SEBI'S Model Underwriting Agreement[CD1]
To,
The
Board of Directors..................Ltd
.................................................
.................................................
Dear
sir,
Re:
Forthcoming public issue of shares/debentures of Rs..... each for cash as
part/premium aggregating to Rs...... (Public issue)
1.
We hereby record that we
(hereinafter referred to as the underwriter) have agreed to underwrite/procure
subscription to shares/debentures of Rs...... each for cash at par/premium
aggregating to Rs..... (Rupees.... only) (hereinafter referred to as the
underwriting obligation) for the captioned public issue by.... Ltd.
(hereinafter referred to as "the Company" on the following terms and
conditions.
2.
Opening of the subscription
list: The subscription list for the public issue shall open not later than
three months from the date of this agreement or such extended period(s) as the
underwriter may agree to in writing. The subscription list shall, unless the
issue is fully subscribed, be kept open by the company for a maximum period of
10 calendar days failing which the underwriter shall not be bound to discharge
the underwriting obligations under this agreement.
3.
To make available final copy of
the prospectus: The company shall before delivering to the Registrar of
Companies (hereinafter referred to as "ROC") make available to the
underwriter a copy of the prospectus, which shall be as modified in the light
of the observations made by SEBI while issuing the acknowledgment card. The
underwriter shall before executing this agreement satisfy himself with the
terms of the issue and other information and disclosures contained therein.
4.
Delivery of prospectus to the
Registrar of Companies: The prospectus in respect of the public issue shall be
delivered by the company to the ROC for registration in accordance with the
provisions of the Companies Act, 1956 not later that 30 days from the date of
this Agreement or such extended period(s) as the under writer may approve in
writing, the time being the essence of this Agreement.
5.
Material disclosures after
filing of prospectus: The company agrees that, if after filing of the
prospectus with the ROC any additional disclosures are required to be made in
the interest of the investors in regard to any matter relevant to the issue,
the company shall with such requirements as may be stipulated by SEBI or the
lead manager and compliance of such requirements shall be binding on the
underwriter; provided that such disclosures shall not give a right to the
underwriter to avoid underwriting obligations unless such subsequent
disclosures are certified by SEBI as being material in nature and essential for
the contract of underwriting; the question whether or not such subsequent
disclosures are material in nature, the decision of SEBI shall be final and
binding on both the parties.
6.
Making available copies of
prospectus and application form, etc. The company shall make available to the
underwriter a minimum of...... (No. of application forms forming part of
abridged prospectus) and....... (number of copies of the prospectus) for every
lakh of ruppes of underwriting accepted by the underwriter. If the underwriter
desires to have more application forms and prospectus than specified he must
state his requirements which would then be considered as condition for
acceptance of this underwriting Agreement. Thereafter, it is responsibility of
the company to deliver to the underwriter the accepted quantity of application
forms and prospectus as soon as the prospectus is filed with the ROC but in any
case not later than 21 days prior to the date of opening of the public issue,
proof of which, should be retained by the company.
7.
Warranty as to statutory and
other approvals. The company warrants that all consents, sanctions, clearances,
approvals, permissions, licences, etc., in connection with the public issue as
detailed in the prospectus or required for completing the prospectus have been
obtained or will be obtained and the same shall remain effective and in force
until the allotment of all the shares/debentures are completed.
8.
Sub-underwriting arrangements:
The underwriter shall be entitled to arrange for sub-underwriting of its
underwriting obligation on his own account with any person or persons on terms
to be agreed upon between them. Notwithstanding such arrangement, the
underwriter shall be primarily responsible for sub-underwriting and any failure
or default on the part of the sub-underwriters to discharge their respective
sub-underwriting obligations, shall not exempt or discharge the underwriter of
his underwriting obligation under this agreement.
9.
