Transcript Kinds of Share Capital (sec. 43)

6th June, 2014
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Kinds of Share Capital (sec. 43)
With Voting Rights
Equity Share Capital
Kinds of
Capital
Share
With
Differential
Voting rights
Preference
Capital
Share
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Voting Rights & Variation Of Rights (sec. 47)
Equity
Share
holders
Right To
Vote On
Every
Resolution
Resolutions which
Directly affects The
Rights
Preference
Shareholders
* Winding Up Of The Company
*Repayment /
Reduction Of Its Equity Or
Preference Share Capital
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Equity with differential rights (sec. 43)
• Authorised by the AOA
• Ordinary resolution (for listed companies through postal ballot)
• Shall not exceed 26% of the total post-issue paid up equity share capital at any point of time
• Should have 3 years track record of distributable profits
• No default in payment of declared dividend, repayment of matured deposits or redemption
of preference shares/debentures, if any including interest there on
• No default in filing Financial Statement & Annual Return for preceding 3 years
• Not be penalized by Court or Tribunal of any offence under RBI, SEBI, SCRA,FEMA and any
other special act where such cos., are regulated, if any
• Conversion into share with differential rights and vice versa is not allowed
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Continued…
Structuring different economic rights for different class
of equity shareholders may become difficult given the
conditions that companies have to comply with under
the Companies (Share Capital and Debentures) Rules,
2014. However, it is important to note that the rules
issued under this chapter specifically mention that
existing equity shares issued with differential rights will
continue to have the rights provided at the time of their
issuance
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Kinds of Issues of share capital (sec. 62, 42,
63, 54, 23 etc.)
Kinds of
Issue
Right Issue
Private
Placement
ESOP’s
Preferential
offer
Other
Issue’s
Bonus Issue
Sweat
Equity
Public Issue
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Rights Issues – sec. 62(1)(a)
• Offered to existing holder of equity share
• Issue can be of any kinds of Shares (Equity or Preference)
• Proportion to their paid up equity capital
• Letter of Offer shall be issued
• Right to renounce
• No valuation and no special resolution
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Rights Issues -Procedure
Conduct
a
Board Meeting
and
pass
resolution for
right issue and
approve
the
letter to offer
Issue of Letter
of Offer which
shall specify the
no. of shares
offered.
Time Limit is 15
to 30 days –
Offer to be
accepted
If not accepted
with in time,
deemed to be
declined
Can
be
renounce within
the time to any
other person
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Section 42. Part II – Private Placement
"private placement"
• means any offer of securities or invitation to subscribe securities to a select group of
persons by a company (other than by way of public offer) through issue of a private
placement offer letter and which satisfies the conditions specified in this section
• No Invitation shall be made to such number of persons not exceeding 50 or such
higher number as may be prescribed in a financial year (i.e., 200) and on such
conditions in the form and manner of Private Placement as may be prescribed
Excluding:
• QIB’s
• Employees
Such concept was not there in the Companies Act, 1956.
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Private Placement Rules
No
fresh
offer
of
Private
Placement is
allowed
unless
the
previous
offer, either
have been
completed or
withdrawn
or
abandoned
If the Private
Placement is
turned to be
a public offer
the
provisions of
SCRA
and
SEBI should
be complied
with
The allotments
must
be
completed
within 60 days,
failing
which
the
amount
should
be
refunded within
15 days form
the date of
completion of
60
days.
Otherwise
it
shall be liable to
repay
that
money
with
interest @ 12%
per annum from
the expiry of
the 60th day
The
subscription
money
should
be
kept in a
separate
bank account
in
a
scheduled
bank
The
company
shall maintain a
Register
and
should keep all
the
offers
received in such
manner as may
be
prescribed
and
complete
information
about such offer
shall be filed with
the
Registrar
within a period
of 30 days of
circulation
of
relevant private
placement offer
letter
No
advertiseme
nt shall be
released
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key points…
Max allotment to 200 number
of Investors (excl. QIBs & ESOP) in one FY
Cash Payment prohibited
Allotment to be made within 60 days, else refund
@ 12% interest p.a.
Share application money to be kept in Separate
Account
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Preferential Offer – sec. 62
• Special Resolution
• Comply with Private Placement Rules
• Valuation of Shares
• Disclosures in explanatory statement
• Fully Paid Up Shares shall be allotted
• Offer should be completed with in 12 months
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Employee Stock Option Scheme – sec. 62
• Issued to Directors and Employees including Subsidiary & Holding Co
• Passing by Special Resolution
• Freedom to fix price and lock in period
• Same definition, but excludes - independent directors, promoter/’PG, director directly or indirectly holds > 10% of
outstanding equity shares and includes – employee of associated company
• minimum one year gap between grant of options and vesting of options
• Amount forfeited by the company if the option is not exercised by the employees within the exercise period
• Options not transferable
• Options not be pledged, hypothecated, mortgaged
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Employee Stock Option Scheme
• Legal heirs or nominees are entitled in case of death of employee
• Disclosure in the board's report
• In the event of resignation or termination, options not yet vested will expire and options vested can
exercise as per the terms at the time of grant of options
• Same definition, but excludes - independent directors, promoter/’PG, director directly or indirectly holds
> 10% of outstanding equity shares and includes – employee of associated company
• listed companies regulated by SEBI
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Bonus Issue – sec. 63
• Existing Members
• Out of Free Reserve ,
Security
Premium,
Capital
Redemption
Reserve
• Authorized by Articles
• Recommended by Board
and Authorize in General
Meeting
• No default in payment in
interest or principal
amount in FD’s or Debt
Securities
• No default in payment of
Statutory
dues
of
employees (PF, Bonus &
Gratuity)
• Partly paid shares shall
be made fully paid up.
