RELEASE OF 1% SECURITY DEPOSIT KEPT BY COMPANIES BRINGING IPO - MMJC

Introduction

The Bombay Stock Exchange (‘BSE’) and National Stock Exchange (‘NSE’) has introduced a streamlined process to refund 1% security deposit kept with the Designated Stock Exchange (DSE) by companies whose IPOs got listed before May 18, 2024. This new Joint Standard Operating Procedure (SOP) is issued pursuant to circular of Securities and Exchange Board of India (SEBI) dated November 21, 2024[1], read with SEBI amendment to ICDR regulations dt: May 17, 2024[2] vide which the requirement for keeping 1% security deposit and no objection certificate to get back the 1% security deposit is dispensed with. SEBI had stated that BSE and NSE will specify process for release of security deposit kept by companies till now with stock exchanges.

Applicability:
Listed companies who had kept 1% security deposit with the exchanges at the time of the opening of the issue, before May 18, 2024, need to apply for the release of the same. The timeline for the application to be made for the receipt of this amount is not separately specified. Hence it is assumed that it would be as per the circular dated November 07, 2022, i.e., after the expiry of 2 months from the date of listing on the latest stock exchange which permitted listing.

Application process as specified in the SOP for the release of 1 % security deposit is as follows:

To apply for the release of the 1% Security Deposit, the company must submit an application to the DSE along with the following documents:

1. Certificate from Merchant Banker

• Confirmation that all the Self Certified Syndicate Banks [‘SCSBs’] involved in the ASBA process have unblocked funds for respective investors and that nothing is pending.
• For issues prior to the ASBA mechanism, confirmation that no shares or funds are lying with the company pursuant to the issue.

2. Company Confirmation Letter

• A declaration on the company letterhead stating that:
  • All dues to lead merchant bankers, registrars, underwriting commission, brokerage commission, and other intermediaries have been paid.
  • All shares have been credited to the respective shareholders and no shares are lying in the escrow account.

3. Statutory Auditor Certificate

• Certification that the company has fully settled all dues to lead merchant bankers, registrars, underwriting commission, brokerage commission and all other intermediaries to the issue and there is no amount pending/outstanding by the Company.

4. Cancelled Cheque

• A copy of the cancelled cheque of the issuer company.

5. Confirmation of No Pending Investor Complaints

• A statement from the company confirming that no investor complaints are pending concerning the issue for which the 1% security deposit was maintained.

Process by Exchange for review of application relating to release of 1% security deposit.

• Document Verification:
• Upon receipt of the application and supporting documents, the Exchange will verify the submission for completeness.

• Investor Grievance Check:
• The Exchange will coordinate with the Investor Services team to confirm the absence of pending complaints against the listed company concerning the issue.

• Deposit Release:
• Following clearance from the Investor Services team, the Exchange will proceed to release the 1% Security Deposit to the company.

Copy of the above circular can be accessed at below link:

https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20241206-6

[1] https://www.sebi.gov.in/legal/circulars/nov-2024/withdrawal-of-master-circular-on-issuance-of-no-objection-certificate-noc-for-release-of-1-of-issue-amount_88655.html [1] https://www.sebi.gov.in/legal/regulations/may-2024/securities-and-exchange-board-of-india-issue-of-capital-and-disclosure-requirements-amendment-regulations-2024_83469.html

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