Brief Synopsis on issue of shares under the Companies Act’2013

Issue of shares under the Companies Act'2013 by Private Limited Companies:

1)      Methods of issue of shares:                       

A)     Private Placement (Section 42 of the Companies Act'2013, Rule 14)

B)      Preferential allotment/Preferential offer

C)      Right Issue                                         

D)     Conversion of Loan/Debentures into shares.

E)      Bonus issue       

                               

      A)     Private Placement (Section 42 of the Companies Act'2013, Rule 14)

"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 section 42.

Conditions under section 42 are:

1) Private Placement should be done through offer letter (PAS-4).

2) A private placement offer letter shall be accompanied by an application form serially numbered and addressed specifically to the person to whom the offer is made and shall be sent to him, either in writing or in electronic mode, within thirty days of recording the names of such persons in accordance with sub-section (7) of section 42 of the Act.

3) The offer shall not be less than Rs. 20,000/- per subscriber  of face value of shares.

4) Subscriber should have a separate bank account from where the subscription should be made.

5) The Private Placement offer should be made only after passing a special resolution by the shareholders.

6) The price of the private placement should be determined

a)

The explanatory statement annexed to the notice for the general meeting should define the basis or justification for the price (including premium, if any) at which the offer or invitation is being made shall be disclosed.

7)

No fresh offer or invitation shall be made unless the allotments with respect to any offer or invitation made earlier have been completed or withdrawn or abandoned by the company – Section 42(3).

8)

Company shall allot its securities within sixty days from the date of receipt of the application money for such securities and if the company is not able to allot the securities within that period, it shall repay the application money to the subscribers within fifteen days from the date of completion of sixty days and if the company fails to repay the application money within the aforesaid period, it shall be liable to repay that money with interest at the rate of twelve per cent per annum from the expiry of the sixtieth day – Section 42(6).

9)

The company shall maintain a complete record of private placement offers in Form PAS-5 and also file alongwith private placement offer letter in Form PAS-4 with ROC within a period of thirty days of circulation of the private placement offer letter. (Date written in the private placement offer letter is the date of circulation of offer letter)

10)

A return of allotment of securities under section 42 shall be filed with the ROC within thirty days of allotment in Form PAS-3. (Like Form-2 of the Old Act)

11)

Contravention of Section 42 of the Act attracts penalty which may extend to the amount involved in the offer or invitation or two crore rupees, whichever is higher, and the company shall also refund all monies to subscribers within a period of thirty days of the order imposing the penalty Section 42(10).

B)

ISSUE OF SHARES ON PREFERENTIAL BASIS: A company may, if authorized by a special resolution passed in a general meeting, issue shares in any manner whatsoever including by way of a preferential offer, to any person(s) whether or not those persons include the persons referred to in clause (a) or clause (b) of sub-section (1) of section 62 (i.e existing shareholders or employees of the Company). Such issue on preferential basis should also comply with conditions laid down in section 42 of the Act (private placement). A valuation report of registered valuer determining the price of shares is also mandatory.

1)

Preferential issue means offer of shares by a Company to a select person or a group of persons on a preferential basis but does not include offer of shares through right issue, public issue, ESOP, bonus issue etc.

2)

The issue of shares on preferential basis should be authorised by the articles of association of the company.

3)

The issue should be made fully paid up at the time of allotment only.

4)

The explanatory statement should disclose the necessary facts about the allotment.

5)

Preferential allotment should be made/complete within 12 months of special resolution.

6)

Valuation to be determined by registered valuer.

C)

RIGHTS ISSUE OF SHARES:

As per section 62 of the Act Where at any time, a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares shall be offered—

1)

to its existing shareholders (OR needs to be passed, if provision there in the AOA)

2)

to employees under a scheme of employees’ stock option, subject to special resolution passed by company.

3)

to any persons, if it is authorised by a special resolution, whether or not those persons include the persons referred to in clause (a) or clause (b), 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.

