A Basic And Proactive Approach To The Preferential Allotment Of Securities By Listed Companies

Introduction to the Topic

As per the Company Act 2013, read with the SEBI (ICDR) Regulations 2018, as amended the companies in India can raise funds through different methods including preferential allotment, right issue, IPOs, employee stock option plan (ESOP), and sweat equity shares. Among all these methods preferential allotment is most suitable fundraising option for unlisted companies when existing shareholders are not intended to infuse more capital in the company.

Preferential Issue as the name suggests, is raising funds from a select group of persons including individuals, venture capitalists, companies, or any other person (who may or may not be the existing shareholders) and not exceeding 200 persons in aggregate in a financial year.

How to determine the price at which shares are to be issued?

The price of shares to be issued by way of preferential allotment shall be determined by a registered valuer in accordance with the provisions contained in the Companies Act, 2013. In addition, where any of the proposed allottee is a person resident outside India, then the following pricing guidelines as provided in Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 shall apply:

• In case of listed company, price worked out in accordance with relevant SEBI Guidelines; i.e. in accordance with Regulation 164 of the SEBI (ICDR) Regulations 2018.
• In case of unlisted company, valuation done as per any internationally accepted pricing methodology for valuation on an arm's length basis duly certified by a Chartered Accountant or a Securities and Exchange Board of India registered Merchant Banker or a practising Cost Accountant

Can shares be offered to existing shareholders under preferential allotment?

Although there is no restriction on offering shares to the existing shareholders under preferential allotment, but it is generally advisable that in case the company wishes to issue shares to existing shareholders, then it shall opt for rights issue instead of preferential allotment as the compliance in case of rights issue is comparatively less.

Do we need to obtain shareholders' consent for preferential issues?

Yes, in case of preferential issue, shares are generally offered to persons other the existing shareholders which leads to dilution of voting rights of the existing shareholders. Companies Act, 2013, thus, prescribes for obtaining shareholders' consent by way of special resolution for preferential allotment of shares.

PROCEDURE FOR PREFERENTIAL ISSUE OF SHARE FOR OTHER THAN LISTED COMPANIES

Section 62 read with Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014 and Section 42 read with Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014 prescribes the procedures and provisions applicable on preferential allotment of shares.

1. Convening a Board Meeting: The following matters shall be transacted at the Board Meeting:

• Consideration of Valuation Report
• Approval for issue of shares on preferential allotment basis.
• Finalization of list of proposed allottees and the offer period
• Fixation of day, date, time and venue of General Meeting for seeking approval of Members for the proposed issue of shares
• Approval of draft Offer cum Application Letter PAS-4
• Approval for opening of bank account

2. Opening a separate Bank Account: The company is required to open a separate bank account for receiving the amount of consideration in respect of the shares proposed to be issued by way of preferential allotment.

3. Convening a General Meeting: A general meeting of members is required for seeking approval of members by way of special resolution for issuance of shares on preferential allotment basis.

4. Filing of Form MGT-14: After passing of special resolution, Form MGT-14 is required to be filed with the Registrar of Companies as soon as possible as without filing the Offer letter cannot be circulated.

5. Circulation of letter of offer in PAS-4: After Form MGT-14 has been filed with the Registrar, letter of offer in Form PAS-4 is required to be circulated by the company to all the proposed allottees.

6. Payment of consideration: After receipt of letter of offer, the allottees will make payment for the consideration amount in the bank account opened by the company specifically for this purpose.

7. Convening Board Meeting for allotment of shares: Within 60 days of the receipt of application money, a board meeting shall be conducted for allotment of shares to those shareholders who have accepted the offer.

8. Filing Return of Allotment: A return of allotment in Form PAS-3 shall be filed with the Registrar of Companies.

9. Filing Form FC-GPR: Within 30 days of passing of board resolution for allotment of shares, Form FC-GPR is required to be filed with RBI in case any of the proposed allottee is a person resident outside India, if any.

