Initial Public Offering (IPOs)/Offer for Sale by Unlisted Companies
An unlisted company can make an (PO) offer for sale of equity shares/any other security convertible into, or exchangeable with, equity shares at a later date only if it meets in the following conditions: .
(a) It has net tangible assets (i.e, total net assets, excluding intangible assets) of at least Rs 3 crore in each of the preceding a full years (of 12 months each) of which not more than 50 per cent should be in monetary assets; if more than 50 per cent of the net tangible assets are held in monetary as, it is the company should have form commitments to deploy the excess in its business/project (i.e. the object for which the money is proposed to be raised to cover the objects of the issue).
(b) It has a track record of distributed profit in terms of Section 205 of the Companies Act for at least 3 out of the immediately 5 years; extraordinary items should not be considered to compute the distributed profits, In case of (i) partnership firms converted into companies and (ii) an unlisted company formed out of division of existing company, the trace record of distributed profits of the firm/division spun off would be considered only if the financial statements for the relevant/respective years conform to, and are revised in tilt format prescribed by, the Companies Act and also comply with the following: (a) Adequate disclosures as per Schedule VI of the Companies Act are made in them. They a duty certified by a chartered accountant to the. Text that (i) the accounts are revised otherwise and the disclosures are in accordance with the provisions of Schedule VI a (ii) the accounting standards of the Institute of Chartered Accountants of India (ICAI) ha been followed, and the financial statements present a true and fair picture of the firm division’s spun off accounts.
(c) It has a net-worth lie. the aggregate value of paid-up equity capital and free raise (excluding revaluation reserves) minus the aggregate value of accumulated losses and referred expenditure not written off including miscellaneous expenses not written on of least Rs 1 crore in each of the preceding a full years (of 12 months each).
(d) In case of change of its name within the last one year, at least 10 per cent of the revenue the preceding one full year is earned by the company from the activity suggested by the name and.
(e) The aggregate of the proposed issue and all previous issues made in the same financial in terms of size (i.e. offer through offer document plus firm allotment and promote contribution through the offer document) does not exceed 5 times its pre issue net-worth per the audited balance sheet of the financial year.
An unlisted company satisfying all the conditions outlined above can allot equity shares/ securities convertible into or exchangeable with, equity shares at a later date in a public issue or offer for sale only if the number of the prospective allocate is not less than 1,000.