Procedure for Private Placement of Non Convertible Debentures (NCDs) under Companies Act, 2013

This procedure is to be followed in case the issue will be within the borrowing limit of the Company as prescribed under Section 180(1)(C) of the Companies Act, 2013.

Sr. No. Particulars What to do Timeline Documents/ Forms
1. Point to be kept in mind before calling of Meeting: a) Identify the person to whom you will issue Debentures.

b) Prepare the list of such persons to whom offer to subscribe debenture will give.

c) Prepare Draft offer letter under PAS-4.

d) Identify the debenture trustee.

e) Obtain the consent from debenture trustee.

f) Ask the details from the Bank to open separate Bank Account.

g) Identify the assets of the Company on which charge will be creating (in case of issue of secured debenture).

h) Obtain Credit Rating from at least one credit rating agency registered with the Board i.e. SEBI. (If the Company intend to list its NCDs).

Day-0
2. Issue the Notice of the Board meeting At least Seven days before Board Meeting:

  • Notice
  • Agenda
  • Notes on Agenda
  • Draft Resolution
Day-1
3. Intimation of Board Meeting to the Stock Exchange At least 2 Working Days in advance to the Stock Exchange where securities of the Company are listed excluding date of Intimation and date of Meeting Day-1
4. Convening of the Board Meeting
  • Attendance Sheet
  • Present draft offer letter PAS-4.
  • Passing of Resolution for

♦ Decide whether Company wants to issue Secured debenture or any other mode of debentures and decide the terms of issue.

♦ Approval of Offer Letter

♦ Appointment of Debenture Trustee.

♦ Open of Separate Bank Account.

♦ Delegation of Authority to Allotment Committee to issue and allotment of NCDs.

♦ Approval of Debenture Trust Deed to be executed with the debenture Trustee.

Day-9
5. Outcome of Board Meeting to the Stock Exchange Submit Outcome of Board Meeting to the Stock Exchange within 30 Minutes of Conclusion of Board Meeting. Day-9
6. Filing of e-form MGT-14 The Company shall have to file certified true copy of Board Resolutions to the Registrar of Companies within 30 days of Board Meeting Day-10 (Upto 38 Days the Company can file)
7. Circulation of Letter of offer and Application Form The Letter of Offer and Application Form together with all attachments should be dispatched.

Note: A Company shall issue Letter of Offer and Application Form only after the Board Resolution has been filed with the Registrar of Companies.

Day-10
8. Opening of Separate Bank Account The Company will have to open the Separate Bank account. Day-10
9. Payment from subscribers Receipt of money from all the subscribers along with a letter for approval of offer. Day-20
10. Issue the Notice of the Board meeting/ Committee Meeting Atheist Seven days before Board Meeting / Committee Meeting:

  • Notice
  • Agenda
  • Notes on Agenda
  • Draft Resolution
Day-21
11. Convening of the Board Meeting /Committee Meeting

 

  • Attendance Sheet
  • Passing of Resolution for

– Allotment of Debentures

– Enter into debenture Deed (SH-12)

– Creation of Debenture Redemption Reserve

– Creation of Charge on assets of the Company.

Day-29
12. Outcome of Board Meeting/ Committee Meeting to the Stock Exchange ♦ Submit Outcome of Board Meeting/ Committee Meeting to the Stock Exchange within 30 Minutes of Conclusion of Board Meeting/Committee Meeting with the following details:

♦ Size of the Issue

♦ Whether securities to be listed? If Yes, Name of the Stock Exchange

♦ Tenure of the Instrument (with Date of Allotment and Date of Maturity)

♦ Coupon Rate / Schedule of Payment of Coupon / interest and principal

♦ Charge/ Security, if any created over the assets

♦ Special right/ interest/ privileges attached to the instrument and changes thereof;

♦ Delay in payment of interest /principal amount for a period of more than three months from the due date or default in payment of interest / principal;

♦ Details of any letter or comments regarding payment/ non-payment of interest, principal on due dates, or any other matter concerning the security and /or the assets along with its comments thereon, if any;

♦ Details of redemption of Debentures

Day-29
13. Payment of Stamp Duty on NCDs The Company shall have to make payment of Stamp Duty on allotment of NCDs Day-
14. Entry into Register of Member The entries in the registers maintained under Section 88 of the Companies Act, 2013, Form MGT-2 shall be made within 7 (Seven) days after the Board of Directors approves the allotment of debentures Day-32 (Upto 35 Days the Company can file)
15. Filing of e-Form PAS-3 Filing of e-Form PAS-3 within 15 days of allotment of debentures to the Registrar of Companies.

Note: The Company shall not utilise monies raised through private placement unless allotment is made and the return of allotment is filed with the Registrar of Companies.

Day-35 (Upto44 Days the Company can file)
16. Listing of Debentures Where the issuer has disclosed the intention to seek listing of debt securities issued on private placement basis, the issuer shall forward the listing application along with the disclosures specified in Schedule I to the recognized stock exchange within fifteen days from the date of allotment of such debt securities.

An issuer may list its debt securities issued on private placement basis on a recognized stock exchange subject to the following conditions:

(a) the issuer has issued such debt securities in compliance with the provisions of the Companies Act, 2013, rules prescribed thereunder and other applicable laws;

(b) credit rating has been obtained in respect of such debt securities from at least one credit rating agency registered with the Board;

(c) the debt securities proposed to be listed are in dematerialized form;

(d) the disclosures as provided in regulation 21 have been made: submission of MOA, AOA, Copy of last three years audited Annual Reports, Copy of the Board / Committee Resolution authorizing the borrowing and list of authorized signatories.

(e) where the application is made to more than one recognized stock exchange, the issuer shall choose one of them as the designated stock exchange.

The issuer shall comply with conditions of listing of such debt securities as specified in the Listing Agreement with the stock exchange where such debt securities are sought to be listed.

Day-40 (Upto 43 Days the Company can file)
17. Filing of e-Form CHG-9 File CHG-9 with the Registrar of Companies for creation of Charge Day-40

Points to be noted:

1. Above-mentioned procedure is to be followed in case the issue will be within the borrowing limit of the Company as prescribed under Section 180(1)(C) of the Companies Act, 2013.

2. A Private Placement Offer cum application letter shall be in the Form PAS-4 and it should be serially numbered and addressed specifically to the person to whom the offer is made.

3. The contents of this document have been prepared on the basis of relevant provisions existing at the time of the preparation. The observations of the author are personal view and the author do not take responsibility of the same.

(The author i.e. CS Parbat Chaudhari is a Company Secretary in Practice and can be reached at (E) csparbat@yahoo.com)

“Learning everyday is ultimately the key to success. Don’t ever stop Learning, Dreaming and Achieving.”

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