PROCEDURE FOR PREFERENTIAL ISSUE OF SHARE IN CASE OF LISTED COMPANIES

The preferential issue of shares is a method through which listed companies issue securities to select investors on a preferential basis. This process is governed by the Securities and Exchange Board of India (SEBI) regulations and ensures transparency, fairness, and adherence to the legal framework. Below is a step-by-step guide detailing the procedure for the preferential issue of shares by listed companies.

1. First Obtain a signed letter of Interest for Participation by Proposed allottees along with DP Transaction statement, Pan, E-Mail, Mobile No. and Aadhar etc, along with Detail of PAN and Name of Beneficial Owners (In case of Corporates LLP/ Firms/ HUF etc.).
2. Give Intimation of Trading Window Closure to Stock Exchange (XBRL+PDF).
3. Give Prior Intimation to Stock Exchange about the Board Meeting (XBRL+PDF).
4. Convene an Audit Committee Meeting to consider and recommend the board for proposed allotment of Shares or Convertible Warrants or Other Securities through Preferential Allotment.
5. Convening a Board Meeting: The following matters shall be transacted at the Board Meeting:
   • After Recommendation of Audit Committee Approve the issuance of shares on a preferential allotment basis, subject to approval of Shareholders,
   • Finalize the list of proposed allottees and determine the offer period.
   • Set the date, time, and venue for the General Meeting to seek shareholder approval.
   • Approve the draft Offer cum Application Letter PAS-4.
   • Approve the opening of a separate bank account for the transaction.
   • Approve the Relevant Date for the Purpose of Deriving Value for Offer in terms of Regulation 161.
6. Submit the Outcome of Board Meeting along with detailed disclosures as per SEBI Circulars.
7. Opening a separate Bank Account: The company must open a dedicated bank account to receive the subscription amount for shares to be issued on a preferential basis.
8. Prepare and send notice to call Shareholders Meeting (general meeting/Postal Ballot Prepare and issue the notice for the General Meeting or Postal Ballot, including all required disclosures as per SEBI and other regulations.

   Information required to be placed before the shareholders:

   The explanatory statement to the Notice of EGM/ AGM/ Postal Ballot seeking approval of shareholders for Preferential; Allotment shall disclose the following information.

   • Objects of the issue; total number of shares or other securities to be issued;
   • price or price band at/within which the allotment is proposed;
   • basis on which the price has been arrived at along with report of the registered valuer; name and address of valuer who performed valuation;
   • amount which the company intends to raise by way of such securities;
   • relevant date with reference to which the price has been arrived at;
   • class or classes of persons to whom the allotment is proposed to be made;
   • intention of promoters, directors or key managerial personnel to subscribe to the offer;
   • proposed time within which the allotment shall be completed;
   • names of the proposed allottees and the percentage of post preferential offer capital that may be held by them;
   • change in control, if any, in the company that would occur consequent to the preferential offer; number of persons to whom allotment on preferential basis have already been made during the year, in terms of number of securities as well as price;
   • justification for the allotment proposed to be made for consideration other than cash together with valuation report of the registered valuer;
   • pre issue and post issue shareholding pattern of the company in the format provided;
   • allotment of securities on a preferential basis made pursuant to the special resolution passed pursuant to sub-rule (2)(b) shall be completed within a period of twelve months from the date of passing of the special resolution; the price of the shares or other securities to be issued on a preferential basis, either for cash or for consideration other than cash, shall be determined on the basis of valuation report of a registered valuer;
   • identity of the natural persons who are the ultimate beneficial owners of the shares proposed to be allotted and/or who ultimately control the proposed allottees;
   • the percentage of post preferential issue capital that may be held by the allottee(s) and change in control, if any, in the issuer consequent to the preferential issue;
   • undertaking that the issuer shall re-compute the price of the specified securities in terms of the provision of these regulations where it is required to do so
   • undertaking that if the amount payable on account of the re-computation of price is not paid within the time stipulated in these regulations, the specified securities shall continue to be locked- in till the time such amount is paid by the allottees;
   • the current and proposed status of the allottee(s) post the preferential issues namely, promoter or non-promoter;
   • material terms of raising such securities, proposed time schedule, purposes or objects of offer, contribution being made by the promoters or directors either as part of the offer or separately in furtherance of objects;
   • principle terms of assets charged as securities.
   • And other material information's, if any.
9. Submit In principal approval request to the Stock Exchanges:

   The company must apply for in-principle approval to the stock exchange(s) where its equity shares are listed on the same day, the notice to shareholder is dispatched. The application must include the following:

   • Certified copy of the resolution passed by the Board of Directors approving the preferential issue
   • Certified true copy of the notice convening the AGM/EGM/Postal Ballot of shareholders along with the explanatory statement
   • Confirmations from the Issuer under Regulation 28(1) of the SEBI (LODR) Regulations, 2015.
   • Certificate from Practicing Chartered Accountant / Practicing Company Secretary Confirming the dematerialization of all existing holding of the proposed allotee and the price methodology or a valuation report thereof.
   • DP Transaction statement of the proposed allottee(s) from 90 trading days prior to the relevant date till commencement of lock-in.
   • NSDL/CDSL confirmation for corporate action for lock in of pre-preferential holdings
   • A certificate from Bank/ FI if the pre-preferential holding of the allottee is under pledge.
   • A certificate from the statutory auditor or Audit Committee of the Company.
    

   Points to be Considered:

   • Obtain in-principle approval under regulations 28 (1) of SEBI LODR regulations from the Exchange prior to the issuance of any security through preferential issue.
   • Application seeking in-principle approval of the stock exchange(s), to be submitted, on the same day when the notice has been sent in respect of the general meeting seeking shareholders' approval.
   • Obtain Permanent Account Numbers (PAN) of the proposed allottees, before submitting the application seeking in-principle.
   • The company shall ensure compliance with the conditions for continuous listing of equity shares as specified in the listing agreement with the stock exchange where the equity shares of the issuer are listed.
   • Ensure there are no outstanding dues like pending SOP fines, annual listing fees, processing fees, etc.
   • An explanatory statement to notice sent to the shareholders obtaining approval for the preferential issue shall contain all the disclosures as mentioned under Regulation 163 (1) of SEBI (ICDR) Regulations, 2018 including the Ultimate Beneficial Owner details.
   • If the Issue size exceeds 100 crores, ensure compliance with item no. 3.2 of annexure A of NSE Circular no. NSE/CML/2023/51 dated July 05,2023.
   • Ensure compliance with item no. 3.1 of annexure A of NSE Circular no. NSE/CML/2023/51 dated July 05, 2023, and upload the Issue summary document with either of stock exchange at time of submitting the application.
   • Ensure compliance with SEBI (SAST) Regulations, 2011 and other applicable regulations.
   • Ensure that all equity shares held by the proposed allottees in the issuer are in dematerialized form.
   • The tenure of the convertible securities of the issuer shall not exceed eighteen months from the date of their allotment.
   • Allottee shall not have sold or transferred any equity shares of the company during the 90 trading days preceding the relevant date.
   • 90 / 10 trading days volume weighted average price shall be calculated by taking into consideration aggregate daily turnover in the scrip over the period of 90/10 trading days and dividing the same by the total number of shares traded during the said period.
   • In case valuation is triggered in terms of any of the provisions of chapter V of SEBI (ICDR) Regulations, 2018 or pursuant to the Articles of Association of the company, ensure submission of a Valuation report along with the application.
   • The entire pre-preferential allotment shareholding of the allottees (ie. the shareholding of the allotee as on the date of the allotment of the security being issued on preferential basis), if any, shall be locked-in for the period as stated in regulation 167(6) of SEBI (ICDR) Regulation, 2018.
   • The transaction statement to be provided shall be:

   a. duly certified,

   b. issued by the Depository Participant,

   c. for a period of 90 trading days prior to the relevant date till commencement of lock-in / relevant date,

   d. reflect lock-in end date of entire pre-preferential holding

10. Publish Notice in Newspapers and submit a copy thereof to the Stock Exchange, (To be done on Next day of Dispatching Notice).
11. Convening The General Meeting:

    A general meeting of members is required for seeking approval of members by way of special resolution for issuance of shares on preferential allotment basis.

