Legal Tips what every startup entrepreneur needs to know?
Startup Attorney India, startup co founder agreement, startup contracts, Startup India Strategist, Startup Lawyer India, startup legal documents, Uncategorized

STARTUPS ENTERING THE SHARE MARKET

LEGALITIES AND COMPLIANCES

India’s economy is one of the fastest expanding in the world, with a rapidly expanding consumer class. India is one of the most promising new markets of the decade to come. For a company, not considering expanding a business to India means ignoring one of the most promising (if not the most!) markets.

For any Startup, a key requirement is its funding. Funding may be from various sources and one such source is the startup bank loan.

Startups in the manufacturing or trading sector for investing in plant, machinery, infrastructure, equipment and inventories can avail Startup bank loan.Banks generally don’t fund expenses like marketing, research & development, salary, rent etc.

Companies in the technology or service sector often cannot access funds from banks and are forced to run their startup with minimal financial resources (bootstrap).

THE BASIC FRAMEWORKS 

Startups can access and actively participate in the Indian share market by making public issue of securities and other instruments within the regulatory framework as stipulated by SEBI (Securities Exchange Board of India) from time to time.The most active stock exchanges in India are the BSE Limited (Bombay Stock Exchange) and the NSE Limited (National Stock Exchange of India).

BSE is the 11th largest stock exchange with more than 5500 companies publicly listed on it.

PUBLIC ISSUES

IPO (INITIAL PUBLIC OFFER)Initial Public Offer is the process through which an issuer company allots fresh securities (“Fresh Issue”) or offers for sale securities (“OFS”) held by its existing shareholders or a combination of both Fresh Issue and OFS to the public for the first time.

This paves the way for the listing and trading of the issuer company’s securities on SEBI-approved stock exchanges in India.

FPO (FOLLOW-ON PUBLIC OFFER) 

In the case of Follow-on Public Offer, an existing publicly listed company makes an additional issuance of its securities to the public or offer for sale of its existing securities to the public, through an offer document.

The process for executing an IPO or an FPO besides other offerings and issues like IDRs (Indian Depository Receipts), preferential allotment etc. is governed by the “Issue of capital and requirements” regulation of SEBI.

IPOs and FPOs are also governed by the Companies Act 2013, the Securities Contract (Regulation) Rules 1957 and the listing regulations.

FEMA(Foreign Exchange Management Act) and its various clauses and regulations including the FDI (Foreign Direct Investment) policies governed by the orders and circulars issued by the government and the Reserve Bank of India (RBI) act as ancillary legislations.

Eligibility Requirements for IPO

The following conditions need to be satisfied by an unlisted startup company to undertake an IPO of its equity shares:

  • The issuer company should have tangible assets of at least INR 30 million(3 crores) in each of the 3 preceding years, of which not more than 50% should be held in monetary assets. However, the limit of 50% on monetary assets shall not be applicable in case the public offer is made entirely through offer for sale;
  • The issuer company should have minimum average pre-tax operating profit of INR 150 million (15 crores) calculated on a restated and consolidated basis, during the 3 most profitable years out of the immediately preceding 5 years;
  • The issuer company should have a net worth of at least INR 10 million (1 crore) in each of the 3 preceding full years;
  • The proposed issue size and all previous issues in the same financial year should however not exceed 5 times its pre-issue net worth as per the audited balance sheet of last financial year; andIf the issuer company has changed its name within the last 1 year, at least 50% of the revenue for the preceding 1 year is earned from the activity indicated by the new name.
  • An unlisted public company cannot undertake an IPO, if the company has less than 1,000 prospective allottees and there are outstanding convertible securities of the company or any other right which would entitle any person any option to receive equity shares after the IPO.

Minimum Offer Requirements

The issuer company is required to offer: 

i. At least 10% of each class or kind of securities to the public, in an IPO, provided: the post issue capital of the company calculated at offer price is more than INR 40,000 million; and

The company shall increase its public shareholding to at least 25%, within a period of 3 years from the date of listing of the securities, in the manner specified by SEBI.

ii.    At least 25% of each class or kind of securities to the public, in an IPO.

SUCCESS MANTRA

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Tech Corp International Strategist (TCIS), Helps Startups to Raise Funds & Assisting Foreign Companies to find Right Business Partner in India. Chief Strategic Officer (CSO) for your Startup IDEA. Investor incubating GREAT IDEAS and grow the startups. Assisting enterprise to enter and find RIGHT Angels, and VCs in Malaysia, Singapore, US, UK, Japan and India.

Our team at TCIS, India consists of experienced professional patent researchers, patent strategists, law experts and mediators who are experts and have experience in performing more than 2200+ patent searches in all technological domains.

Our technological THINKING GEEKS experts provide their assistance to gain a clear perspective over technical as well as market difficulties that Your PATENT may face while launching and entering into a country.

We at TCIS, India have a well renowned team of Lawyers of Delhi/ NCR who have vast experience of more than 12++ years.  We at TCIS, India have inspiring and tireless mediators who have successfully completed mediation in disputes related to co-founder disputes, company disputes, mediation is website ownership, trademark infringement, commercial disputes, patent infringement, intellectual property disputes, disputes in corporate sectors and trademark commercial disputes.

We at TCIS, India BELIEVE mediation is a voluntary and a non-coercive form of conflict management, wich is highly practical within the intricate dynamics of international relations, dominated by the principles of preservation of actors, independence and haptonomy.

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