4)

Letter of offer for right issue of shares needs to be made and given to existing shareholders for making Right Issue of shares.

5)

Shareholders will be given 15-30 days for accepting the right issue of shares from the date of offer letter.

D)

CONVERSION OF LOANS OR DEBENTURES INTO SHARES: A private company may convert loans raised by the company or debentures issued by the company into shares by passing of special resolution if there is such a term attached to the debentures issued or loan raised by the company to convert such debentures or loans into shares in the company – Section 62(3).

E)

Bonus issue:

Conditions

1)

Must be authorised by the articles otherwise the articles need to be amended.

2)

Resolution in the general meeting needs to be passed.

3)

The Company has not defaulted in repayment of the statutory dues, Fixed deposits   or debt securities.

4)

All shares must be made fully paid up before making bonus issues.

5)

Bonus issue can be made out of:

Free reserves

Securities premium Account

Capital Redemption Reserve This article has been shared by CA Pratik Anand. He can be reached at capratikanand@gmail.com

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An Open Letter by a CA Student to ICAI President regarding HIGH PASSING PERCENTAGE IN CPT and LOW PASSING PERCENTAGE IN CA FINAL:-

Respected CA K. Raghu Sir,

Words just aren’t sufficient to describe the contribution you’ve made to Indian accountancy profession as the President of the Institute of Chartered Accountants of India.I would like to express my concern over the future of Chartered Accountancy Profession and students enrolled.

Right now ICAI has INCREASING TREND of number of students with “high” CPT Results and then RESTRICTING them at Final stage to QUALIFY.

To Start with I would like to bring to your notice some statistics:

CA FINAL 

Both Groups
May 14 - 7.29%
Nov-13 3.11%
May-13 10.03%
Nov-12 12.97%
May-12 16.38%
Nov-11 15.78%
May-11 20.51%

CPT Passing%

June 14 - 28.63%
Dec-13 37.61%
Jun-13 27.02%
Dec-12 27.07%
Jun-12 37.56%
Dec-11 35.33%
Jun-11 33.31%

Sir I know council regulation which says council may change results to maintain Standard. As per Regulation 39(2) "The Council may, in its discretion, revise the marks obtained by all candidates or a section of candidates in any particular paper or papers or in the aggregate in such manner as may be considered necessary, for maintaining the standards of pass percentage provided in these Regulations."

Do you personally think its right; do you think such variation is correct??

Such deliberate manipulation of the result by the ICAI so as to reduce the supply of Chartered Accountants in the market is not good for the future of this dynamic Profession.

As per my opinion such a regulation is unconstitutional. Irrespective of what the regulations say, no examining body has the authority to mark a correct answer in the answer script as wrong. No legally justified regulation can ideally give authority to any entity to do such wrongful acts just to reduce the pass percentage.

Nobody has right to “waste” the youth’s ENERGY and TIME. We can’t see the FRUSTRATION on the face of lacks of students in near future. Many times it leads to suicide which is not desirable at all.

Let’s take an example if 25,000 students qualify every year (which is said as good results of CA), then also at least 40 years are required to qualify all the students registered so far (at the time of writing students were 10 Lacs and the flow was increasing)!

It is time to rethink SERIOUSLY about those who are registered as CA students. Why Entry to this profession is not made tough??

IIT's and IIM's are prestigious degree just like Chartered Accountancy. There entry is limited, they maintain a standard. This is what should be followed.

The ICAI teaches us lessons of ethics and morality which is incorporated in the syllabi of our course but what can be comprehended now is that the same ethics are being compromised here by the ICAI itself by manipulating the result pattern just like one regulates the regulator of a kitchen stove to control the production of Chartered Accountants in the market in whichever way the Institute wishes to.

Why CPT results were not controlled in Nov 2013 when CA Final Results were controlled?

It clearly shows ICAI Management doesn’t wish to close the COACHING HUTS.

