Banks and Financial Institution Act, 2073 (Part-2)
Chapter-3: Dealing in Securities
8. Prospectus
1. Before issuing its securities to the public, every BFI shall obtain approval from the Securities Board and register its prospectus with NRB.
2. Until the registration of Prospectus as per sub-section (1), no prospectus shall be published by such BFI or any other person on its behalf.
3. Notwithstanding anything contained in sub-section (1), no prospectus shall be registered by NRB until it receives in writing, the information regarding approval for registration of prospectus.
9. Share Allotment
1. BFI shall at least, 30% of its issued capital, set aside for subscription by the general public.
“General Public” here means the natural person only.
2. Shares set aside as per sub-section (1) shall be issued to the general public within the prescribed time period. If any shares remain unsubscribed by the general public, such shares can be issued to a firm, company, or institution.
3. In addition to the limit specified in sub-section (1), BFI can set aside an additional 0.5% of its issued capital only to its employees.
4. BFI if desires to do so, can convert promoter shares into general shares, by following the procedures laid down by NRB. However, the promoter share shall not at any time be less than 51%.
“Promoter Share” shall promoter shares as prescribed by NRB.
“General Share” shall mean shares other than promoter share.
5. Notwithstanding anything contained in sub-section (1), it shall not be mandatory for BFI to have a substantial interest in GON or Infrastructure Development Bank (IDB), to maintain the shareholding pattern as per sub-section (1).
6. Any foreign BFI or any BFI established under the joint investment of foreign institutions or IDB, shall issue shares to the general public as prescribed by NRB.
7. While issuing shares of BFI to the general public, 100% of the Face Value of such shares shall be called at the time of application.
10. Dealing in Securities
1. The prevailing provisions in respect of sale, allotment & exchange shall be followed by BFI while issuing its securities to the general public.
2. BFI shall, within 7 days of entering into an agreement for dealing in securities with institutions dealing in securities, forward to NRB a copy of such agreement.
3. Prior approval of NRB shall be obtained before issuing any debenture or financial instruments by banks or FIs.
4. Before providing approval as per sub-section (3), NRB may stipulate terms and conditions and it shall be the duty of such BFI to follow the same.
11. Selling of Shares and Pledging
1. The promoter of a BFI shall not be allowed to sell or pledge the shares in his/her/its name at least 5 years from the date of starting banking or financial transactions by such BFI.
2. Notwithstanding anything contained in sub-section (1), if due to any reason a special circumstance has arisen or the promoter has been declared blacklisted on transaction made with any other BFI, shares of BFI held by promoter can be transferred between other promoters after obtaining the approval from NRB.
“Special Circumstance” means, the meeting of the Board couldn’t be held for consecutive 3 times due to the lack of quorum or the Board could not reach a decision due to non-agreement between directors.
3. Promoter can, after obtaining approval from NRB, sell or pledge the share in his/her/its name in between promoters, after, 5 years has been completed from the date of start of banking or financial transaction and issuing shares to the general public.
However, no approval of NRB is required for promoters holding shares less than 2% of the issued capital.
4. Notwithstanding anything contained in Section 9 (1) & (2), promoter shares can be converted into general shares after obtaining prior approval from NRB, after 10 years has been completed for the start of banking & financial transaction by such BFI considering the overall effect in the capital market, banking & financial sector.
5. Prior approval of NRB is required in case promoter is an institution, for a major change in shareholders having substantial interest, selling and transferring of shares of such institutional promoter.
However, no approval of NRB is required for institutional promoters holding shares less than 2% of the issued capital.
12. Restriction in dealing in Securities
1. Directors, CEO, Auditor, Company Secretary, or employee directly involved in management and finance of bank and FI, while being on the office or up to 1 year from the date of retirement, shall not, either in his/her own name or in the name of the family members of such person or any other person or firm or company or institution in which such person has a substantial interest, be allowed to, purchase or sell, cause to purchase or sell, pledge, cause to pledge, gift, exchange or deal in any manner whatsoever, in the securities of such BFI. Provided that such restriction shall not be imposed in case of, bonus shares, right shares, shares allocated for employees, newly issued shares, following the direction of NRB, selling of whole of the shares held by an institution being a director or having the right to appoint director, merger or acquisition as per Chapter-10, transaction of shares in between directors of BFI whose operation and management have been affected after obtaining prior approval of NRB or dealing in shares during restructuring or liquidation of problematic BFI.
2. In case of violation of sub-section (1), such BFI shall forfeit the shares and sell or transfer the same as per the direction of NRB.
13. Prohibition on Purchase of Own Shares by BFI
1. BFI shall not buy or extend credit on the security, of its own shares.
2. Notwithstanding anything contained in sub-section (1), in the following situations, BFI may buy back its own shares after obtaining prior approval from NRB, so that the buyback would be from the free reserve available for distributing dividend not exceeding the % prescribed by NRB:-
a. If the shares issued by BFI have been fully paid up;
b. If the shares issued by BFI have already been listed on Securities Board;
c. If there is a provision for buyback of its own shares in the AOA of the BFI;
d. If a Special Resolution has been passed at the AGM of BFI for buying back its own shares;
e. If the Debt Equity Ratio (Ratio of debt to share capital and free reserve) does not exceed 2.00 after buying back own shares;
“Debt” means all amounts of secured and unsecured borrowing made by BFI.
f. If the value of buying back shares does not exceed 20% of issued share capital and free reserve of BFI;
g. If the direction issued by NRB in respect of Capital Fund is not contravened due to such buyback;
h. If the direction issued by NRB from time to time-related to buyback of shares is not contravened;
3. To buy-back its own shares as per sub-section (2), BFI shall apply to NRB disclosing the following details:-
a. Reason, necessity, deadline, and method of buy-back of shares;
b. A statement of evaluation of the possible impact of buyback of shares on the financial situation of the BFI;
c. Number, per unit value, and a class of shares intended to be bought back;
d. The minimum and maximum value of shares to be bought back as per Clause (c) and its source of payment;
e. Any other details prescribed by NRB in respect of buyback of shares;
f. Any other details to be disclosed as per prevailing law.
4. After verifying the application and details as per Sub-section (3), NRB may give approval for buyback to such BFI if it deems appropriate.
5. After obtaining approval as per Sub-section (4), the BFI may, by any of the following methods buyback its shares within 6 months from the date of approval or 12 months from the date of passing Special Resolution at GM whichever is later:-
a. Buying from securities market;
b. Buying proportionately from the existing shareholders.
6. BFI shall, after buying back the shares, submit a statement of the number of shares bought back, the amount paid on the same, and other relevant details, within 30 days of buying back of shares.
7. Amount equal to the face value of shares bought back as per Sub-section (5) shall be reduced from issued capital and shown separately in ‘Capital Redemption Reserve’ (CRR) Fund and such the amount shall be kept as if it is paid-up share capital.
8. BFI shall, within 120 days of buyback, cancel the shares bought back as per Sub-section (5).
9. Other provisions related to buyback shall be as prescribed by NRB.