CIRCULAR
SEBI/HO/MIRSD/ MIRSD-PoD-2/P/CIR/2022/163 November 28, 2022
To,
All Recognized Stock Exchanges and Clearing Corporations
All Registered Depositories
All Registered Stock Brokers and Clearing Members through Stock Exchanges
and Clearing Corporations
All Registered Depository Participants through Depositories
All Registered Investment Advisers
All Registered Research Analysts
All Registered Registrars to an Issue and Share Transfer Agents (RTA)
All Registered KYC (Know Your Client) Registration Agencies (KRA)
Sir / Madam,
Sub: Procedure for seeking prior approval for change in control
1. Securities and Exchange Board of India (‘SEBI’) vide circular no.
CIR/MIRSD/14/2011 dated August 02, 2011 had specified the procedure for
seeking prior approval for change in control of certain intermediaries including stock
brokers, depository participants and RTAs.
2. Regulation 9(c) of SEBI (Stock Brokers) Regulation, 1992 and Regulation 9(c) read
with Regulation 10B of SEBI (Stock Brokers) Regulation, 1992, provide respectively
that stock broker and clearing member shall obtain prior approval of SEBI in case of
change in control. Similarly, Regulation 36(1)(d) of SEBI (Depositories and
Participants) Regulations, 2018, Regulation 15(11) of SEBI (Investment Advisers)
Regulation, 2013, Regulation 24(3) of SEBI (Research Analysts) Regulations, 2014,
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Regulation 9A(1)(a) of SEBI (Registrar to an Issue and Share Transfer Agents)
Regulation, 1993 and Regulation 7(5) of SEBI {KYC (Know Your Client)
Registration Agency} Regulations, 2011 provide that depository participant,
investment adviser, research analyst or research entity, registrar to an issue and
share transfer agent and KRA respectively shall obtain prior approval of SEBI in
case of change in control.
3. To streamline the process of providing approval to the proposed change in control
of stock broker/clearing member, depository participant, investment adviser,
research analyst or research entity, registrar to an issue and share transfer agent
and KRA (hereinafter referred as intermediary or applicant), it has been decided as
under:
i. The Intermediary shall make an online application to SEBI for prior
approval through the SEBI Intermediary Portal (‘SI Portal’)
(https://siportal.sebi.gov.in).
ii. The online application in SI portal shall be accompanied by the following
information/declaration/undertaking about itself, the acquirer(s)/the
person(s) who shall have the control and the directors/partners of the
acquirer(s)/ the person(s) who shall have the control:
a. Current and proposed shareholding pattern of the applicant
b. Whether any application was made in the past to SEBI seeking
registration in any capacity but was not granted? If yes, details thereof.
c. Whether any action has been initiated / taken under Securities
Contracts (Regulation) Act, 1956 (SCRA)/Securities and Exchange
Board of India Act, 1992 (SEBI Act) or rules and regulations made
thereunder? If yes, the status thereof along with the corrective action
taken to avoid such violations in the future. The acquirer/ the person
who shall have the control shall also confirm that it shall honour all
past liabilities / obligations of the applicant, if any.
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d. Whether any investor complaint is pending? If yes, steps taken and
confirmation that the acquirer/ the person who shall have the control
shall resolve the same.
e. Details of litigation(s), if any.
f. Confirmation that all the fees due to SEBI have been paid.
g. Declaration cum undertaking of the applicant and the acquirer/ the
person who shall have the control (in a format enclosed at Annexure
A), duly stamped and signed by their authorized signatories that:
i. there will not be any change in the Board of Directors of
incumbent, till the time prior approval is granted;
ii. pursuant to grant of prior approval by SEBI, the incumbent shall
inform all the existing investors/ clients about the proposed
change prior to effecting the same, in order to enable them to
take informed decision regarding their continuance or otherwise
with the new management; and
iii. the ‘fit and proper person’ criteria as specified in Schedule II of
SEBI (Intermediaries) Regulations, 2008 are complied with.
h. In case the incumbent is a registered stock broker, clearing member,
depository participant, in addition to the above, it shall obtain approval
/NOC from all the stock exchanges/clearing corporations/depositories,
where the incumbent is a member/depository participant and submit
self-attested copy of the same to SEBI.
iii. The prior approval granted by SEBI shall be valid for a period of six
months from the date of such approval within which the applicant shall file
application for fresh registration pursuant to change in control.
