By R S BHATIA (FCS)

By R S BHATIA
(FCS)
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INTRODUCTION
TYPES OF SHARES
MODES OF ISSUE OF SECURITIES
PRIVATE PLACEMENT
SHARES CERTIFICATE
TRANSFER & TRANSMISSION OF
SECURITUES
ALLOTMENT
PREFERENCE SHARES AND REDEMPTION OF
SHARES
MEANING OF DEBENTURES & ITS TYPES
¾ As per Section 2(81) of the Companies Act, 2013
Securities means the securities as defined in the
Section 2(h) of SCRA, 1956 and which states that the
‰ Securities Include:o Shares, scrips, stocks, bonds, debentures, debenture
p
Company
p y or other
stocks etc. in or anyy incorporated
body corporate.
o Derivatives,
o Units issued by any Collective Investment Scheme to the
investors in such scheme.
o Units or any other such instruments issued to the
investors under any Mutual fund scheme .
o Government Securities or;
o such other instruments, rights or interest therein shall
be declared by the Govt
Govt. to be securities
securities.
Section 2(84) of the Companies Act,2013 inter alia
states that the share means a share in the share capital
of a company and includes stock.
(The term stock has not been defined in the New Act)
Section 43 of the Companies Act,2013 inter alia states
that the Share capital of a Company shall be of two
kinds:kinds:
¾ Equity Share Capital
¾ Preference Share Capital
yp
Types
of
Equity
shares
• Equity
shares with
voting
ti rights
i ht
• Equity
shares with
differential
h
rights
NOTE:- Equity
NOTE
E i shares
h
with
i h diff
differential
i l
rights has been defined under the Rule 4 of
Companies (Share Capital & Debentures)
Rules,2014
‰ In case of listed Companies Equity shares are issued and are
traded every day in the stock market.
market
‰ Equity shareholders only get dividend after preference
shareholders.
‰ The returns on equity shares are not at all fixed.
fixed It depends on
the amount of profits made by the Company
‰ The Board of Directors decides how much of the dividends
will be given to equity shareholders. Shareholders may accept
or reject the offer at the Annual General Meeting.
Meeting
‰ As per section 47 r/w section 50(2) of the Companies Act,
2013
™
every member of a company holding equity share capital
((with voting
g rights)
g ) shall have a right
g to vote on everyy
resolution placed before the company
and
™
his voting right on a poll shall be in proportion to his
share in the paid-up equity share capital of the
company.
Rule 4 of the Companies (Share Capital and
Debentures)) Rules,2014
,
1)
No company limited by shares shall issue equity shares
with differential rights unless the following conditions are
satisfied:ti fi d
a)
The issue is authorized by the Articles
b)
Issue is authorized by members by Special resolution.
( resolution in a listed company to be passed by postal
ballot)
c)
Shares with differential rights shall not exceed 26% of
the total paid-up equity.
( Paid Up Capital + Shares Issued with Differential
Ri ht )
Rights)
d)
Company should
C
h ld h
have track
k record
d off di
distributable
ib bl
profits in last 3 years in F.Y.
e) Company has not defaulted in :¾
filing of financial statements and annual returns for 3
financial years immediately preceding the financial
years in which it is decided to issue such shares.
¾
the payment of a declared dividend,
¾
¾
the payment of term loan,
loan
statutory payments etc.
2) The notice of meeting in which S.R is going to be passed
shall be accompanied with the Explanatory Statement and
Board’ss Report which contains the following:Board
following:
™
™
™
Total no. of shares
details of the differential rights
the percentage(%) of shares with differential rights to the
post issue capital including shares issued with differential
rights
™ The price of the issue
™ The diluted EPS. (As per AS-20)
3)
The company shall not convert its existing equity
sshare
a e capital
cap tal w
with
t vot
voting
g rights
g ts into
to equ
equity
ty sshare
ae
capital carrying differential rights.
4) The holders of such shares shall enjoy all other rights
such as bonus shares, rights shares etc.
