Recently, The Ministry of Corporate Affairs came up with a notification dated 16th August, 2019 pursuant to which the Central government notifies the Companies (Share Capital And Debentures) Amendment Rules, 2019 to further amend the Companies (Share Capital and Debentures) Rules, 2014:-
1. In Rule 4, in sub-rule (1) of Companies (Share Capital and Debentures) Rules, 2014
(i) “Clause c“ has been substituted with the following-
‘(c)’ the voting power in respect of shares with differential rights of the company shall not exceed seventy four per cent of total voting power including voting power in respect of equity shares with differential rights issued at any point of time];
“Erstwhile provision”:
(c) the shares with differential rights shall not exceed twenty-six percent of the total post-issue paid up equity share capital including equity shares with differential rights issued at any point of time;
(ii) “Clause d” shall be omitted.
“Erstwhile provision”:
(d) The Company having consistent track record of distributable profits for last three years.
2. In Rule 5, in sub-rule (3) of Companies (Share Capital and Debentures) Rules, 2014:-
(i) In the Explanation, occurring at the places, for the word “director”, the words *[director or Company secretary] shall be substituted.
“Erstwhile provision”:
In Explanation-
(a) In case of a One Person Company, it shall be sufficient if the certificate is signed by a *[director] and the company secretary or any other person authorised by the Board for the purpose.
(b) *[director] shall be deemed to have signed the share certificate if his signature is printed thereon as facsimile signature by means of any machine, equipment or other mechanical means such as engraving in metal or lithography or digitally signed, but not by means of rubber stamp, provided that the *[director] shall be personally responsible for permitting the affixation of his signature thus and the safe custody of any machine, equipment or other material used for the purpose.
3. In Rule 12, in sub-rule (1) of Companies (Share Capital and Debentures) Rules, 2014:-
In proviso to the Explanation, for the words [Five years], the words *[Ten years] shall be substituted.
“Erstwhile provision”:
“Provided that in case of a startup company, as defined in notification number 3 [G.S.R. 127(E), dated 19th February, 2019 issued by the Department for Promotion of industry and Internal Trade], Ministry of Commerce and Industry Government of India, Government of India, the conditions mentioned in sub-clause (i) and (ii) shall not apply upto *[Five years] from the date of its incorporation or registration.”]
4. In Rule 18, in sub-rule (7) of Companies (Share Capital and Debentures) Rules, 2014:-
(i) Following shall be substituted:-
The company shall comply with the requirements with regard to Debenture Redemption Reserve (DRR) and investment or deposit of sum in respect of debentures maturing during the year ending on the 31st day of March of next year, in accordance with the conditions given below:-
(a) Debenture Redemption Reserve shall be created out of profits of the company available for payment of dividend;
(b) the limits with respect to adequacy of Debenture Redemption Reserve and investment or deposits, as the case may be, shall be as under;-
(i) Debenture Redemption Reserve is not required for debentures issued by All India Financial Institutions regulated by Reserve Bank of India and Banking Companies for both public as well as privately placed debentures;
(ii) For other Financial Institutions within the meaning of clause (72) of section 2 of the Companies Act, 2013, Debenture Redemption Reserve shall be as applicable to Non -Banking Finance Companies registered with Reserve Bank of India.
(iii) For listed companies (other than All India Financial Institutions and Banking Companies as specified in sub-clause (i)), Debenture Redemption Reserve is not required in the following cases –
(A) in case of public issue of debentures –
Sub- Item: A For NBFCs registered with Reserve Bank of India under section 45- IA of the RBI Act, 1934 and for Housing Finance Companies registered with National Housing Bank;
Sub- Item: B For other listed companies;
(B) In case of privately placed debentures, for companies specified in sub items A and B.
(iv) for unlisted companies, (other than All India Financial institutions and Banking Companies as specified in sub-clause (i)) –
(A) for NBFCs registered with RBI under section 45-IA of the Reserve Bank of India Act, 1934 and for Housing Finance Companies registered with National Housing Bank, Debenture Redemption Reserve is not required in case of privately placed debentures.
(B) For other unlisted companies, the adequacy of Debenture Redemption Reserve shall be ten percent. of the value of the outstanding debentures;
(v) In case a company is covered in item (A) or item (B) of sub-clause (iii) of clause (b) or item (B) of sub-clause (iv) of clause (b), it shall on or before the 30th day of April in each year, in respect of debentures issued by a company covered in item (A) or item (B) of sub-clause (iii) of clause (b) or item (B) of sub-clause (iv) of clause (b), invest or deposit, as the case may be, a sum which shall not be less than fifteen per cent., of the amount of its debentures maturing during the year, ending on the 31st day of March of the next year in any one or more methods of investments or deposits as provided in sub-clause (vi):
Provided that the amount remaining invested or deposited, as the case may be, shall not at any time fall below fifteen percent. of the amount of the debentures maturing during the year ending on 31sr day of March of that year.
(vi) For the purpose of sub-clause (v), the investments, as the case may be, are as follows: –
(A)In deposits with any scheduled bank, free
(B) In unencumbered securities of the Central methods of deposits or from any charge or lien; Government or any State Government;
(C) In unencumbered securities mentioned in sub-clause (a) to (d) and (ee) of section 20 of the Indian Trusts Act, 1882;
(D) in unencumbered bonds issued by any other company which is notified under sub-clause (f) of section 20 of the Indian Trusts Act, 1882:
Provided that the amount invested or deposited as above shall not be used for any purpose other than for redemption of debentures maturing during the year referred above.
(c) In case of partly convertible debentures, Debenture Redemption Reserve shall be created in respect of non-convertible portion of debenture issue in accordance with this sub-rule.
(d) The amount credited to Debenture Redemption Reserve shall not be utilized by the company except for the purpose of redemption of debentures.
Explanation to Rule 18 sub Rule 7:-
S.No. |
Class of Companies |
Applicability |
|
1. |
For All India Financial Institutions regulated by Reserve Bank of India and Banking Companies. | No DRR required for both public as well as privately placed debentures. |
|
2. |
For other Financial Institutions within the meaning of clause (72) of section 2 of the Companies Act, 2013 | DRR provisions shall be applicable as applies to Non -Banking Finance Companies registered with Reserve Bank of India. |
|
3. |
For Listed Companies (other than Co. as specified in S.No. 1. of this table:- | |
|
a) b) |
In Case of Public Issue:
(i) For NBFCs registered with Reserve Bank of India under section 45- IA of the RBI Act, 1934 and for Housing Finance Companies registered with National Housing Bank; (ii) For other listed Companies. In Case of Privately placed debentures: (i) Companies specified in sub-point (a) (i), (ii) of Point (3) of this table. |
Companies specified in sub- point (a) and (b) of S.No. 3 of this table do not need to create DRR. |
|
4. |
In Unlisted Companies (other than Co. as specified in S.No. 1. of this table:-
(i) For NBFCs registered with Reserve Bank of India under section 45- IA of the RBI Act, 1934 and for Housing Finance Companies registered with National Housing Bank; (ii) For other unlisted companies |
No need to Constitute DRR.
Debenture Redemption Reserve shall be ten percent of the value of the outstanding debentures. |
NOTE: Provisions of this Notification shall come into effect from the date of its publication in official gazette.
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