MUMBAI, Aug 12: The Securities and Exchange Board of India on Tuesday disappointed the market by not discussing the JR Varma committee recommendations on the modified carry forward system. Sebi chairman DR Mehta told reporters after the meeting that the issue was not discussed for want of time.

Instead, the board members cleared the proposed amendments to the disclosure and investor protection (DIP) guidelines following the consolidation of the guidelines issued from time to time.

The regulatory body also decided to amend the registrar regulations to enforce an arms-length relationship between the issuer and registrar to the issue. Further, the board has also decided to waive the requirement of paying Sebi a turnover-based fee by a corporate member on conversion from individual/partnership member status.

With the amendments to the disclosure norms, the entry barrier for unlisted companies into the capital market has been changed to stipulate a dividend payment in the immediately preceding three years instead of at least three of the preceding five years.

A listed company will be required to meet the entry norm only if the post-issue networth becomes more than five times the pre-issue networth. The promoters' contribution for public issues has been made a uniform 20 per cent irrespective of the issue size.

Earlier, the requirement was 25 per cent for an issue size upto Rs 100 crore and 20 per cent for more than Rs 100 crore. Also, it has been decided that only such securities for which a specific written consent has been obtained from the shareholders for a lock-in will be allowed to form a part of the promoters' contribution.

Further, the holdings of those promoters whose names appear in the offer document have to be disclosed. Companies will also be required to make their partly paid-up shares fully paid up or forfeit the same before making a public/rights issue.

Unlisted firms have been allowed to freely price their securities provided they have shown net profit in the immediately preceding three years subject to fulfillment of disclosure requirements. It has also been decided that a registrar to an issue has to be compulsorily appointed for a rights issue.

The SEBI board decided that no registrar to an issue can act as such for any issue of securities made by any body corporate if the registrar and the issuer company are associates. An associate means a person who either directly or indirectly exercises control over 10 per cent or more of the voting capital or a director or relative of any one is also a director or relative of the other.

"The idea is that there should be no conflict of interest," said Mehta.The turnover-based fees have been waived for new corporate entities in order to encourage brokers to go in for corporatisation. Currently, of the 8,867 brokers, there are 2,407 corporate entities. However, the waiver is subject to several conditions.

These include that the erstwhile individual partner should be a director of the new company and should continue to hold at least 40 per cent of the paid up capital of the company for a period of three years. Also, it is necessary that the partner should have already paid the fees to Sebi as recommended by the expert committee while their status was that of an individual member.

In cases where the issue of payment of fees is under the consideration of a court, the company will have to submit an undertaking to deposit the fee payable by the individual/partnership firm as decided by the court.

Also, the individual/partner who becomes a director should not be disqualified for being a member of an exchange and should not have been declared a defaulter. A detailed presentation about the working of the depository was made to the board and a decision taken that pledging of shares need not require permission from the depository.

Mehta said that the move should help banks use the dematerialised shares as collateral against loans.

For want of time, the board also could not discuss the proposed amendments to the mutual fund regulations and merchant banking regulations. These and the Varma committee recommendations have been carried forward to the next baord meeting to be held in Chennai on September 5.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.