‰ Public Company can issue securities through following
modes ::
ƒ Through prospectus (Public offer)
( it includes IPO, FPO or offer for sale by an existing
share holder through issue of prospectus)
ƒ
ƒ
ƒ
Private placement
Rights Issue
B
Bonus
Issue
I
‰ Under New Act, Private Company can issue securities
through following modes:modes:
ƒ Rights Issue
ƒ Bonus Issue
ƒ Private Placement
™ All types of companies (Including OPC) can issue
securities under ESOP scheme or Preferential Issue
¾ Private placement means any offer of securities or
i it ti tto subscribe
invitation
b ib securities
iti tto a select
l t ggroup off
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
u/s 42 r/w Rule 14 of the Companies(Prospectus and
Allotment of Securities) Rules
Rules, 2014
CONDITIONS :•
•
Applicable to all types of securities
Company may make an offer or invitation to subscribe to
securities through issue of a private placement offer letterForm No. PAS-4
• SR for each type of offer
•
Explanatory
p
y Statement to g
give:-
9
justification of price
9
List of proposed allottees
9
postt and
d pre iissue shareholding
h
h ldi pattern
tt
• No offer to more than 200 persons in a financial year
excluding QIBs or Employees under stock option scheme.
•
Application form should be serially numbered and
addressed to a specific person.
•
Form can be sent in writing / in electronic form
•
Company to maintain all records including PAN, Bank
account details etc. in Form No. PAS-5 & to file with ROC
(also with SEBI if company is listed) along with Form PAS-4
PAS 4
within 30 days from the date of circulation
• Company to maintain all records including PAN, Bank
account details etc. in Form PAS-5
• No fresh offer unless previous offer completed/
withdrawn/ abandoned. This is applicable even if
earlier offer is for different kind of security.
• Minimum investment size Rs 20
20,000/000/ face value.
value
• Separate
p
Bank Account for Application
pp
Moneyy
• particulars of consideration received if the securities
were issued for consideration other than cash.
As per Section 46 r/w Rule 5 of the Companies (Share
Capital and Debentures) Rules,2014
™ A share Certificate is prima facie evidence of the title
of person to such shares.
™ Share Certificate should be issued to subscriber to M/A
within 2 months.
™ Every certificate of shares shall be in Form No. SH-1
™ Minimum subscribed capital brought in within 2 months
as share certificates need to be issued within that
time.
time
I the
th case off ttransfer/
f / ttransmission
i i share
h
tifi t
™ In
certificate
should be issued in One Month.( Earlier 2 Months)
( Rule 6 of said Rules)
™ Duplicate Share Certificates shall be issued in lieu
of those that are lost or destroyed with the prior
approval of Board and payment of such fees as the
Board thinks fit. ( Fee not exceeding Rs.50 per
certificate)
™ The Register of Renewed & Duplicate Share
C tifi t maintained
Certificates
i t i d iin Form
F
No.
N SH
SH-2
2
As per Section 56 of the Companies Act, 2013 r/w Rule
11 of Companies(
p
( Share Capital
p
& Debentures)) Rules,,
2014 company having share capital shall register a
transfer of the securities of the company if:o Instrument of transfer of securities shall be in the
Form No. SH-4
o Instrument of transfer duly stamped, dated, &
executed to be delivered within 60 days of
execution.
o The provisions of these section shall be applicable to
all companies including listed ones.
o If in case of partly paid shares
shares, an application of
transfer of shares is made by the Transferor, then
company
p y shall give
g
notice of application
pp
to the
transferee in Form No. SH-5 and transferee must give
reply of the notice within 2 weeks from the date of
receipt of notice.
o Time
Ti
period
i d within
ithi which
hi h certificates
tifi t off all
ll
securities allotted, transferred or transmitted are to
be delivered by
y the company
p y (unless
(
prohibited
p
by
y any
y
law)
• 2 months from the date of incorporation in case of
subscribers to M/A
• 2 months from allotment in case of allotment of
shares.
• 1 month from the date of receipt of transfer deed/
intimation of transmission.
• 6 months
h from
f
the
h date
d
off allotment
ll
in
i case off
debentures.
As per section 39 of the Companies Act, 2013 r/w
Rule 12 of Companies (Prospectus & Allotment of
Securities) Rules, 2014
• The amount p
payable
y
on application
pp
on securities
shall not be less than 5% of the nominal amount of
the security.
‰
• The application money should be transferred in
separate
t b
bank
k accountt within
ithi 60 d
days from
f
th
the d
date
t
of such receipt.
• The company should make allotment within 60 days.
• Otherwise refund within next 15 days from the same.
