied with, including the requirement of a special resolution. 2 [ Explanation. For the purpose of this sub-regulation, lenders shall mean all scheduled commercial banks (excluding Regional Rural Banks) and All India Financial Institutions. ] 3 [*****] ********** Notes 1. Omitted vide NOTIFICATION No. SEBI/LAD-NRO/GN/2019/05 dated 29-03-2019 before it was read as scheme 2. Inserted vide NOTIFICATION No. SEBI/LAD-NRO/GN/2019/05 dated 29-03-2019 3. Omitted vide NOTIFICATION No. SEBI/LAD-NRO/GN/2019/05 dated 29-03-2019 before it was read as (7) The provisions of this Chapter shall not apply where the preferential issue of specified securities is made to person(s) at the time of lenders selling their holding of specified securities or enforcing change in ownership in favour of such person(s) pursuant to a debt restructuring scheme implemented in accordance with the guidelines specified by the Reserve Bank of India, subject to the following conditions: a) guidelines for determining the issue price have been specified by the Reserve Bank of India in accordance with which the issue price shall be determined and which shall be in compliance with the applicable provisions of the Companies Act, 2013; b) issue price shall be certified by two independent valuers; c) specified securities so allotted shall be locked-in for a period of at least three years from the date of their allotment; d) lock-in of equity shares allotted pursuant to conversion of convertible securities issued on preferential basis shall be reduced to the extent the convertible securities have already been locked-in; e) special resolution has been passed by shareholders of the issuer before the preferential issue; f) issuer shall, in addition to the disclosures required under the Companies Act, 2013 or any other applicable law, disclose the following information pertaining to the proposed allottee(s) in the explanatory statement to the notice for the general meeting proposed for passing the special resolution as stipulated at clause (e) of this sub-regulation: a. identity, including that of the natural persons, who are the ultimate beneficial owners of the shares proposed to be allotted and/ or who ultimately control the proposed allottee(s); b. business model; c. statement on growth of business over a period of time; d. summary of audited financial statements of previous three financial years; e. track record, if any, in turning around companies; f. proposed roadmap for effecting turnaround of the issuer. g. applicable provisions of the Companies Act, 2013 are complied with. 4. Omitted vide Notification No. SEBI/LAD-NRO/GN/ 2022/ 63 dated 14-01-2022 before it was read as (3) and (4) of sections 81 of the Companies Act, 1956 or sub-section 5. Inserted vide Notification No. SEBI/LAD-NRO/GN/ 2022/ 63 dated 14-01-2022