Business
SEBI warns investors on issues by unlisted companies
Chennai, April 23
Markets regulator Securities
and Exchange Board of India (SEBI) on Thursday warned the public of
some unlisted companies issuing debentures, preference shares as private
placement without complying with law.
"Any offer of securities
made to 50 or more people has to be construed as a 'Public Offer' under
the provisions of Companies Act, 1956," SEBI said.
According to
SEBI, some unlisted companies are luring retail investors by issuing
securities including non-convertible debentures/ non convertible
preference shares in the garb of private placement, without complying
with the provisions of Companies Act, 1956 read with the Companies Act,
2013, SEBI (Issue and Listing of Debt Securities), Regulations, 2008 and
SEBI (Issue and Listing of Non Convertible Redeemable Preference
Shares), Regulations, 2013.
SEBI said under Companies Act, 2013,
private placement shall be made only to such persons whose names are
recorded by the company prior to the invitation to subscribe.
"Further,
in case of private placements, the company shall not release any public
advertisements or utilise any media, marketing or distribution channels
or agents to inform the public at large about such an offer. Further,
such offer or invitation shall not be made to more than 200 persons in
the aggregate in a financial year," SEBI said.
SEBI has taken
action against 112 such entities, since January 2013 for issuance of
securities in the form of non-convertible preference
shares/non-convertible debentures to public, without complying with the
prescribed provisions of law.
"Investors are also cautioned not
to subscribe to such issues. Investors are advised to see whether any
such entity has filed offer document or filed application with Stock
Exchange for listing," SEBI said.