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The Ministry of Corporate Affairs has brought into effect Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2018 w.e.f. August 07, 2018. The following is the Comparative Analysis of the New Rules vis a vis old Rules alongwith the need/reason for change/impact of the change, as applicable:



Old Rule / Sub-rule No.

Rule / Sub Rule

New Rule / Sub-rule No.

Rule / Sub-rule

Change / Reason for Change / Impact of the Change

Proviso to Sub-Rule 2(a)

Provided that in the explanatory statement annexed to the notice for the general meeting the basis or justification for the price (including premium, if any) at which the offer or invitation is being made shall be disclosed:

Proviso to Sub-rule 1

Following disclosures to be made in Explanatory Statement:

  • Particulars of offer including date of passing Board Resolution;
  • Kinds of securities of securities offered and price at which security is being offered;
  • Basis or justification at which offer or invitation is being made;
  • Name and address of valuer who performed valuation;
  • Amount which the company intends to raise by way of such securities;
  • material terms of raising such securities, proposed time schedule, purposes or objects of offer, contribution being made by the promoters or directors either as part of the offer or separately in furtirera'ce of objects; principle terms of assets charged as securities:

It must be noted here that the disclosures have been specified / clearly spelt out as these were part of the disclosures specified under 62(1)(c) and were not covered when securities were issued under Section 42, so to cover the disclosures to be made when securities are directly issued under Section 42, the amendment has been made.

Proviso to Sub-Rule 2(a)

Provided further that in case of offer or invitation for non-convertible debentures, it shall be sufficient if the company passes a previous special resolution only once in a year for all the offers or invitation for such debentures during the year

Proviso to Sub-rule 1

Provided further that this sub-rule shall not apply in case of offer or invitation for. non-convertible debentures, where the proposed amount to be raised through such offer or invitation does not exceed the limit as specified in clause (c) of sub-section (1) of section 180 and in such cases relevant Board resolution under clause (c) of subsection (3) of section 179 would be adequate:

Provided also that in case of offer or invitation for non-convertible debentures, where the proposed amount to be raised through such offer or invitation exceeds the limit as specified in clause (c) of sub-section (1) of section 180, it shall be sufficient if the company passes a previous special resolution only once in a year for all the offers or invitations for such debentures during the year.

The ideology behind the change could be that incase of private Companies where Section 180(1)(c) is not applicable and only Section 179(3)(c) is applicable so as to align with existing exemption to Pvt. Companies, the proviso has been newly inserted.

Sub-rule 4

Return of Allotment to be filed within 30 days

Sub-rule 6

Return of Allotment to be filed within 15 days.

Return of Allotment to be filed within 15 days.

-

-

Sub-rule 8

(8) A company shall issue private placement offer cum application letter only after the relevant special resolution or Board resolution has been filed in the Registry:

Provided that private companies shall file with the Registry copy of the Board resolution or special resolution with respect to approval under section (c) of subsection (3) of section 179.

Board / Special Resolution as may be applicable is required to be passed before circulation of private placement offer letter.

PAS-4

PAS-4 was as a whole document containing details of the Issuer

PAS-4

PAS-4 has been divided into two parts- PART A and PART B.

PART A Consist of details of Issuer and PART B which is to be filled by the Applicant. Which is also to be counter signed by the Applicant.

The idea is good, but not in line with the motto ease of doing business. Considering a case of NBFC wherein day in day out NCD’s are issued on Pvt. Placement basis, the change will increase the documentation part and one more area to monitor, vigil.

PAS-4

-

PAS-4

Details of default in Annual Filing to be specified

Specifically included the details of default in annual filing

PAS-4

-

PAS-4

3. Mode of payment for subscription:

  • Cheque
  • Demand Draft or
  •  Other Banking Channels

Mode of Payment to be specified by the Issuer

PAS-4

-

PAS-4

Pre and Post Issue Shareholding Pattern to be specified.

This was covered under rules made for Sec. 62(1)(c) now specifically covered under rules for private placement 


Disclaimer: 

The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Though utmost efforts have made to provide authentic information, it is suggested that to have better understanding kindly crosscheck the relevant sections, rules under the Companies Act, 2013.

The observations of the author are personal view (and not connected with the organization where the author works or has worked or will work) and the authors do not take responsibility of the same and this cannot be quoted before any authority without the prior written approval of the author.

IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.

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Category Corporate Law, Other Articles by - Sumit Talreja 



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