What are Underwriting and Brokerage Agreements? Draft a Sample of Brokerage Agreement. Assume facts.

Underwriting is an insurance against risk. When shares or debentures of a company are issued, they are, by and large, underwritten to ensure that all the shares or debentures issued are taken up and thus the required capital is raised. If the issue is undersubscribed, the Board may call the Underwriters to subscribe the same. Before entering into an underwriting arrangement with a member of any recognised stock exchange, it is the duty of the directors of the concerned company to ensure that the underwriter has sufficient financial resources to meet any obligation which may devolve upon him in the event of the issue not being fully subscribed by public. Such an agreement with the Underwriter is an Underwriting Agreement. Section 40(6) of the Companies Act, 2013 permits a company to pay certain commissions and prohibits the payment of all other commissions, discounts etc. As per Rule 13 of the Company (Prospectus and Allotment of Securities) Rules, 2014 - a company may pay commission to any person in connection with the subscription or procurement of subscription to its securities, whether absolute or conditional, subject to certain conditions. Such an agreement with the Broker to assist in subscription of shares for the agreed brokerage is Brokerage Agreement . Specimen Agreement for Acting as Broker to an Issue Name and address of the firm of brokers who agree to act as brokers. Ref. No. .......... Date .......... The Board of Directors (Name and address of the company for whose public issue the firm agrees to act as broker) Dear Sir(s), Re: Proposed public issue of .......... (type of security) Shares/ Debentures of ₹.......... each for cash at par of .......... Ltd. We, the undersigned, hereby testify and consent to act as Brokers to the Issue of .......... Shares/Debentures of ₹.......... each for cash at par as captioned above by .......... Ltd. and to our name being inserted as Brokers in the prospectus which the company intends to issue in respect of the proposed issue of capital and we hereby authorise the said company to deliver this consent to the Registrar of Companies. .......... pursuant to Section 40(6) of the Companies Act, 2013. As required under Rule 13 of the Company (Prospectors and Allotment of Securities) Rules, 2014, we are agreeable to accept one and a half per cent on the issue price as brokerage on allotment made in respect of applications bearing our rubber stamp as brokers.