start up listing & itp listing

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Startup SME Listing & Institutional Trading PlatformListing of start-ups and growing companies without an IPO

SEBI startup listing normsThe much awaited Alternate Capital Raising Platform is certainly a welcome initiative at least from an intent perspective. The Government andSEBIseems to have made the right noises in terms of permitting tech, product and e-commerce startups access capital markets as is prevalent globally. The possibility of a listing for a startup is a huge boon as it gives the much needed liquidity of holding an early exit option for investors.

continuedStartups have been permitted to issue ESOPs to their promoters and directors who hold more than 10 percent unlike other companies who are restricted from doing so.In June 2015, SEBI allowed the exchanges institutional trading platform (ITP) to be used for capital raising by start-ups which are intensive in their use of technology, information technology, intellectual property, data analytics, biotechnology or nano-technology, to provide products, services or business platforms with substantial value addition.However, even among these companies, only those that have at least 25% of their pre-issue capital being held by qualified institutional buyers (QIBs) were allowed to access the exchange platform.

Implementation and challengesDuring the year 2016-17, the Government took a number of steps towards facilitating ease of doing business for startups. The Norms under foreign exchange laws have been relaxed to allow startups to raise external commercial borrowings.Foreign Venture Capital Investors (FVCIs) who, hitherto, could invest in only certain specified sectors have now been permitted to invest in all startups, irrespective of the sector. Startups are permitted to issue sweat equity shares up to 50 percent of their paid up capital as against other companies which are restricted from issuing sweat equity shares in excess of 25 percent of their paid-up capital.

ISSUE OF SPECIFIED SECURITIES BY SMALL AND MEDIUMENTERPRISESSEBI (ICDR) Regulations (CHAPTER XA)

SEBI (ICDR) Regulations (Chapter XA)Post-issue face value capital does not exceed 10 crorePost issue face value capital is more than 10 crore rupees and upto 25 crore Minimum number of allottees - 50.Minimum application value Rs. 1,00,000100 % underwriting by merchant bankers and underwriters.The merchant banker/s shall underwrite at least fifteen per cent of the issue size on his/ their own account/s.

Migration to SME exchange / Main BoardA listed issuer whose post-issue face value capital is less than twenty five crore rupees may migrate its specified securities to SME exchange if its shareholders approve such migration by passing a special resolution through postal ballot to this effect.An issuer, whose specified securities are listed on a SME Exchange and whose post issue face value capital is more than ten crore rupees and upto twenty five crore rupees, may migrate its specified securities to Main Board if its shareholders approve such migration by passing a special resolution through postal ballot to this effect.

Eligibility Criteria of BSE SME (SME Platform)Net Tangible assets of at leastRs. 3 croresNet-Worth (excluding revaluation reserves) of at leastRs. 3 croresThe post-issue paid up capital of the company shall be at leastRs. 3 croresand should not exceed25 croresTrack record of distributable profits for at least two yearsThe minimum application and trading lot size shall not be less thanRs. 1,00,000The issue shall be 100% underwritten and Merchant Bankers shall underwrite 15% in their own accountMandatory Market making for atleast 3 years

continuedOther RequirementsCompanies shall mandatorily have a website.For listing on BSE SME platform promoters will mandatorily be required to attend an interview with the Listing Advisory Committee.

Eligibility Criteria of EMERGE - NSE SME (SME Platform)The post-issue paid up capital of the company (face value) shall not be more thanRs. 25 croreThe company should have track record of atleast 3 yearsThe company should have positive cash accruals (earnings before depreciation and tax) from operations for atleast 2 financial years preceding the application and its net-worth should be positive

continuedOther Disclosure (in the offer document)Any material regulatory or disciplinary action by a stock exchange or regulatory authority in the past one yearith the Listing Advisory Committee.The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) litigation record, the nature of litigation, and status of litigation.In respect of the track record of the directors, the status of criminal cases filed or nature of the investigation being undertaken with regard to alleged commission of any offence by any of its directors

LISTING ON INSTITUTIONAL TRADING PLATFORMSEBI (ICDR) Regulations (Chapter XC)

LISTING ON INSTITUTIONAL TRADING PLATFORMSEBI (ICDR) Regulations (Chapter XC):The provisions of this chapter shall apply to entities which seek listing of their specified securities exclusively on the institutional trading platform either pursuant to a public issue or otherwise.The institutional trading platform shall be accessible to institutional investors and non-institutional investors.

Eligibility CriteriaAn entity which is intensive in the use of technology, information technology, intellectual property, data analytics, bio-technology or nano-technology to provide products, services or business platforms with substantial value addition and at least twenty five per cent of its pre-issue capital is held by qualified institutional buyer.No person, individually or collectively with persons acting in concert, shall hold twenty five per cent or more of the post-issue share capital in an entity specified in sub-regulation

Listing without public issueFile a draft information document along with necessary documents with the Board in accordance with these regulationsRegulations relating to the following shall not be applicable in case of listingwithout public issue:(i) allotment;(ii) issue opening / closing;(iii) advertisement; (iv) underwriting;(v) regulation 26(5);(vi) pricing;(vii) dispatch of issue material;

continuedThe entity shall obtain in-principle approval from the recognised stock exchanges on which it proposes to get its specified securities listed.The entity shall list its specified securities on the recognised stock exchange within thirty days: from the date of issuance of observations by the Board; or from the expiry of the period stipulated in sub-regulation (2) of regulation 6, if the Board has not issued any such observations.Provisions relating to minimum public shareholding shall not apply to entities listed on institutional trading platform without making a public issue.

Listing pursuant to public issueFile a draft information document along with necessary documents with the BoaThe minimum application size shall be ten lakh rupees.The number of allottees shall be more than two hundred.The allocation in the net offer to public category shall be as follows:(a) seventy-five per cent to institutional investors:(b) twenty-five per cent to non-institutional investors;

Exit of entities listed without making a public issueAn entity whose specified securities are listed on the institutional trading platform without making a public issue may exit from that platform, if-(a) its shareholders approve such exit by passing a special resolution through postal ballot where ninety per cent of the total votes and the majority of non-promoter votes have been cast in favor of such proposal; and(b) the recognised stock exchange where its shares are listed approve of such an exit.