Treatment of applications made
with underwriters/sub-underwriters stamp for the purpose of allotment. The
application bearing the stamp of the underwriter or as the case may be the
subunderwriter whether made on their own behalf or otherwise shall be treated
in the same manner as the applications received directly from the members of
the public and, in the event of the issue being oversubscribed, such
applications shall be treated on par with those received from the public and
under no circumstances, the applications bearing the stamp of the underwriter
or the sub-underwriter shall be given any preference or priority in the matter
of allotment of shares/debentures.
10.
Computation of underwriter's
obligation:
1. If the issue is undersubscribed, the underwriting obligation, shall
be determined in the manner set out hereunder; provided that under no
circumstances, the underwriter's obligation to subscribe/procure subscription
to shares/ debentures shall exceed the amount mentioned in clause 1 above.
2. The following applications for shares/debentures shall be treated pro
tanto in or towards satisfaction of the underwriter's obligations under this
Agreement, namely -
a.
applications which have been
accepted excluding those withdrawn before allotment; and
b. applications received from the underwriter or any of his sub-underwriters
including those applications which bear the stamp of the underwriter or any of
the sub-underwriters,
3. After making adjustments as provided in sub-clause (2) above the
underwriting obligation of the underwriter and other underwriters shall be,
subject to following further adjustments.
a. The application received from the public independently i.e. those
applications not covered under sub-clause (2) above shall be apportioned
amongst all the underwriters. Where underwriting obligations have not. been
fully satisfied after adjustments under sub-clause (2) above in proportion to
their respective underwriting obligations and to that extent their respective
underwriting obligation shall stand reduced.
b. If, after the adjustments made under sub-clauses (2) and (3)(a)
above, it is found that the shares/debentures available for adjustment are in
excess of the shares/debentures required to be subscribed in fulfillment of the
underwriting obligations of one or more individual underwriters, then such
excess amount required to meet the underwriting obligations of any underwriter
shall be further apportioned amongst such other underwriters, whose
underwriting obligations have not been fully discharged, in proportion to their
respective underwriting obligations.
11.
Procedure for
effecting/discharge of underwriting obligations: The underwriting obligations
as determined under clause 10 shall be discharged in the manner mentioned
below:
a. the company shall within 30 days after the date of closure of
subscription list communicate in writing to the underwriter, the total number
of shares/debentures remaining unsubscribed, the number of shares/debentures
required to be taken up by the underwriter or subscription to be procured
therefor by the underwriter.
b. (b)the company shall make available to the underwriter, the manner
of computation of underwriting obligation and also furnish a certificate in
support of such computation from the company's auditors.
c. the underwriter on being satisfied about the extent of devolvement
of the underwriting obligation, shall immediately and in any case not later
than 30 days after receipt of the communication under sub-clause (a) above,
make or procure the applications to subscribe to the shares/debentures and
submit the same together with the application moneys to the company.
d. in the event of failure of the underwriter to make the application
to subscribe to the shares as required under clause (c) above, the company
shall be free to make arrangements(s) with one or more persons to subscribe to
such shares without prejudice to the rights of the company to take such
measures and proceedings as may be available to it against the underwriter
including the right to claim damages for any loss suffered by the company by
reason of failure on the part of the underwriter to subscribe to the shares as
aforesaid.
Note
- The Company is free to quantify the damages being a multiple of the value of
the shares/debentures not subscribed by the underwriter.
12.
Right to receive underwriting
commission/brokerage. Subject to the underwriter fulfilling his underrating
obligations, he shall be entitled to receive commission in respect of the
underwriting obligation undertaken by him and brokerage in respect of the shares/debentures
procured by him at the rates set out in clause 13 hereunder. The underwriting
commission shall be payable only if his underwriting commitment is fully
subscribed.
13.
Underwriting commission: (1) In
consideration of the underwriter agreeing to underwrite the shares/debentures
as mentioned in clause 1 above, the company shall pay to the underwriter a
commission at the following rates; Note:
1. The rates as mutually negotiated between the company and the
underwriter may be inserted. Needless to say that the rates so agreed upon
shall be subject to the provisions of section 76 of the Companies Act, 1956.
