51h Floor. “A” Wing, Shastri Rhawan,
Dr. R.P. Road, New Delhi — 110001
All the Regional Directors,
All the Registrar of Companies/ Official Liquidators All stakeholders
Sub : New Rules in respect of unlisted public companies preferential allotment / private placement
Ministry is considering to substitute Unlisted Public Companies (Preferential Allotment) Rules, 2003 by replacing it with Unlisted Public Companies (Preferential Allotment) Rules, 2011 which requires more disclosures and keeping the securities in Demat Form. A copy of draft Rules is enclosed.
You are requested to examine the draft rule and furnish your comments/recommendations to the Ministry by 20th June, 2011 by email on following e-mail addresses.
( B.K.L. Srivastava )
GSR New Delhi .5.2011
In exercise of the powers conferred by sub Section (1-A) of Section 81 of the Companies Act 1956 read with Section 642 of the said Act, the Central Government hereby makes the following rules in supersession of unlisted Public companies (Preferential Allotment) Rules, 2003.
1. Short Title and Commencement
(i) These rules may be called Unlisted Public Companies (Preferential Allotment and Private Placement) Rules 2011
(ii) They shall come into force on the date of their publication on official Gazette.
These rules shall be applicable to all unlisted public companies in respect of preferential issue of equity shares, fully convertible debentures, partly convertible debentures or any other financial instrument which would be convertible into or exchanged with equity shares at a later date.
(1) “Preferential Allotment” includes issue of shares on preferential basis and or through private placement made by a company in pursuance of a resolution passed under sub-section (IA) of Section 81 of the Companies Act, 1956 and issue of shares to the promoters and their relatives either in public issue or otherwise.
(2) “Promoter means
(a) the person who are in over-all control of the company: and
(b) the person or persons who hold themselves as promoters.
Explanation: Where a promoter of a company is a body corporate, the promoters of that body corporate shall also be deemed to he promoters of the company.
(3) “control” shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner.
4. Special Resolution
(i) No issue of shares on a preferential basis can be, made by a company unless authorized by its articles of association and unless a special resolution is passed by the members in a General Meeting authorizingthe Board of Directors to issue the same. The Special resolution shall be acted upon within a period of 12 months.
(ii) The issuer company making an offer of securities shall make the disclosures in the offer documents as given in Annexure-I to this Rule.
(iii) The offer document as stated in sub-pars (ii) above shall be approved by the members in General Meetings by way of special resolution.
(iv) The copy of special resolution passed in the General Meeting for issue of private placement alongwith copy of offer document shall be filed with the ROC as required under section 192(4) of the Act.
Where warrants are issued on a preferential basis with an option to apply for and get the shares allotted, the issuing company shall determine before hand the price of the resultant shares.
6. Other conditions for the issue of private placement
(i) There should not be a gap of more than 30 days between the opening and closing of issue of private placement.
(ii) There should be a minimum gap of period of 60 days between two issues i.e., closing of one issue and opening of another issue.
(iii) For any issue of debentures, convertible debentures or any other financial instruments which would be convertible into or exchanged with equity shares at a later date under private placement which may result into cumulative amount of Rs. 5 crores or more, a company has to seek prior approval of Central Government in the prescribed e-form (as given in Annexure-II). (e-form is to he developed).
However, no approval of Central Government is required for issue of equity shares under private placement.
(iv) After every issue of security under private placement, the company shall tile with the Registrar of Companies a return of allotment within 30 days of the allotment in the prescribed e-form duly verified by the practicing professional (as given in Annexure-III) (e-form is to he developed).
7. Dematerialization of the Securities
All securities issued under preferential allotment or private placement shall be kept in Dematerialized form as required under Depositories Act, 1996
8. Compliance Certificate
Every company having made private placement or preferential allotment under these rules shall file a compliance certificate by practicing Chartered Accountant/ Company Secretary/ Cost Accountant with the office of Registrar along with return of allotment which will certify that preferential allotment/ private placement made is in accordance with these rules.
DISCLOSURES IN THE OFFER DOCUMENT PURSUANT TO RULE 4(11) OF THE RULE
The following disclosures are mandatory to be make in addition to other disclosures, if any, company wishes to make in the offer document :