• Delay
D l in
i refund
f db
beyond
d thi
this period
i d :- 12% interest.
i t
t
Also from the 76th day the amount will be treated as
deposit.
• Penalty for contravention of section 42 :- Higher of
amount involved in the offer or Rs. 2 Cr. And also
refund all money to subscribers.
• Return of Allotment in PAS-3 (30 days)
• Complete list of all security holders containing the
full
name, address, PAN & Email ID of such security
holders,
Complete list of all security holders containing the full
name address
name,
address, PAN & Email ID of such security holders
holders,
•
• Shares issued for consideration other than cash should
be executed as an agreement which is duly stamped,
and if agreement is not reduced to writing then
complete details of contract shall be filed with ROC in
F
Form
No.
N PAS
PAS_3
3 along
l
with
ith th
the valuation
l ti report.
t
As per Section 43(b) of the Companies Act, 2013 Preference
Share Capital means that part of issued capital which carries or
would
ld carry a preferential
f
l right
h with
h respect to:ƒ
ƒ
payment of dividend (either as a fixed amount or an
amount calculated at a fixed rate)
repayment of capital (in case of winding up)
Preference share holders have a right to vote on
resolutions affecting their rights. However, if dividend
is not paid on a Class of preference shares for a period of
2 years or more,
more then such shareholders shall have a
right to vote on all resolutions placed before a meeting
of a company
™ As per section 55 of the Act, 2013 r/w Rule 9 of Companies
((Share Capital
p
and Debentures)) Rules,, 2014 Company
p y limited
by shares :• shall issue only redeemable preference
shares.
shares
• Preference shares shall liable to be redeemed within a
period not exceeding 20 years.
projects
j
preference
p
shares can be
• For infrastructure p
issued for a period of more than 20 years but for less than 30
years.
• If rights of any particular class of shareholders affected
then consent of at least 75% of shareholders of that class is
required to pass the resolution.
€
As per Section 2(30) of the Companies Act, 2013 Debentures
Includes:Debenture Stock;
Bonds or ;
Any other instruments evidencing a debt
(whether constituting a charge on the assets of the
company or not).
€
As per Section
A
S ti 71 off th
the C
Companies
i A
Act,2013
t 2013 r/w
/ R
Rule
l 18 off
the Companies (Share Capital & Debentures) Rules, 2014
1)
A Company may issue wholly or partly convertible
debentures and such issue shall be approved by a Special
Resolution passed at a General Meeting.
2) Company cannot issue debentures carrying voting rights.
h ld create
t Debenture
D b t
R
d
ti R
3) C
Company should
Redemption
Reserve
Account out of the distributable profits.
4) It is mandatory to appoint debenture trusty if debenture
is issued to more than 500 persons
5) Debenture Trust Deed indemnifies or exempts the
Debenture Trustee against the loss. However, such deed
is void in case of Breach of Trust.
6) The liability of Debenture Trustee shall be exempt
subject to the approval of debenture holder holding not
less than 3/4th in value of total debentures.
7) Payments of interest & redemption shall be with the
terms of the issue.
8)
9)
Secured debentures maximum tenure 10 years. But
for Infra it is 30 years.
Trust Deed Form SH-12.
10) Maintenance of liquid assets of 15% of debentures
maturing
g during
g the y
year. This can be used only
y for
redemption and should not fall below 15%
11)
such
h an issue
i
off d
debentures
b t
shall
h ll b
be secured
db
by the
th
creation of a charge, on the properties or assets of
p y, having
g a value which is sufficient for
the company,
the due repayment of the amount of debentures
and interest thereon
any amount raised by the issue of bonds or debentures
secured by a first charge or a charge ranking pari passu
with the first charge on any assets referred to in
Schedule III of the Act excluding intangible assets of
the company or bonds or debentures compulsorily
convertible into shares of the company within five
years:
Provided that if such bonds or debentures are secured
by the charge of any assets referred to in Schedule III
of the Act, excluding intangible assets, the amount of
such bonds or debentures shall not exceed the market
value of such assets as assessed by a registered valuer;
6
Security Point
of View
Tenure Point of
View
Mode of
Redemption
Point of View
• Secured Debentures
• Unsecured Debentures
• Redeemable
Debentures
• Perpetual Debentures
• Convertible Debentures
• Non- Convertible
Debentures