4. To streamline the process of providing approval to the proposed change in control
of an intermediary in matters which involve scheme(s) of arrangement which needs
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sanction of the National Company Law Tribunal (“NCLT”) in terms of the provisions
of the Companies Act, 2013, the following has been decided:
i. The application seeking approval for the proposed change in control of the
intermediary shall be filed with SEBI prior to filing the application with
NCLT.
ii. Upon being satisfied with compliance of the applicable regulatory
requirements, an in-principle approval will be granted by SEBI;
iii. The validity of such in-principle approval shall be three months from the
date issuance, within which the relevant application shall be made to
NCLT.
iv. Within 15 days from the date of order of NCLT, the intermediary shall
submit an online application in terms of paragraph 3 of this circular along
with the following documents to SEBI for final approval:
a. Copy of the NCLT Order approving the scheme;
b. Copy of the approved scheme;
c. Statement explaining modifications, if any, in the approved
scheme vis-à-vis the draft scheme and the reasons for the
same; and
d. Details of compliance with the conditions/ observations, if any,
mentioned in the in-principle approval provided by SEBI.
5. While the above mentioned intermediaries are advised to ensure compliance with
the provisions of this circular, Stock Exchanges/Clearing Corporations and
Depositories are directed to:
i. bring the provisions of this circular to the notice of their
members/participants and also disseminate the same on their websites.
ii. make necessary amendments to the relevant bye-laws, rules and
regulations for the implementation of the above directions.
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iii. communicate to SEBI, the status of the implementation of the provisions
of this circular in their monthly development reports.
6. With respect to stock brokers/clearing members, depository participants and RTAs,
this circular shall supersede the circular no. CIR/MIRSD/14/2011 dated August 02,
2011 with effect from the date of applicability of this circular.
7. The provisions of this circular shall be applicable with effect from December 01,
2022.
8. This circular is issued in exercise of powers conferred under section 11(1) of the
Securities and Exchange Board of India Act, 1992, to protect the interests of
investors in securities market and to promote the development of, and to regulate
the securities market.
9. This circular is available on the SEBI website at www.sebi.gov.in under the category
"Legal Circulars".
Yours faithfully,
Amrita Shukla
Deputy General Manager
+91-22-26449882
E-mail: amrita@sebi.gov.in
Encl.: As above
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Annexure A
Declaration-Cum-Undertaking
We M/s. (Name of the intermediary/the acquirer/person who shall have the
control), hereby declare and undertake the following with respect to the
application for prior approval for change in control of (name of the intermediary
along with the SEBI registration no.):
1. The applicant/intermediary (Name) and its principal officer, the directors or
managing partners, the compliance officer and the key management persons
and the promoters or persons holding controlling interest or persons
exercising control over the applicant, directly or indirectly (in case of an
unlisted applicant or intermediary, any person holding twenty percent or more
voting rights, irrespective of whether they hold controlling interest or exercise
control, shall be required to fulfill the ‘fit and proper person’ criteria) are fit
and proper person in terms of Schedule II of SEBI (Intermediaries)
Regulations, 2008.
2. We bear integrity, honesty, ethical behaviour, reputation, fairness and
character.
3. We do not incur following disqualifications mentioned in Clause 3(b) of
Schedule II of SEBI (Intermediaries) Regulations, 2008 i.e.
(i) No criminal complaint or information under section 154 of the Code of
Criminal Procedure, 1973 (2 of 1974) has been filed against us by the
Board and which is pending.
(ii) No charge sheet has been filed against us by any enforcement agency
in matters concerning economic offences and is pending.
(iii) No order of restraint, prohibition or debarment has been passed against
us by the Board or any other regulatory authority or enforcement agency in
any matter concerning securities laws or financial markets and such order is
in force.
(iv) No recovery proceedings have been initiated by the Board against us
and are pending.
(v) No order of conviction has been passed against us by a court for any
offence involving moral turpitude.
(vi) No winding up proceedings have been initiated or an order for winding
up has been passed against us.
(vii) We have not been declared insolvent.
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(viii) We have not been found to be of unsound mind by a court of
competent jurisdiction and no such finding is in force.
(ix) We have not been categorized as a wilful defaulter.
(x) We have not been declared a fugitive economic offender.
4. We have not been declared as not ‘fit and proper person’ by an order of the
Board.
5. No notice to show cause has been issued for proceedings under
SEBI(Intermediaries) Regulations, 2008 or under section 11(4) or section
11B of the SEBI Act during last one year against us.
6. It is hereby declared that we and each of our promoters, directors, principal
officer, compliance officer and key managerial persons are not associated
with vanishing companies.
7. We hereby undertake that there will not be any change in the Board of
Directors of incumbent, till the time prior approval is granted.
8. We hereby undertake that pursuant to grant of prior approval by SEBI, the
incumbent shall inform all the existing investors/ clients about the proposed
change prior to effecting the same, in order to enable them to take informed
decision regarding their continuance or otherwise with the new management.
The said information is true to our knowledge.
(stamped and signed by the Authorised Signatories)
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