    Issue of Warrants - In the case of warrants, an amount equivalent to at least 25% of the consideration shall be paid against each warrant on or before the date of allotment of warrants and the balance 75% of the consideration shall be paid on or before the date of allotment of the equity shares.

12. Payment of Additional Listing Fees While Submitting IN-Principle approval request and Other Important Points to consider:
    • Issue summary document in XBRL format is also to be submitted along with approval
    • Ensure payment of additional listing fees as applicable.
    • Ensure compliance with item no. 3.1 of annexure A of NSE Circular no. NSE/CML/2023/51 dated July 05, 2023, and upload the Issue summary document with either of stock exchange at time of submitting the application.
    • The company shall ensure compliance with the conditions for continuous listing of equity shares as specified in the listing agreement with the stock exchange where the equity shares of the issuer are listed.
    • Ensure there are no outstanding dues like pending SOP fines, annual listing fees, processing fees, etc.
    • Ensure compliance with SEBI (SAST) Regulations, 2011 and other applicable regulations.
13. File Form MGT-14 after passing of the Resolution in Shareholders Meeting, as soon as possible as without that the Company cannot circulate offer letter with proposed allottees.
14. Complete allotment Process within 15 Days from the Date of approval of Shareholder or date of in-principal approval from Stock Exchanges, whichever is later. (I.e. Circulate offer letter, open offer and receive funds and make allotment of securities to the Proposed allottees ).

    Note: In case of Multiple Stock Exchanges, the Date shall be counted from the date when the Approval of later is received.

    In case the allotment is not made within the timelines specified

    Regulation 170 (2) of ICDR provides that in case allotment of securities offered by way of preferential issue is not completed within the specified time, the issuer will have to pass another special resolution approving the preferential issue and the relevant date will change accordingly.

    Further the offer letter in PAS-4 cannot be circulated unless the form MGT-14 has been filled with the ROC for approval received from the shareholders.

15. Submit Listing approval within 20 Days from the date of allotment to the Stock exchange

    The Issuer shall make an application to the exchange/s for listing within 20 days from the date of allotment of securities which are to be listed. In case of delay in making application, the Exchange shall levy fine as per SEBI circular no SEBI/HO/CFD/DIL2/CIR/P/2019/94 dated August 19, 2019.

    • Certified copy of the resolution passed by the shareholders at the AGM /EGM/Postal Ballot approving the preferential / private placement.
    • Certified copy of the resolution passed by the Board of Directors for allotment of equity shares / convertible securities on preferential / private placement basis.
    • Certified true copy of the shareholding pattern, pre and post issue of shares
    • Certificate* from Statutory Auditors in Prescribed Format.
    • An Assurance Certificate* from Practicing Company Secretary in Prescribed Format.
    • Confirmation from the Issuer in prescribed format.
    • Certified true copy of Statement of Holding of the allottee(s) as on the date of allotment of securities issued by the Depository Participant. Further, the statement shall reflect lock-in end date of entire pre-preferential holding.
    • Certified true copy of transaction statement reflecting lock-in creation date and lock-in end date of the warrants/convertible securities allotted, issued by the Depository Participant. OR Depository confirmation for corporate action for lock in of warrants/convertible securities allotted.
    • Issue Details in prescribed format.
    • Issue summary document in XBRL format is also to be submitted along with approval request.
     

    Note: In case listing application is not filed within 20 days from the date of allotment, penalty of Rs. 20,000 per day shall be levied as per the SEBI circular dated 19.08.2019.

16. File Final Listing & Trading Approval Application with the Stock-Exchange.

    Submit the Final application for trading approval within 7 Days from the receipt of the Listing Approval along with all documents:

    o Confirmation form the Depositories i.e. NSDL/CDSL.

    o Issuer Confirmation in the prescribed form

    o Confirmation certificates form the Practising Company Secretary in the prescribed format for list of allottees.

