Where at any time, a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares may be offered to any persons, if it is authorised by a special resolution, either for cash or for a consideration other than cash, if the price of such shares is determined by the valuation report of a registered valuer subject to such conditions as may be prescribed [Section 62(c) of the Companies Act, 2013]. These persons may include equity shareholders of the company referred to in clause
Rules 13 of the
Companies (Share Capital and Debentures) Rules 2014 give us detailed procedure.
Before discussing provisions in details, we may understand expression
“Preferential Offer”.
The expression
‘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 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.
For the purposes
of issue of shares on preferential basis under clause (c) of sub-section (1) of
section 62, 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
and such issue on preferential basis should also comply with conditions laid
down in section 42 of the Act.
This make clear
that Section 42 which is private placement shall always be read with Section
62(1)(C) read with Rule 13 of these Rules. Section 42 will not apply to 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.
The price of
shares to be issued on a preferential basis by a listed company shall not be
required to be determined by the valuation report of a registered
valuer.
Common
compliances:
Where the
preferential offer of shares or other securities is made by a company whose
share or other securities are listed on a recognized stock exchange, such
preferential offer shall be made in accordance with the provisions of the Act
and regulations made by the Securities and Exchange Board.
It the shares or
other securities of the company are not listed, the preferential offer shall be
made in accordance with the provisions of the Act and rules made
hereunder.
Any company
whether their shares or other securities are listed or not, shall comply with
the following requirements, namely:-
(a) The issue is
authorized by its articles of association;
(b) The issue has
been authorized by a special resolution of the
members;
(c) The
securities allotted by way of preferential offer shall be made fully
paid up at the time of their allotment.
(d) The company
shall make the following disclosures in the explanatory
statement to be annexed to the notice of the general meeting pursuant
to section 102 of the Act:
(i) The objects of the issue;
(ii) The total number of shares or other securities to
be issued;
(iii) The price or price band at/within which the
allotment is proposed;
(iv) Basis on which the price has been arrived at
along with report of the registered valuer;
(v) Relevant date with reference to which the price
has been arrived at;
(vi) The class or classes of persons to whom the
allotment is proposed to be made;
(vii) Intention of promoters, directors or key
managerial personnel to subscribe to the offer;
(viii) The proposed time within which the allotment
shall be completed;
(ix) The names of the proposed allottees and the
percentage of post preferential offer capital that may be held by
them;
(x) The change in control, if any, in the company that
would occur consequent to the preferential offer;
(xi) The number of persons to whom allotment on
preferential basis have already been made during the year, in terms of number of
securities as well as price;
(xii) the justification for the allotment proposed to
be made for consideration other than cash together with valuation report of the
registered valuer;
(xiii) The pre issue and post issue shareholding
pattern;
(e) The allotment of securities on a preferential
basis made pursuant to the special resolution passed pursuant to sub-rule (2)(b)
shall be completed within a period of twelve months from the
date of passing of the special resolution.
(f) 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.
(g) The price of
the shares or other securities to be issued on a preferential basis, either for
cash or for consideration other than cash, shall be determined on the basis of
valuation report of a registered valuer;
(h) 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;
(i) 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;
(j) where the
preferential offer of shares is made for a non-cash consideration, such non-cash
consideration shall be treated in the following manner in the books of account
of the company-
(i) where the non-cash consideration takes the form of
a depreciable or amortizable asset, it shall be carried to the balance sheet of
the company in accordance with the accounting standards; or
(ii) where clause (i) is not applicable, it shall be
expensed as provided in the accounting standards.
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