Making public a list of 233 unlisted companies fraudulently raising money, the markets regulator on Wednesday warned such firms and their directors of stringent action and asked investors not to be lured by their schemes. The warning comes amid a crackdown against various unlisted firms that have lured small investors by issuing securities such as non-convertible debentures/non-convertible preference shares in the garb of private placement.
Between January 2013 and March 15 this year, Sebi has taken action against 233 firms for issuance of non-convertible as well as convertible preference shares preference shares, non-convertible debentures (NCDs) to public without complying with the regulations.
So far in 2016, Sebi has passed orders against 37 firms in such cases.
Securities were issued by these companies without complying with the prescribed Companies Act and Sebi norms.
The companies against which action has been taken include Shankalp Food and Beverages, Silicon Projects, Pious Agro Industries, Ravi Kiran Realty, Angela Agrotech, Amrit Projects, MARS Agrofarm Developers and Golden Heaven Agro Project India
"Companies are cautioned not to issue securities to public without complying with provisions of law... Failing which Sebi will be constraint to take stringent action against such companies and their directors," Securities and Exchange Board of India (Sebi) noted.
"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," it added.
As per Companies Act 1956, any offer of securities made to 50 or more persons has to be construed as a Public Offer.
The new Companies Act also mentioned that Private Placement has to be made only to such persons whose names are recorded by the company prior to the invitation to subscribe.
It further said 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.
Besides, such offer or invitation will not be made to more than 200 persons in the aggregate in a financial year, the sectoral guidelines say.
Moreover, under the norms no issuer can make public issue of these securities, unless it has made application to the recognised stock exchanges for listing of such securities.
The issuer among other things, is required to file the offer document with Registrar of Companies and stock exchanges and has to make necessary disclosures.