SEBI (ICDR) REGULATIONS 2018 - CHAPTER V

(Regulation 158 to Regulation 170)

REGULATION 159 - ISSUERS INELIGIBLE TO MAKE A PREFERENTIAL ISSUE

1. Preferential issue of specified securities shall not be made to any person who has sold or transferred any equity shares of the issuer during the 90 trading days preceding the relevant date.
2. Where any person belonging to promoter(s) or the promoter group has previously subscribed to warrants of an issuer but has failed to exercise the warrants, the promoter(s) and promoter group shall be ineligible for issue of specified securities of such issuer on preferential basis for a period of one year.
3. If the Promoters or directors is a fugitive economic offender.
4. if the Issuer has any outstanding dues to the Board, the stock exchanges or the depositories.

REGULATION 160 - CONDITIONS FOR PREFERENTIAL ISSUE

A listed issuer making a preferential issue of specified securities shall ensure that: -

• all equity shares allotted by way of preferential issue shall be made fully paid up at the time of the allotment.
• a special resolution has been passed by its shareholders
• all equity shares held by the proposed allottees in the issuer are in dematerialised form
• the issuer is in compliance with the conditions for continuous listing of equity shares
• the issuer has obtained the Permanent Account Numbers of the proposed allottees, except those allottees which may be exempt by the SEBI.
• the issuer has made an application seeking in-principle approval to the stock exchange on the same day when the notice seeking shareholders' approval is sent.

REGULATION 161 - RELEVENT DATE FOR PREFERNETIAL ISSUE

For the purpose of this Chapter, "relevant date" means -

• In case of preferential issue of equity shares, the date thirty days prior to the date on which the meeting of shareholders is held to consider the proposed preferential issue.
• In case of a preferential issue of convertible securities, either the relevant date referred to in clause (a) of this regulation or a date thirty days prior to the date on which the holders of the convertible securities become entitled to apply for the equity shares.

Where the relevant date falls on a weekend or a holiday, the day preceding the weekend or the holiday will be reckoned to be the relevant date.

REGULATION 162 - TENURE OF CONVERTIBLE SECURITIES

• The tenure of the convertible securities of the issuer shall not exceed eighteen months from the date of their allotment.
• Upon exercise of the option by the allottee to convert the convertible securities the issuer shall ensure that the allotment of equity shares is completed within 15 days from the date of such exercise by the allottee.

REGULATION 162 A - MONITORING AGENCY

• If the issue size exceeds one hundred crore rupees, the issuer shall make arrangements for the use of proceeds of the issue to be monitored by a credit rating agency registered with the Board.
• The monitoring agency shall submit its Quarterly report to the issuer till hundred percent of the proceeds of the issue have been utilised.
• The board of directors and the management of the issuer shall provide their comments on the findings of the monitoring agency.
• The issuer shall, within forty-five days from the end of each quarter, upload the report of the monitoring agency on its website and also submit the same to the stock exchange.

REGULATION 163 - DISCLOSURES TO SHAREHOLDERS

The issuer shall, in addition to the disclosures required under the Companies Act, 2013 or any other applicable law, disclose the following in the explanatory statement to the notice for the general meeting proposed for passing the special resolution:

• The Objects of the preferential issue;
• Maximum number of specified securities to be issued;
• Intent of the promoters, directors, key managerial personnel or senior management of the issuer to subscribe to the offer;
• Shareholding pattern of the issuer before and after the preferential issue;
• Time frame within which the preferential issue shall be completed;
• Identity of the natural persons who are the ultimate beneficial owners of the shares proposed to be allotted and/or who ultimately control the proposed allottees.
• Undertaking that the issuer shall re-compute the price of the specified securities in terms of the provision of these regulations
• Undertaking that if the amount payable on account of the re-computation of price is not paid within the time stipulated in these regulations, the specified securities shall continue to be locked- in till the time such amount is paid by the allottees.
• Disclosures, if the issuer or any of its promoters or directors is a wilful defaulter or a fraudulent borrower.
• Details of Valuer performing Valuation.
• The current and proposed status of the allottee(s) post the preferential issues namely, promoter or non-promoter.