• Once issued should not
be withdrawn
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Sweat Equity Shares – sec. 54
• Issued to Directors and
Employees
including
Subsidiary & Holding Co.
• Can be issued at discount
or for consideration other
than cash
• For providing Technical
Know How , Intellectual
Property Rights or Value
addition
• Authorised by a special
resolution
• one year should have
elapsed
since
the
commencement
of
business
• listed companies
regulated by SEBI
are
• Offer
should
be
completed with in 12
months
• Shall not issue more than
15% of Paid up Capital
• Shares shall be locked in
for 3 years
• Valuation
of Equity
Shares & Know How,
Intellectual Property shall
be done by RV
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Comparative analysis
Companies Act, 1956
Particulars
Private
Public
Companies Act, 2013
Particulars
Private
Public
Rights
Issue
No provisions Sec. 81
were
prescribed.
Rights Issue Sec.
62(1)(a)
Sec.
62(1)(a)
Preferentia
l Allotment
No provisions Sec. 81(1A)
were
prescribed.
Preferential Sec.
Allotment
62(1)(c)
Sec.
62(1)(c)
ESOP’s
No provisions No provisions
were
were
prescribed.
prescribed.
ESOP’s
Sec.
62(1)(b)
Sec.
62(1)(b)
Sweat
Equity
Sec. 79A
Sweat
Equity
Sec. 54
Sec. 54
Bonus
Issue
No provisions No provisions
were
were
prescribed.
prescribed.
Bonus Issue Sec.63
Sec.63
Sec. 79A
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Issue of Preference Shares – sec. 55
• Irredeemable Preference Shares are not allowed to issue
• Maximum redemption period shall not exceed 20 years &
Infrastructure projects – 30 years
• Passing by Special Resolution
• Explanatory statement to be annexed to the notice
• listed companies are regulated by SEBI
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Redemption of Preference Share
• Shall be redeem out of Profit or Proceeds of
fresh issue
• No such shares redeemed unless fully paid up
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Issue of Debentures – sec. 71 read with sec. 42 & 62
A company may issue debentures with an
option to convert such debentures into
shares, either wholly or partly at the time
of redemption.
Provided that the issue of debentures with
an option to convert such debentures into
shares, wholly or partly, shall be approved
by a special resolution passed at a general
meeting.
No company shall issue any debentures
carrying any voting rights.
Where debentures are issued by a
company under this section, the company
shall create a debenture redemption
reserve account out of the profits of the
company available for payment of dividend
and the amount credited to such account
shall not be utilised by the company except
for the redemption of debentures.
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Deposits – sec’s 73-76 read with (Acceptance of
Deposits Rules by Companies)
Deposit means
Any receipt of money by way of deposit or loan or in any
other form, by a company.
Depositor means
Any member who has made deposit with the Company
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What is not a Deposit
Amount received from
CG, SG or guarantee
provided by them
Amount received from
Foreign Govt., Banks,
FI, ADB, IFC, etc.,
Amount received from
any Banking Co. or SBI
or its Subsidiaries
Amount received from
Banks, Public Financial
Institutions, Insurance
Co. etc.,
Amount raised through
Commercial Paper
Amount raised from
one Co. to other Co
Amount received from
Subscription
of
Securities
Amount received from
Director
Amount raised by issue
of secured bonds &
debentures or issue of
CCD’s convertible into
shares within 5 years
Amount received from
Employee under
Contract
Any non-interest
bearing amount held in
trust
Advance received for
Supply of Goods
Security deposit for
performance of
contract
Advance consideration
received for transfer of
Property
Loan bought in by
Promoters as
stipulated by Banks
and FI
Amount accepted by
Nidhi Co
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From whom to accept
Eligibility Criteria
Public Co. in order
to accept from
other than
members
Every other Co.
only from
Members
(Eligible Co.)
Net worth 100 Cr
or more
Turnover 500 Cr
or more
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Tenure of Deposit
Deposits shall
be accepted
Minimum for 6
months
Maximum for
36 months
If accepted for less than 6 months
Such deposits shall not be more
than 10% of paid up capital +
free reserves
Minimum 3 months shall elapse
before repayment of deposits
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Threshold limits
from members only,
then till 10% of Paid
up Capital + free
reserves
Eligible Co.
from other than
members, then till
25% of Paid up Capital
+ free reserves
Threshold limits for
accepting or renewal
of Deposits by various
Co.
Govt. Eligible Co.
till 35% of Paid up
Capital + free reserves
Other than Eligible Co.
from members only,
then till 25% of Paid
up Capital + free
reserves
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About existing Deposits
File within a period of
3
months
from
commencement of this
act Form DPT – 4
Shall repay all
deposits within
the
• one year or
• on the date on which
deposits are becoming due
whichever is earlier
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Insurance
Contract to be entered with
insurance agency before 30 days
of issuing Circular
In default to repay and if amount
is more than Rs. 20,000/-, the
Insurance Co. shall repay not less
than Rs. 20,000/- for each
depositor
Its mandatory
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Every new beginning comes from
some other beginning’s end
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