At which stage in the formation of a company does it interact with SEBI.
A company interacts with SEBI at the Capital Subscription stage of its formation.
This stage involves raising funds from the public by issuing securities such as shares and debentures. A public company is required to issue a prospectus, which is an invitation to the public to subscribe to the capital of the company. Before raising funds from the public, the company must obtain SEBI Approval.
SEBI (Securities and Exchange Board of India) is the regulatory authority that has issued guidelines for disclosure of information and investor protection. The company must make adequate disclosure of all relevant information and must not conceal any material information from potential investors. Prior approval from SEBI is necessary for protecting the interests of investors before the company proceeds with raising funds from the public.
Explanation
The textbook clearly mentions under section 7.2.3 Capital Subscription that SEBI Approval is the first step required for raising funds from the public. The context explicitly states that 'Prior approval from SEBI is, therefore, required before going ahead with raising funds from public.' This interaction occurs specifically during the Capital Subscription stage, which is the third stage in company formation after Promotion and Incorporation. Private companies do not require this interaction as they are prohibited from raising funds from the public.