November, 2013 : The toughest results of CA Final in last 10 years. . Whether the performance of almost all the brilliant students has WEAKENED or the quality of marking system has IMPROVED SUDDENLY?

I was shocked to know that even the 3% result given by the institute is not actual. The actual % was just around 1.7% but there is news that 2 grace marks were awarded to every body, so the result jumped to about 3%. Something is totally wrong over here.One should not forget this result is of those students who were declared successful in IPCC ”happily.”

I am not saying that ICAI should declare 100% result but a consistency should be maintained. Whatever be the state of the economy, system should be same for all the students and transparency should be there in the process. Just because of economy you can't differentiate between two students both of whom may be actually worthy to become chartered accountant. In 6 months if results drops from 10% to 3% it can't be said that suddenly the quality of students appeared has decreased to the level of un-acceptance.

Harvard,Stanford or Kellog never reduced their results due to world wide recession. Oxford never stopped giving Economics Degrees due to recession.The world famous CFA institute pass % ages are so consistent. That is why more people opting for CFA,USA. It’s Time for change!!!!

Yours Faithfully
Aam Aadmi

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Kaveri Grameena Bank - Vacancy for Chartered Accountant

Post - Officer Scale II - Specialist Officers 
      
     1. Chartered Accountant 
         Educational Qualification - Certified Associate (CA) from Institute of                    Chartered Accountants of India
      
     2. Treasury Manager 
          Educational Qualification - Certified Associate (CA) from Institute of                   Chartered Accountants of  India or MBA in Finance from a recognised                 University /Institution

         For official Advertisement Click Here.

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Bharat Earth Movers Limited (BEML) - Vacancy for CA/ICWA

 Bharat Earth Movers Limited (BEML) is a Government sector company of India. They have branches and regional head offices all over the country. To fulfill the requirement of staffs BEML recruits personnel from all over the country. They conduct exam to recruit the vacant places in BEML.

Posts of BEML vacancy

1. Officer 

Finance - 03 Post - Graduation with CA/ICWA

2. Assistant Officer

Finance - 02 Post - Graduation with CA/ICWA Inter.

For Official Advertisement Click Here.

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No law perfect, new Companies Act provides for self regulation: MCA

No law perfect, new Companies Act provides for self regulation: MCA

New Act, which replaces the nearly six-decade-old legislation that governs corporates, was passed by the UPA govt Stating that no law can be considered perfect, the Corporate Affairs Ministry has said the new Companies Act provides an opportunity for self- regulation and greater transparency.


The new Act, which replaces the nearly six-decade-old legislation that governs corporates, was passed by the UPA government.

The new government has proposed as many as 14 amendments to the Companies Act, 2013 after taking into account concerns from stakeholders. The proposed changes, however, could not passed in the just concluded winter session of Parliament.

Over 60 per cent of provisions of the new law came into force from April 1 and the remaining ones are expected to be implemented in a phased manner.

In a handbook, which will be released soon, the Ministry of Corporate Affairs (MCA) has said the new law provides the corporate sector an opportunity for self-regulation, while mandating greater transparency and enhanced disclosures for improve compliance.

"While no law can be considered perfect, the Companies Act, 2013 is an attempt to modernise the earlier legal framework of 1956 by introducing features of good international corporate governance," it said.

The handbook provides a snapshot of activities done by the Ministry, including regulatory aspects.

"Of equal importance, the new legislation provides for protection of interests of investors, especially small and minority shareholders," it noted.

 Citing the Companies (Amendment) Bill, 2014, the Ministry said such measures demonstrate commitment of the government to promote an effective, robust and transparent corporate governance regime.

The Bill, cleared by Lok Sabha earlier this month, would effect as many as 14 amendments, as part of efforts to make it more easier for companies to do business in the country. However, the Bill could not be passed in the Rajya Sabha.

To address concerns, the Ministry -- which is implementing the Companies Act -- has already notified 15 amendments to various rules and issued 45 clarifications.

(Business Standard)

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