Transcript New Concepts, Initiatives and Opportunities in the

Presentation
By
CA Anil Sharma
Prospectus & Allotment of Securities
• Chapter III – Sections 23 to 42
• Part I – Public Offer – Sections 23 to 41
• Part II – Private Placement – Section 42
• the Companies (Prospectus and Allotment of
Securities) Rules, 2014.
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Share Capital & Debentures
• Chapter IV – Sections 43 to 72
• Share Capital – Sections 43 to 70
• Debentures - Sections 71 & 72
• The Companies (Share Capital and Debentures)
Rules, 2014.
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Section 23 – Issue of Securities
• By public company
– Through prospectus to public (Public offer)
– Private placement
– Right issue
– Bonus issue
• By private company
– Right issue
– Bonus issue
– Private placement
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Securities
• Sec 2(81) – means the securities as defined in Section 2(h)
of the Securities Contracts (Regulation) Act, 1956.
– 2(h) “securities” include—
• (i) shares, scrips, stocks, bonds, debentures, debenture stock or other
marketable securities of a like nature in or of any incorporated
company or other body corporate;
• (ia) derivative;
• (ib) units or any other instrument issued by any collective investment
scheme to the investors in such schemes;]
• (ic) security receipt as defined in clause (zg) of section 2 of the
Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002;
• (id) units or any other such instrument issued to the investors under
any mutual fund scheme;]
• (ii) Government securities;
• (iia) such other instruments as may be declared by the Central
Government to be securities; and
• (iii) rights or interest in securities;
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Section 24- Powers to SEBI
• Relating to issue and transfer of securities and
non- payment of dividend by listed companies &
cos intending to get their securities listed – to be
administered by SEBI
• Others by the Central Government.
• So far as ‘intending to list’ unlisted companies are
concerned, SEBI now has jurisdiction over their
private placements. This clarity was lacking in
section 55A of CA, 1956- otherwise no change in
provisions.
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Section 42- Offer or invitation for subscription of
securities on private placement
• No reference or definition of ‘private placement’ in
CA,1956.
• In terms of section 67 of CA,1956 where shares or
debentures were available for subscription or purchase
only to those receiving the offer/invitation, it was
considered as ‘private placement’ and was out side the
preview of ‘public issue’.
• The section 67 was examined by Apex Court in the case
of Sahara Real Estate Corporation Ltd Vs. SEBI dealing
with ‘public issue’ in the garb of private placement.
• This decision lead to bringing in section 42 in CA,2013.
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Section 67 of the CA, 1956
• Sub-section (3)
• No offer or invitation shall be treated as made to the public
…if the offer or invitation can properly be regarded, in all
the circumstances – (a) as not being calculated to result, directly or indirectly, in the
shares or debentures becoming available for subscription or
purchase by persons other than those receiving the offer or
invitation ; or
– (b) otherwise as being a domestic concern of the persons
making and receiving the offer or invitation :
• Provided that nothing contained in this sub-section shall
apply in a case where the offer or invitation to subscribe for
shares or debentures is made to fifty persons or more.
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Section 42- Private Placement means
– Offer to select group of people, whose names are
recorded prior to invitation,
– Offer is through issue of private placement letter,
– Offer is made to not more than 200 persons
(excluding QIB and ESOP) (Rule 14(b)) and
– Limit of 200 number is with reference to financial
year.
– the value of such offer or invitation per person
shall be with an investment size of not less than
twenty thousand rupees of face value of the
securities.
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Section 42-Other conditions for Private
Placement
• Applicable to all whether listed company or
not.
• No fresh offer unless earlier offers have been
completed.
• Securities to be allotted in 60 days.
• Money to be kept separately till the allotment
is completed.
• Company not to release any advertisement for
such offer.
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Rule 14- Private Placement Offer Letter
• Private placement offer letter in Form PAS-4.
• To be accompanied by an application form serially numbered and
addressed specifically to the person to whom the offer is made
• To be sent either in writing or in electronic mode, within thirty days
of recording the names of such persons in accordance with subsection (7) of section 42.
• The proposed offer of securities or invitation to subscribe securities
has to be previously approved by the shareholders of the company,
by a Special Resolution, for each of the Offers or Invitations:
• The explanatory statement annexed to the notice for the general
meeting shall disclose the basis or justification for the price
(including premium, if any) at which the offer or invitation is being
made.
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Rule 14(3) Record of Private Placement
• The company shall maintain a complete record of
private placement offers in Form PAS-5.
• a copy of such record along with the private
placement offer letter in Form PAS-4 shall be filed
with the Registrar within a period of thirty days of
circulation of the private placement offer letter.
