Warrant-to-Equity Conversion Not Deemed Corporate Action As It is Not Caused Due to Any Action Taken By Company | SEBI
- Blog|News|Company Law|
- 1 minute
- By Taxmann
- |
- Last Updated on 16 January, 2024
Latest from Taxmann
Informal Guidance No. SEBI/HO/ISD-POD-2/P/OW/2023/0000042307/1, Dated 13.10.2023
A company engaged in business of stock broking came up with issuance of equity shares along with detachable warrants, via rights issue. The allotment of shares was completed on 24.03.2023. The company sought through informal guidance whether the act of conversion of warrants into equity shares forms part of corporate action.
Also, a query was raised that if the DP converts his warrants into equity shares prior to passing of six months from the date of allotment, will this transaction be considered as contra trade?
The SEBI directed that such conversion shall not be treated as corporate action since it is not caused due to the action taken by the company. Further, both the transactions, i.e., allotment of shares and exercising of warrant shall be treated as acquisition of securities (akin to buy trades).
Therefore, the exercise of warrants shall not be considered as contra-trade with respect to allotment of shares under rights issue as both the transactions are in nature of acquisitions without any corresponding transaction of sale.
Further, it was directed that act of conversion of warrants to equity shares will be in the nature of an acquisition (akin to buy trades). Therefore, any sale transaction prior to the passing of six months from the date of allotment of shares (pursuant to the conversion of warrants into equity shares) shall attract the restriction of contra-trade.
Click Here To Read The Full Updates
Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.
Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.
The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:
- The statutory material is obtained only from the authorized and reliable sources
- All the latest developments in the judicial and legislative fields are covered
- Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
- Every content published by Taxmann is complete, accurate and lucid
- All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
- The golden rules of grammar, style and consistency are thoroughly followed
- Font and size that’s easy to read and remain consistent across all imprint and digital publications are applied
Sign Up
To subscribe to our weekly newsletter please log in/register on Taxmann.com
Latest Books
Everything on Tax and Corporate Laws of India
To subscribe to our weekly newsletter please log in/register on Taxmann.com