Note: The issuer shall place a copy of the certificate of a practicing company secretary before the general meeting of the shareholders considering the proposed preferential issue, certifying that the issue is being made in accordance with the requirements of these regulations.

For Share Swap (Consideration other than Cash): Specified securities may be issued on a preferential basis for consideration other than cash, provided that it shall comprise only swap of shares pursuant to a valuation report by an independent registered valuer.

The special resolution shall specify the relevant date on the basis of which price of the equity shares to be allotted on conversion or exchange of convertible securities shall be calculated.

REGULATION 164 - PRICING OF FREQUENTLY TRADED SHARES

If the equity shares of the issuer have been listed on a recognised stock exchange for a period of 90 trading days or more as on the relevant date, the price of the equity shares to be allotted pursuant to the preferential issue shall be not less than higher of the following:

• the 90 trading days' volume weighted average price of the related equity shares quoted on the recognised stock exchange preceding the relevant date; or
• the 10 trading days' volume weighted average price of the related equity shares quoted on the recognised stock exchange preceding the relevant date.

Further, The valuation can be done under Regulation 164 A (Pricing in preferential issue of shares of companies having stressed assets ) or 164B (Optional pricing in preferential issue) as the case may be.

REGULATION 165 - PRICING OF INFREQUENTLY TRADED SHARES

Where the shares of an issuer are not frequently traded, the price determined by the issuer shall take into account the valuation parameters including book value, comparable trading multiples, and such other parameters as are customary for valuation of shares of such companies:

Provided that the issuer shall submit a certificate stating that the issuer is in compliance of this regulation, obtained from an independent registered valuer to the stock exchange where the equity shares of the issuer are listed.

REGULATION 166- ADJUSTMENTS IN PRICING

The price determined for a preferential issue in accordance with regulations 164, 164A, 164B or 165 shall be subject to appropriate adjustments as per Conditions stipulated under Regulation 166.

REGULATION 166A - OTHER CONDITIONS FOR PRICING

• Any preferential issue, which may result in a change in control or allotment of more than five per cent. of the post issue fully diluted share capital of the issuer, to an allottee or to allottees acting in concert, shall require a valuation report from an independent registered valuer and consider the same for determining the price and if the proposed allotment result in a change in control of the issuer, it shall also cover guidance on control premium and shall be published on the website of the issuer and a reference of the same shall be made in the notice calling the general meeting of shareholders.
• Any preferential issue, which may result in a change in control of the issuer, shall only be made pursuant to a reasoned recommendation from a committee of independent directors of the issuer after considering all the aspects relating to the preferential issue including pricing, and the voting pattern of the said committee's meeting shall be disclosed in the notice calling the general meeting of shareholders and the said meeting of the independent directors shall be attended by all the independent directors.

REGULATION 167 - LOCK-IN RESTRICTIONS

• The specified securities, allotted on a preferential basis to the promoters or promoter group and the equity shares allotted pursuant to exercise of options attached to warrants issued on a preferential basis, shall be locked-in for a period of 18 months from the date of trading approval.
• Provided further that equity shares allotted in excess of the twenty per cent. shall be locked-in for six months from the date of trading approval pursuant to exercise of options or otherwise, as the case may be.
• Provided further that in case of convertible securities or warrants which are not listed on stock exchanges, such securities shall be locked in for a period of one year from the date of allotment.
• The specified securities allotted on a preferential basis to persons other than the promoters and promoter group and the equity shares allotted pursuant to exercise of options attached to warrants issued on preferential basis to such persons shall be locked-in for a period of six months from the date of trading approval.