2. (2) The underwriting commission shall be payable by the company
within 15 days from the date of finalisation of allotment and proof of such
payment within the specified time should be available with the company. The
obligation to pay underwriting commission shall arise only upon the underwriter
fulfilling his underwriting obligation and duly subscribing to the
shares/debentures, if any devolved on him.
14.
Obligations of the company
1. The company shall immediately after the closure of the subscription
list, take expeditious steps for processing the applications and complete the
allotment within the time limit prescribed under the Companies Act, 1956 and also
comply with other listing requirements.
2. If the company fails to receive 90% of the issue amount including
the amount received from the underwriters towards devolvement, within 60 days
from the date of closure of subscription
list,
the company shall refund the amount paid by the underwriter in fulfilment of
his underwriting obligations. The obligation to refund the moneys shall be
without prejudice to the disputes if any in regard to the underwriting
obligation to the underwriter.
15.
Time is the essence of the
agreement: All obligations of the company and the underwriter, are subject to
the condition that time wherever stipulated, shall be of the essence of the
agreement. Consequently any failure on the part of the company or the
underwriter to adhere to the time limits shall unless otherwise agreed to
between the company and the underwriter, discharge the underwriter or company
of his/their obligations under the underwriting agreement.
16.
Right of termination under
special circumstances. Notwithstanding anything contained herein, the
underwriter shall have the option to be exercised by him at any time prior to
the opening of the issue as notified in the prospectus of terminating this
agreement under any or all of the following circumstances -
i.
if any representations/statements
made by the company to the underwriter and/or in the application forms,
negotiations, correspondence, the prospectus or in this letter are or are found
to be incorrect;
ii.
a complete breakdown or
dislocation of business in the major financial markets, affecting the cities of
Calcutta, Bombay, Madras or New Delhi;
iii.
declaration of war or
occurrence of insurrection, civil commotion or any other serious or sustained
financial, political or industrial emergency or disturbance affecting the major
financial markets of Calcutta, Bombay, Madras or New Delhi.
17.
Notice of termination to the
company: Notwithstanding anything contained in clause 16 above, in the event of
the company failing to perform all or any of the covenants within time limits
specified wherever applicable under this letter of underwriting, the
underwriter shall inform the company with adequate documentary evidence of the
breach/non-performance by Registered post/Speed post and acknowledgment
obtained therefore, whereupon the underwriter shall be released from all or any
of the obligations required to be performed by him.
18.
Net worth of the underwriter.
The underwriter, hereby declares that he satisfies the net worth/capital
adequacy requirements specified under the SEBI (Underwrites) Rules and
Regulations, 1993 or the bye-laws of the stock exchange of which the
underwriter is a member and that he is competent to undertake the underwriting
obligations mentioned in clause 1 hereinabove.
19.
Registration with the SEBI: The
underwriter hereby declares that SEBI has granted to him a certificate of
registration to act as an underwriter in accordance with the SEBI
(Underwriters) Rules and Regulations, 1993 or, he has applied for registration
to SEBI within the time stipulated under sub-section (1) of section 12 of the
Securities and Exchange Board of India Act, 1992 and is entitled to carry on
the business as an underwriter under the SEBI Act.
20.
Reference to arbitration - Any
dispute arising out of this agreement between the underwriter and the company
shall be referred to the Arbitration Committee constituted by the Regional
Stock Exchange in which the shares/debentures are to be listed and the decision
of the Arbitration Committee shall be final and binding on both the parties.
Yours
faithfully.
for..........
(Signature
of the underwriter)
We,
the company.................. Ltd. the above named do hereby accept your offer
for undewriting on the above mentioned terms and conditions.
Authorised
Signatory...............
For...............
Ltd.
Designation..............
Authorised
by a resolution passed at the meeting of the Board of Directors held on
the....... day of.............. 19.....
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