Specimen Broker Agreement explained: this guide covers what Specimen Broker Agreement means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Broker Agreement for Share Issue
In a public issue of securities: the company (through the Lead Manager) appoints brokers/syndicate members to: (a) market the issue to investors, (b) collect subscription applications, (c) process bids in the book-building process. The broker agreement governs: (a) the broker's obligations, (b) brokerage/commission rates, (c) compliance with SEBI ICDR Regulations, (d) liability and indemnity.
Key Clauses
1. Appointment: The Company/Lead Manager appoints (SEBI Registration No. ) as a Broker/Syndicate Member for the public issue of equity shares.
2. Broker's Obligations: (a) Market the issue to investors within the broker's network, (b) accept and process application forms/bids, (c) ensure KYC compliance of investors, (d) upload bids on the stock exchange platform (for book-building), (e) handle application money through the designated bank, (f) comply with SEBI ICDR Regulations and ASBA requirements, (g) not make any representation about the issue other than what is in the offer document.
3. Brokerage: The Company shall pay brokerage of % (typically 1-2%) of the subscription amount procured through the Broker. Under Section 40 of the Companies Act: brokerage shall not exceed 2% of the issue price. Brokerage is payable within [30] days of allotment. For retail applications through ASBA: brokerage is typically Rs. 10-20 per application (flat fee).
4. ASBA Compliance: All applications must be through ASBA (Application Supported by Blocked Amount) -- the broker ensures investors apply through their bank's ASBA facility. No physical application forms accepted.
5. Indemnity: The Broker indemnifies the Company against claims arising from the Broker's misrepresentation, unauthorized promises, or non-compliance with SEBI regulations.
6. Confidentiality: The Broker shall maintain confidentiality of all issue-related information until the offer document is made public.
SEBI Requirements
(a) Brokers must be SEBI-registered stock brokers or authorized sub-brokers, (b) all applications through ASBA/UPI -- no cash applications, (c) the broker must upload bids on the exchange platform in real-time during the book-building period, (d) the broker must ensure investors' PAN, demat account, and bank account are valid, (e) brokerage payments are disclosed in the offer document.
Disclaimer: This article is for informational purposes only and does not constitute legal or professional advice. While every effort has been made to ensure accuracy based on the latest laws and amendments, readers should consult a qualified professional before acting on any information provided. For expert assistance, contact us.
Key Facts About Specimen Broker Agreement
- Applies in: All states across India, under the relevant central law.
- Mode: Mostly online via the official government portal.
- Typical timeline: Ranges from a few days to a few weeks depending on the case.
- Non-compliance: May attract penalties, interest or late fees.
- Expert help: TaxClue completes Specimen Broker Agreement end to end for you.
What is the maximum brokerage for share issue?
Under Section 40 Companies Act: brokerage for share issue shall NOT exceed 2% of the issue price. For debentures: maximum 2.5%. In practice: brokerage is typically 1-1.5% for institutional investors and Rs. 10-20 per application for retail ASBA applications. Brokerage is payable only on SUCCESSFUL applications -- not on withdrawn or rejected bids. The brokerage amount is disclosed in the offer document (DRHP/RHP).
What is ASBA and why is it mandatory?
ASBA (Application Supported by Blocked Amount) is the system where the investor's application money is BLOCKED in their bank account (not transferred to the company) until allotment. If allotted: only the allotment amount is debited. If not allotted: the block is released. SEBI has made ASBA mandatory for ALL public issues -- no physical forms or cheque-based applications are accepted. Benefits: (1) investor's money earns interest during the issue period, (2) faster refunds (no refund needed -- just unblock), (3) reduced fraud risk.
Over 90% of compliance penalties in India arise from missed due dates — timely handling of Specimen Broker Agreement can save businesses thousands of rupees each year.
Specimen Broker Agreement: a key compliance topic in Indian tax and corporate law that businesses and individuals must understand to remain compliant.
An agreement appointing a stock-broker to procure subscriptions to a company's issue of shares for brokerage, distinct from underwriting (no obligation to take up unsubscribed shares), under Section 40 of the Companies Act, 2013.
BROKERAGE AGREEMENT FOR ISSUE OF SHARES
THIS AGREEMENT is made at [City] on this [Day] day of [Month], 2026 BETWEEN:
[Company Name] Limited, a company incorporated under the Companies Act, 2013, having its registered office at [Address] (the "Company"); AND
[Broker Name / Firm], a SEBI-registered stock broker (SEBI Regn. No. [____]; Member of [Exchange]), having its office at [Address] (the "Broker").
Clause 1. Appointment. The Company appoints the Broker as a broker to procure applications from investors for the Company\'s issue of [__] equity shares of ₹[10] each at ₹[__] per share (the "Issue"), on the terms of the prospectus/offer document dated [__].
Clause 2. No Underwriting Obligation. It is expressly agreed that the Broker undertakes only to procure subscriptions and is NOT obliged to subscribe for or take up any unsubscribed portion of the Issue (i.e., this is a brokerage, not an underwriting, arrangement).
Clause 3. Brokerage. The Company shall pay the Broker brokerage at [__]% of the issue price on shares actually allotted against applications bearing the Broker\'s stamp/code. The rate of brokerage shall not exceed the ceiling permitted (customarily 1.5% for public issues), and shall be disclosed in the prospectus as required under Section 40.
Clause 4. Applications & Stamping. The Broker shall forward valid, completed application forms with application money to the Company\'s bankers to the issue within the Issue period; only applications bearing the Broker\'s code and resulting in allotment qualify for brokerage.
Clause 5. Compliance. The Broker shall comply with the SEBI (Stock Brokers) Regulations, 1992, SEBI (ICDR) Regulations, 2018, and applicable exchange bye-laws, and shall not make any representation beyond the prospectus.
Clause 6. Payment. Brokerage shall be paid within [30] days of allotment, subject to deduction of tax at source under the Income-tax Act, 1961 and levy of GST as applicable, against the Broker\'s statement of allotted applications.
Clause 7. Term & Termination. This Agreement is valid for the Issue and any extension thereof; it may be terminated by either party by [7] days\' written notice, without prejudice to brokerage already earned.
Clause 8. Governing Law & Arbitration. Governed by Indian law; disputes referred to arbitration under the Arbitration and Conciliation Act, 1996 / the relevant exchange arbitration mechanism, seat at [City].
IN WITNESS WHEREOF the parties have executed this Agreement on the date first above written.
| For [Company Name] Limited ____________________ Director (DIN [____]) | For [Broker Name] ____________________ Authorised Signatory (SEBI Regn. [____]) |
Witnesses: 1. ______________ 2. ______________
- Brokerage differs from underwriting commission — a broker only procures subscriptions and does not guarantee the issue; payment is only on shares actually allotted against the broker's code.
- Brokerage must be authorised by the Articles and disclosed in the prospectus (Section 40); customary ceiling for public issues is around 1.5% of issue price.
- The broker must be registered with SEBI (Stock Brokers Regulations, 1992) and the issue must comply with SEBI (ICDR) Regulations, 2018 for a public/listed issue.
- Deduct TDS and charge GST on brokerage; file the return of allotment in Form PAS-3 and reconcile brokerage to allotted applications.
Disclaimer: This is a general-purpose template for reference only. Facts, figures, stamp duty and clauses vary with your situation and state law — have it reviewed before use. Need this professionally drafted, stamped and filed? Talk to a TaxClue expert.