09 May 2016
Hi, What is the procedure to issue equity shares at face value to few of the existing shareholders of a Private limited company. Do we need to prepare PAS-4 or is it unnecessary because of The Companies (Share capital and Debentures) Amendment Rules, 2015. plus should I go with Right Issue or private placement?
I would really appreciate a direct step by step procedure because all the articles available for research were written before the Amendment Rules 2015.
I have advised the route of Section 42, Private Placement and the exemption which you are talking about is related to the Preferential Allotment of securities under section 62.
10 May 2016
Sir I don't know who Mr. Vikas is but i'll assume you were trying to address me
As you have mentioned earlier you have advised me to take the route of Section 42 under Chapter III Prospectus and Allotment of Securities i.e. ''Offer or invitation for subscription of securities on private placement" now as per section 42 we are supposed to follow procedure in the manner prescribed in "The Companies (Prospectus and Allotment of Securities) Rules, 2014" specifically Rule 14 which is regarding Private placement.
Now as per this rule we are supposed to prepare Form PAS-4 as offer letter and Form PAS-5 as for records of the company, but in the notification http://www.mca.gov.in/Ministry/pdf/Chapter4_Rules_19032015.pdf dated 18 March 2015 only amends rule 14 sub rule (1) & (3) which is regarding only private placement, whereas Rule 13 of Companies (Issue of Share Capital and Debentures) Rules, 2014 is the rule which applies to preferential allotment
10 May 2016
Dear Vaibhav, Yes i am addressing you only...
Dear please read this notification once again, it says in case you made any Preferential Issue under section 62, and the 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.
It means in case of Preferential Allotment under Section 62 if the allotment is to be made to the members only, you not need to prepare Offer letter.
But still in case of Private Placement under Section 42 you need to prepare and file Offer Letter.
10 May 2016
As per your advice I did read the entire Notification again along with Sections 42 & 62 read alongside Rule 14 of Companies (Prospectus & Allotment of Securities) Rules 2014 {for Section 42} and Rule 13 of Companies (Issue of Share Capital and Debentures) Rules, 2014 {which governs Section 62} Now from what I am able to understand is that Rule 14 is only applicable to Section 42 (in which we can make private placement) and since rule 14 does not apply to Section 62 (in which we can make preferential allotment). I think that the word "preferential offer'' in notification dated 18 march 2015 is used a little carelessly which is causing all the confusion because there is no point in removing the applicability of a rule 14 which doesn't even apply to section 62 ( which controls the preferential allotment).
12 May 2016
ok I have realised the mistake I was making in understanding Mr. Ankur Srivastava you are right about the application of notification sir :)
and in answer to my original question which now have been resolved is that simplest way to issue shares to existing subscribers is through preferential allotment under sec 62 of CA 2013.
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