Companies Act, 2013

NitiN Somani, SPA Capital Advisors Limited

A dCoverageAgenda

Public Issue11✓GDRs22

Private Placement

Ri h I

33

44 Rights Issue44

Bonus Issue55

55

Applicabilitypp y

Section 23 of Companies Act, 1956 is the enabling provision with respect to public issue.

Applicability

Public Company Private Company

Companies Act, 2013 – Part I of 

SEBI ICDR RegulationsChapter III Regulations

Power to Regulateg

Power to Regulate Issue and Transfer of Securities & Payment of Dividend.

• Listed Company or Company which intends to list its Shares on Recognized Stock Exchange(s)

SEBI ICDR R l i– SEBI ICDR Regulations;

– Companies Act, 2013; and

– Companies (Prospectus & Allotment of Securities) Rules, 2014.

• Unlisted Companies (other than above)

– Companies Act, 2013; and

– Companies (Prospectus & Allotment of Securities) Rules, 2014.

Additional disclosures to be made in Prospectusp

The following additional / new disclosures in the Offer Document have been made mandatory:

• Details of promoters’ shareholding including:

d h h h d f ll id– date when the shares were made fully paid up;

– source of funds utilized by promoter for acquisition of shares in the company, including loantaken with details, if any;

• Various other disclosures aligned in line with SEBI ICDR Regulations

– Gestation period of project, extent of progress made, time schedule for its implementation

– Business / transaction for which the proceeds of the issue are to be applied directly /indirectlyy

– Default or non payment of statutory dues

– Details of pending litigations involving issuer, promoter, director, subsidiary, group company orany other person whose outcome may have material adverse effect on the position of theissuerissuer

– Certain reports and financial information with respect to companies proposed to be acquiredout of the proceeds of the issue

Offer for Sale

Existing Shareholders propose to sale their holding(s).

Minimum Subscription

Companies Act, 2013

No need to comply

Min. Application Value

Companies Act, 2013

No such requirement

Cost Bearing

Companies Act, 2013

Cost borne by Company be p y

SEBI ICDR Regulations

No need to comply

Remarks

q

SEBI ICDR Regulations

Shall be within Rs. 10,000 to 

Rs. 15,000

liable to be reimbursed by the 

respective shareholder.

SEBI ICDR Regulations

No difference Remarks

ICDR will prevail.

No such provision, but the 

same was shared 

proportionately.

Advertisement of Prospectusp

New Provision.

• Advertisement of prospectus shall include:

– the contents of its memorandum as regards the objects;

– the liability of members;

– the amount of share capital of the company;p p y;

– the names of the signatories to the memorandum;

– the number of shares subscribed for by signatories; and

– its capital structure.

Allotment of Securities

Some important provisions.

Subscription

Companies Act, 2013

Return

Form PAS‐3 to be filed within 30p ,Refund within 15 days

SEBI ICDR REGULATIONSListing within 12 working days from issue closure

Form PAS‐3 to be filed within 30 days of allotment.

issue closure

Application Amount

Companies Act, 2013

Default

Company and its Officer,Companies Act, 20135% of Nominal Amount

SEBI ICDR REGULATIONS25% of Nominal Amount

Company and its Officer, Rs. 1,000 for each day or Rs. 1,00,000, whichever is less.

Amendment to Objects of the Issuej

Modified provision with opportunity to exit

• Company can change the objects of the issue for which funds raised from public

A l f b i d id i l l i• Approval of members required vide special resolution

• Cannot modify the objects to use funds for buying, trading or otherwise dealing in equity shares ofany other listed company

• Promoter / controlling shareholder to provide exit to the dissenting shareholders who have notagreed to the proposal to vary the terms of contract / object referred to in the Prospectus

• Exit price to be determined in the manner as specified by SEBI

Miscellaneous

Some Important Provisions.

• Before making offer, permission  of stock exchange(s) for listing shall be granted.

