UNDERWRITING AND BROKERAGE AGREEMENTS

                             UNDERWRITING  AND BROKERAGE AGREEMENTS

(I)         Underwriting agreements-The object of underwriting  is to insure against  the risk that shares, debentures or debenture stock  offered  by  a company  for subscription  may not be taken up. For floatation of share/debenture capital, a company is generally  required  to have  the public  issue fully  underwritten to insure that all the shares and debentures are  taken  up by the investor and thus  the required  capital  is raised. The  underwritten provides an assurance  against the risk  of undersubscription .

(a)       Payment of commission to underwriter .- The underwriters are entitled to commission. Section 76 of the Companies Act, 1956, provides as follows :

            “76 (1). A company may pay a  commission to any person in consideration of-

(a)       his subscribing or agreeing to subscribe, whether absolutely or  conditionally  for any shares in, or debentures of, the company, or

(b)       his procuring or agreeing  to procure subscription, whether absolute or  conditional for any shares in or debentures of, the company,

            If the following condition are fulfilled, namely :-

i)          the payment   of the commission is authorised  by the articles ;

ii)         the commission  paid or agreed to be paid  does not exceed in case of shares five per cent of the price at which the shares are issued  or  the amount or rate authorised  by the articles, whichever is less,  and in the case of debentures, two and a half per cent of the price at  which the  debentures are issued for the amount or rate authorised by the articles, whichever is less :

iii)        the amount  or rate percent of the commission paid or agreed to be paid is-

(a)       in case of shares or debentures offered to the public for subscription, disclosed in the prospectus; and

(b)       in the case of shares or debentures not offered to the public for subscription, disclosed in the statement in lieu of prospectus, or in a statement in the prescribed form signed in like manner as a  statement in lieu of prospectus and filed before the payment of  the commission  with the Registrar and where a circular or  notice, not being a prospectus  inviting subscription  for the share  or debentures, is issued, also disclosed in that circular  or  notice ;

iv)        the number of shares or debentures which persons have agreed for a commission of subscribe absolutely or conditionally is disclosed in the manner aforesaid; and

v)         a copy of the contract for the payment of the commission is delivered to the Registrar at the time of delivery of the prospectus or the statement in lieu of prospectus  for registration.

2)         Save as aforesaid and save as provided in section 78, no company  shall allot any of its shares or debentures or apply any of its moneys, either directly or indirectly in payment of any commission, discount or allowance, to any person  in consideration of-

a)         his subscribing  or agreeing to subscribe, whether absolutely or conditionally, for any shares in, or debentures of, the company; or

b)         his procuring or agreeing  to procure  subscription, whether absolute  or conditional, for any shares in, or debentures of, the  company whether  the shares, debentures or money be so allotted  or applied  by being added to the purchase  money of any property acquired  by the company or to the contract price of any  work  to be executed  for the company, or the money be paid  out the nominal purchase money or contract price, or otherwise.

3)         Nothing in this section shall affect the power of any company to pay such brokerage  as it has heretofore  been lawful for a company to pay.

4)         A vender to, promoter of, or other person who receives payment in shares, debentures or money from, a company shall have and shall be deemed always to have  had power to apply for any part of the shares,  debentures or money so received  in payment of any commission the payment of which, if made directly by the company, would  have been legal under this section.

(4-A)   For the removal of doubts  it is hereby declared that  no commission shall be paid under clause (a) of sub-section (1) to any person on shares or debenture  which are not offered to the public for subscription :

            Provided that where a person has subscribed  or agreed to subscribes under clause (a) of sub-section (1) for any shares in, or debentures of, the company  and before the issue of the prospectus  or statement in lieu  thereof any other person  or persons has or have subscribed  for any or all of those  shares or  debentures  and that fact together with the aggregate amount of  commission  payable under this section in respect of such  subscription  is disclosed in such prospectus  or statement, then the company may pay commission  to the first mentioned person in respect of such subscription.

5)         If default is made in complying with the provisions of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees.”

LETTER OF ACCEPTANCE

To

            ……………….

Dear Sir,

            With reference  to your application dated………….we accept and admit you as an underwriter of………………ordinary shares of our company at  commission  of…………….per cent, upon the footing and subject to the conditions contained in your application.

                                                                                                                                    Yours,  etc.

                                                ………….......