SEBI guidelines (1992) on public issue envisage the listing of securities on any stock exchange or OTCEI.
OTCEI is a company incorporated in 1990 under the Companies Act. It became operational on September 1992.
ADVERTISEMENTS:
OTCEI is a recognized stock exchange under the securities Contract (Regulation) Act, 1956. The objective of the OTCEI is to help companies raise finances from capital in a cost effective manner and provide a convenient and effective avenue of capital market investment for investors at large.
Listing on OTCEI may be sought by companies with an equity capital of less than Rs. 10 Crore or closely held companies wanting to attain a listed company status and company assisted by venture capitalists.
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Listing Requirements of OTCEI:
a. The minimum issued share capital of a company must be Rs. 30 lakhs, subject to a minimum public offer of equity shares worth of Rs. 20 lakh.
b. Companies with an issued equity capital or more than Rs. 500 lakhs, seeking listing on the OTC will have to comply with the listing requirements and guidelines that are applicable to such companies for enlistment on other recognized stock exchanges.
ADVERTISEMENTS:
c. Non-Bank Financial companies involved in investment, finance, leasing and hire-purchase have to be registered with RBI.
d. Listing will be granted only on the issue being fully subscribed. Offer documents of companies
e. Seeking listing on the OTCEI will not be vetted by the SEBI.
Underwriting, under writer, which is preferably a bank, broker or F.I. agrees to purchase a certain number of shares if there is under subscription of the issue. The consideration paid to the underwriter is called under writing commission.
ADVERTISEMENTS:
Issuers have the option of dividing whether the issue is to be underwritten or not. The number of underwriters registered with SEBI as on March 31, 2000 was 42. If the issue is not underwritten and if the minimum subscription of 90% of the offer to the public is not received, the entire amount received as subscription would have to be returned infill.
The issuer decides regarding the number of underwriters. The lead managers much satisfy themselves about the net worth of the underwriters and the outstanding commitment. They must disclose the same to the SEBI. The underwriting arrangements may be filled with the stock exchanges.
Minimum Subscription:
90% subscription is mandatory for each issue of capital and rights issue. Within 60 days of the opening of the issue, the company should receive 90% of the issued amount from public subscription plus accepted development from underwriters. If the company could not do so, then the entire amount of subscription is needed to be refunded.