• All monies received for subscription shall be kept in separate account and shall be utilized for:‐

– Adjustment against allotment where approval for listing has been granted– Adjustment against allotment, where approval for listing has been granted.

– Repayment of monies in case of failure to allot.

• Brokerage / Commission

– Equity – 5%

– Debt – 2.5%

• Multiple application with different names of combinations thereof for acquiring or subscribing shares: made punishable offence u/s 447 (introduced in Companies Act).

Miscellaneous

Some Important Provisions.

• Entire holding of Promoter Group to be in demat form (listed companies are also presently subjectto the same requirement)

• Refund, if any, shall be made in the same bank account from which the money was remittedRefund, if any, shall be made in the same bank account from which the money was remitted

• Default

– Company

• Fine with Rs. 5 lakhs , extendable to Rs. 50 lakhs

ff f l– Every Officer in Default

• Imprisonment – Max. 1 year; or

• Fine – Min. Rs. 50,000 extendable to Rs. 3,00,000; or

• Both

• The provisions applicable to Prospectus are not applicable to the offer document for rights issue

A dCoverageAgenda

Public Issue11

GDRs22

Private Placement

Ri h I

33

44

✓

Rights Issue44

Bonus Issue55

55

Eligibilityg y

As per Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Mechanism)Scheme, 1993

• Issuer

– Shall not be restrained by SEBI from accessing the securities market.

• Subscriber

– Should not be prohibited by SEBI to buy, sell or deal in securities.

Conditions

Following Conditions to be satisfied

• Board Resolution to be passed.

• Special Resolution to be passed.p p

• Overseas Depository Bank shall be appointed.

• Provisions of the scheme and rules and regulations to be complied with.

• Shall appoint Merchant Banker / PCS / PCA / PCWA who shall prepare Compliance Report.

• Compliance Report shall be placed in the Board Meeting.

• Board shall have at least one Independent Director.

Form and Manner

• Can be issue by way of:

– Public Offer; or;

– Private Placement; or

– Other manner prevalent abroad.

• Can be listed or traded on overseas platform.

• May be issued against new Shares or may be sponsored against the shares held by shareholders.

• Allotment shall be in the name of Overseas Depository Bank.

Voting Rightsg g

• May become member of the Company.

• Entitlement of Voting Rights only after conversion.g g y

• Until conversion, Overseas Depository shall be entitled to vote on behalf of holders in accordance

with the agreement.

Proceeds of Issue

• Shall be remitted to‐

– Bank account in India; or;

– Indian Bank operating abroad; or

– Foreign Bank , Scheduled bank as per RBI.

Miscellaneous

• Company which has issued DRs before commencement of these rules shall comply within six

months of commencement of these rules,

• In an issue after the expiry of six months, these rules to be complied with.

• Offer document shall not be deemed as prospectus.

U il d i f ODB h ll b d i h R i f b• Until redemption, name of ODB shall be entered in the Register of members.

A dCoverageAgenda

Public Issue11

GDRs22

Private Placement

Ri h I

33

44

✓Rights Issue44

Bonus Issue55

55

Private Placement

Some Important Provisions.

• Offer shall be given to maximum 200 persons in a financial year.

• “Persons” excludes:

– QIBs; and

– Employees of the Company being offered shares under ESOP.

• Offer shall be made in form PAS‐4.

• Offer should be an individual offer, non transferable in nature,

• Every private placement should be approved by way of special resolution

• In case of multiple issues of NCDs in a financial year, one Special Resolution shall be sufficient.

Private Placement

Some Important Provisions.

• Following conditions to be satisfied:

– Offer letter shall be accompanied by an application form.p y pp

– Application form shall be serially numbered and addressed.

– Justification for price shall be made in the Explanatory Statement.

– Minimum application value shall for equity shares of face value Rs. 20,000.

• No fresh issue until the allotment has been made or withdrawn or abandoned.

