The Companies Act also provides that, the amount or rate of under-writing commission and the number of shares or debentures subscribed or underwritten by the umdenvriters must be disclosed in the prospectus or statement in lieu of prospects or circularnotice inviting subscription for shares or debentures. A copy of the underwriting agreement must also be delivered to the Registrar along with the prospectus or statement in lieu of prospectus [Sec. 76(13]. A company can pay brokerage on sale of shares m addition to Underwriting commission [Sec. 76(3)}. However, no commission can be paid to my person for subscribing or agreeing to subscribe for any shares or debentures which are not offered for public subscription Sec. 7614A)].
Any default in complying with the provisions of.Sec. 76 will make the compamy amd every erp officer in default liable to fine which may extend to P.s. 500 [Sec. 76(5)].
Brokerage. Brokerage is the amount paidby a company to a broker for placing shares or debentures or for procuring sobscriptiop for shares. Brokerage should be dlstingmshed from underwriting comnuss lon. Unlike an underwriter, a broker does not give any underta to the company to take up shares or debentures if the issue is under-subseribed. He does not take auv share himself, but onlyprocurespersons who are willing to subscribe for shales He getsbrokerage on the shares for which he procures subscription Brokerage can be paid in addition to ut; and even on shares which an not offered for public subscnption. However, payment of brokerage must be authoriscd by the Artiyles and it must be stated in the prospectus or statement in lieu thereof
: INCORPORATION OF A COMPANY 75
(a) For issues up to Rs. 25 crores ... 0.5 per cent (b) For excess over Rs. 25 crores ... 0.2 per cent
Managers to issue must not be paid any fees in respect of amounts agreed to be taken up by financial institutions or devolving on them as nvesh erwriters i n respect of promoters' quota Including amounts taken up by emploveess d rs their friends and associates, and is respect of Lights is qe.
terms and conditions up der vi Rich the underwriters agree to nndernne the shares are embodied in a document known as I. rider ggremem (cr Contract). lye usual clauses of the agree nem amDng Lear thigh alp: J the number of shares which the riders agree to and an errn by the mrtder tilers to take up such of the shanks as are not subscribed bv the public. (ii) an m by the nnpany that tub terms of issue specified in the prospectus shall not be ahead witnl-.rt the prior co Asnt ofthe Anderritets: (iii) authon yof the mnvritm to the company to allot them the balance of the shares not taken up by the public and (iv) the rate of commission payable to the mmdervrriters for underwriting the shares and the mode of payment (the cor'mmssionis usually p nd at so much per share on all the shares umderuritten irrespective of whether the underwriter has actually to take them up or note.
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