• the payment to be made for subscription to
securities shall be made from the bank account
only and the company shall keep the record of
the Bank account from where such payments for
subscriptions have been received.
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Rule 12- Return of allotment
• The company shall, within thirty days file with the Registrar
a return of allotment in Form PAS-3 .
• Form PAS-3 to attach:
– a list of allottees stating their names, address, occupation, if
any, and number of securities allotted to each of the allottees
and the list shall be certified by the signatory of the Form PAS-3
as being complete and correct as per the records of the
company.
– In the case of securities (not being bonus shares) allotted as
fully or partly paid up for consideration other than cash, a copy
of the contract, duly stamped, pursuant to which the securities
have been allotted together with any contract of sale if relating
to a property or an asset, or a contract for services or other
consideration.
– A report of a registered valuer in respect of valuation of the
consideration shall also be attached along with the contract .
– Form PAS 5 along with PAS 4.
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Section 62- Further issue of share capital
• Corresponding to Sections 81 and 94A of CA,
1956.
• Unlike section 81, section 62 applies to private
limited companies also.
• Cut out dates for pre-emptive rights of existing
rights as provided in section 81 are missing in
Section 62.
• Second option of issue of further shares to
others after passing ordinary resolution and after
taking approval of the CG is missing in Section 62.
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Preferential Issue of shares
• It means an issue of shares or other securities, by a
company to any select person or group of persons on a
preferential basis and does not include
– shares or other securities offered through a public issue,
– rights issue,
– employee stock option scheme, employee stock purchase
scheme or
– an issue of sweat equity shares or
– bonus shares or
– depository receipts issued in a country outside India or
– foreign securities
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Rule 13- Issue of shares on preferential basis
• For the purposes of section 62(1)(c), If
authorized by a special resolution passed in a
general meeting, shares may be issued by any
company in any manner whatsoever including
by way of a preferential offer, to any persons
whether or not those persons include the
persons referred to in clause (a) or clause (b)
of sub-section (1) of section 62.
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Rule 13- Issue of shares on preferential basis
• For the purposes of section 62(1)(c), shares
may be issued by any company in any manner
whatsoever including by way of a preferential
offer, and such issue on preferential basis
should also comply with conditions laid down
in section 42.
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Preferential offer
• means an issue of shares or other securities, by a company
to any select person or group of persons on a preferential
basis and
• does not include shares or other securities offered through:
–
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–
–
–
–
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public issue,
rights issue,
employee stock option scheme,
employee stock purchase scheme
an issue of sweat equity shares
bonus shares
depository receipts issued in a country outside India or
foreign securities;
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Shares & Other Securities under Rule 13
• Means:
– equity shares,
– fully convertible debentures,
– partly convertible debentures or
– any other securities,
• which would be convertible into or exchanged
with equity shares at a later date.
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Requirements for Preferential offer
• The preferential offer of shares or other securities shall be
subject to compliance with the following requirements:
– the issue is authorized by its articles of association;
– the issue has been authorized by a special resolution of the
members
– the securities allotted by way of preferential offer shall be
made fully paid up at the time of their allotment.
– the company shall make the required disclosures in the
explanatory statement to be annexed to the notice of the
general meeting pursuant to section 102 of the Act
– the allotment of securities shall be completed within a period of
twelve months from the date of passing of the special
resolution. if the allotment of securities is not completed within
twelve months from the date of passing of the special
resolution, another special resolution shall be passed for the
company to complete such allotment thereafter.
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Requirement for Preferential offer
• The preferential offer of shares or other securities shall be
subject to compliance with the following requirements:
– the price of the shares or other securities to be issued either
for cash or for consideration other than cash, shall be
determined on the basis of valuation report of a registered
valuer;
– where convertible securities are offered on a preferential basis
with an option to apply for and get equity shares allotted, the
price of the resultant shares shall be determined beforehand on
the basis of a valuation report of a registered valuer and also
complied with the provisions of section 62 of the Act;
– where shares or other securities are to be allotted for
consideration other than cash, the valuation of such
consideration shall be done by a registered valuer who shall
submit a valuation report to the company giving justification for
the valuation.
•
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Preferential allotment
• Relevant section- Section 62 (1)(c).
• Section 62 refers to Rule 13 of the Companies
(Share Capital and Debentures) Rules, 2014.
• Rule 13 refers to Section 42.
• Section 42 refers to Rule 14 of the Companies
(Prospectus and Allotment of Securities)
Rules, 2014.
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THANK YOU
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Tuesday, July 07, 2015