• All monies payable towards subscription shall be paid through cheque or DD or any other banking 

channels but not by cash.

• Offer open for a period of 30 days from the date of recording the names of persons to whom offer 

to be madeto be made

Private Placement

Some Important Provisions.

• Allotment shall be made within 60 days from the date of receipt of application money.

• In case of failure, refund shall be made within 15 days, otherwise liable for interest of 12%., y ,

• Such share application money not refunded will be deemed to be public deposit in terms of

Companies (Acceptance of Deposits) Rules, 2014

A li i h ll b k i b k i S h d l d B k• Application money shall be kept in separate bank account in Scheduled Bank.

• Application money shall be utilized only for:

– Adjustment against allotment of securities; and

– Repayment of monies in case of failure to allot.

• Records shall be maintained in form PAS‐5 and the same shall be filed to ROC as well as SEBI(in case

of listed company)of listed company).

Private Placement

Exception clauses

• For the purpose of calculation of 200 persons, it excludes:

– QIBs; and;

– Employees of the Company being offered shares under ESOP.

• Limit on maximum number of persons (i.e. 200) to whom shares can be offered and application size 

i h i i f l f R 20 000 N li bl NBFC d HFCwith minimum face value of Rs. 20,000: Not applicable to NBFCs and HFCs

Private Placement

Registered Valuer

• For the purpose of allotment, the Company needs to disclose fair value of securities in the

explanatory statement & offer document

• Fair price shall be determined by a Registered Valuer

• Till the rules for Registered Valuer is determined, valuation shall be conducted by an independent

merchant banker or an independent chartered accountant in practice having a minimummerchant banker or an independent chartered accountant in practice having a minimum

experience of ten years

• The explanatory statement shall also disclose the justification for the issue price

A dCoverageAgenda

Public Issue11

GDRs22

Private Placement

Ri h I

33

44✓ Rights Issue44

Bonus Issue55✓

55

Rights Issueg

Some Important Provisions.

• To be given only to the persons who, as on date of offer, are holder of the equity shares of the

company.

• Offer shall be made by notice specifying:

– The number of shares offered; and

Li i i i l h 15 d d di 30 d f h d f ff– Limiting a time not less than 15 days and not exceeding 30 days form the date of offer.

– If the offer is not accepted within specified time, the same shall be deemed to be declined.

• Offer shall have right to renounce unless articles provides otherwise.

• If offer is declined, Board shall have the power to dispose them off in the best and advantageous

way possible.

Rights Issueg

Some Important Provisions.

• Notice shall be dispatched through:

– Registered post; org p ;

– Speed post; or

– Electronic mode (introduced in Companies Act, 2013, but SEBI ICDR Regulations does not

id f di h h h l i d )provide for dispatch through electronic mode).

• Notice shall be sent at least 3 days before opening of the issue.

• Sections applicable to Prospectus not applicable to the Letter of Offer for rights issue

A dCoverageAgenda

Public Issue11

GDRs22

Private Placement

Ri h I

33

44 Rights Issue44

Bonus Issue55✓

55

Bonus Issue

Some Important Provisions.

• Bonus issue shall be made of fully paid shares.

• Bonus issue shall be made out of:

– Free reserves; or

– Securities premium account; or

– Capital redemption reserve account.

• Bonus issue shall not be made out of reserve create for revaluation of assets.

Bonus Issue

Some Important Provisions.

• Following conditions to be satisfied:

– Authority in AOA;y ;

– Authorized in General Meeting;

– Company has not defaulted in payment of interest or principal in respect of fixed deposits or 

d b i idebt securities.

– Company has not defaulted in payment of statutory dues to employees contribution to PF, 

gratuity and bonus.

– Partly paid up shares shall be made fully paid up.

– Shall not be issued in lieu of dividend.

• Bonus issue once announced cannot be withdrawn• Bonus issue once announced, cannot be withdrawn.

Thank You!Thank You!

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