Company having share capital can increase its subscribed capital through following modes of issues:
Many times because of availability of many options to issue securities a dilemma arises that which one will be better option to fulfill our requirement; Therefore this Article will help you to understand what kind of Securities can be issued through Preferential allotment ,to whom it can be issued, Procedure of the issue and Provisions thereof.
Preferential allotment is a process in which shares are allotted to a specific group of people or companies which are interested in it on preferential basis at a predetermined price and does not include shares or other securities offered through a public issue, rights issue, employee stock option scheme, employee stock purchase scheme or an issue of sweat equity shares or bonus shares or depository receipts issued in a country outside India or foreign securities.
Pursuant to Section 62(1)(c) of the Companies Act, 2013, Rule 13 (issue of shares on Preferential basis) of Companies (Share Capital and Debentures) Rules, 2014 is applicable.Further, in addition to above Rule, Rule 14 (Private Placement section 42) of Companies (Prospectus and allotment of Securities) Rules, 2014 is applicable.
Provided that in case of any preferential offer made by a company to one or more existing members only, the provisions of sub-rule (1) and proviso to sub-rule (3) of rule 14 of Companies (Prospectus and Allotment of Securities) Rules, 2014 shall not apply.
Any person,if it is authorized by Special Resolution, including person allotted shares under right issue or ESOP therefore it can be said that any person either existing shareholder or outsider is eligible to get securities under preferential allotment.
Any company can go for preferential allotment, whether it’s a Public or private, listed or unlisted, Section 8 Companies, etc, Except Nidhi Company because it is not governed by section 62 by amendment notification dated 5th June 2015.
The expression “shares or other securities” means equity shares, fully convertible debentures, partly convertible debentures or any other securities, which would be convertible into or exchanged with equity shares at a later date.
|No. of Forms||Form Purpose||Time limit for filing in ROC Attachment|
|MGT-14||Passing of Special Resolution approving the preferential allotment||Within 30 days of passing of resolution Certified True copy of Special resolution along with Explanatory statement|
|PAS-3||Return of allotment||Within 15 days from the date of allotment Certified true copy of Board resolution List of allotees|
|Form PAS-5||Valuation report (if required)|
Following procedure should be followed by the Company intending to issue securities under Preferential allotment:
Through this article we try to cover provisions and procedure applicable on the Companies specially unlisted companies (because in case of listed companies more procedure needs to be followed according to SEBI guidelines) at the time of issuing securities through preferential allotment.
Hope the information will assist you in your Professional endeavours. In case of any query / information, please do not hesitate to write back to us at [email protected]