Regulation 167(6): Lock-in on Pre-Preferential Holding

The entire pre-preferential allotment shareholding of the allottees, if any, shall be locked-in from the relevant date up to a period of 90 trading days from the date of trading approval, Provided that in case of convertible securities or warrants which are not listed on stock exchanges, the entire pre-preferential allotment shareholding of the allottees, if any, shall be locked-in from the relevant date up to a period of 90 trading days from the date of allotment of such securities.

REGULATION 167 - LOCK-IN AND RESTRICTIONS ON TRANSFERABILITY

The specified securities, allotted on a preferential basis to the promoters or promoter group and the equity shares allotted pursuant to exercise of options attached to warrants issued on a preferential basis, shall be locked-in for a period of 18 months from the date of trading approval.

REGULATION 167A: PLEDGE OF LOCKED-IN SPECIFIED SECURITIES

Specified securities, except SR equity shares, held by the promoters and locked-in under the provisions of these regulations, may be pledged as collateral for a loan granted by a scheduled commercial bank or a public financial institution or a systemically important non-banking finance company or a housing finance company, Provided that the loan has been granted to the issuer or its subsidiary(ies) for the purpose of financing one or more of the objects of the issue and pledge of specified securities is one of the conditions for sanction of the loan.

REGULATION 168 - TRANSFERABILITY OF LOCKED-IN SHARES

1. Subject to the provisions of Securities and Exchange Board of India (Substantial Acquisition of shares and Takeovers) Regulations, 2011, specified securities held by promoters and locked-in in terms of sub-regulation (1) of regulation 167, may be transferred among the promoters or the promoter group or to a new promoter or persons in control of the issuer: Provided that the lock-in on such specified securities shall continue for the remaining period with the transferee.
2. The specified securities allotted on a preferential basis shall not be transferable by the allottees till the trading approval is granted for such securities by all the recognised stock exchanges where the equity shares of the issuer are listed

REGULATION 169: PAYMENT OF CONSIDERATION

1. Full consideration of specified securities other than warrants, shall be paid by the allottees at the time of allotment of such specified securities except in case of shares issued for consideration other than cash.
2. In the case of warrants, an amount equivalent to at least twenty-five per cent. of the consideration determined in terms of regulation 164 shall be paid against each warrant on the date of allotment of warrants and the balance seventy-five per cent. of the consideration shall be paid at the time of allotment of the equity shares pursuant to exercise of options against each such warrant by the warrant holder.
3. In case the warrant holder does not exercise the option for equity shares against any of the warrants held by the warrant holder, the consideration paid in respect of such warrant in terms of sub-regulation (2) shall be forfeited by the issuer.
4. he issuer shall ensure that the consideration of specified securities, if paid in cash, shall be received from respective allottee's bank account and in the case of joint holders, shall be received from the bank account of the person whose name appears first in the application.
5. The issuer shall submit a certificate from the statutory auditors to the stock exchanges where the equity shares of the issuer are listed stating that the issuer is in compliance of sub-regulation (4) and the relevant documents thereof are maintained by the issuer as on the date of certification.

REGULATION 170: ALLOTMENT OF SECURITIES

1. Allotment pursuant to the special resolution shall be completed within a period of fifteen days from the date of passing of such resolution.
2. If the allotment of the specified securities is not completed within fifteen days from the date of special resolution, a fresh special resolution shall be passed and the relevant date for determining the price of specified securities under this Chapter shall be taken with reference to the date of the latter special resolution.
3. Where a preferential allotment is made that attracts an obligation to make an open offer for shares of the issuer under SEBI (SAST) Regulation, 2011, and there is no offer made under sub-regulation (1) of regulation 20 of the SEBI (SAST) Regulation, 2011, the period of fifteen days shall be considered from the expiry of the period specified in sub-regulation (1) of regulation 20 or date of receipt of all statutory approvals required for the completion of an open offer under the SEBI (SAST) Regulation, 2011.
4. Allotment of the specified securities shall be made only in dematerialised form.

TENTATIVE CHECKLIST FOR PREFERENTIAL ALLOTMENT OF SECURITIES