Pref issue of warrants

Save Share

This query is : Resolved

Priyanka (Querist)

26 July 2010 Dear Experts,

Request please share a detialed Checklist for Preferential issue of warrants.
Also, please let me know, whether for preferential issue, Co is required to obtain an in-principle approval from Stock Exchange.

Pls reply urgently...
Regards
Priyanka

Ankur Garg

Ankur Garg (Expert)

26 July 2010 Hi Priyanka,

Kindly download the preferential Allotment checklist from the link given below:

https://www.caclubindia.com/share_files/preferential-allotment-checklist-11699.asp

But you may find it a bit outdated as it is as per sebi dip guideline.

You are requested to read the same with SEBI (ICDR) Regulations, 2009.

Regards

Ankur Garg

Ankur Garg (Expert)

26 July 2010 Oops i forget to comment...

Yes after holding the BM for considering the issue you have to go for obtaining the In-principle approval from STX under clause 24(a) of the Listing Agreements.

Thanks

Priyanka

Priyanka (Querist)

27 July 2010 Dear Mr Ankur,
Thanks for the reply.

One query, is that, if the Company makes this preferential allotment of warrants now, then is the Company prohibited from making any further allotment of any other securities/shares for next two years as per Sec 81(1A) of the Companies Act,1956.

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

10 August 2024 Under Section 81(1A) of the Companies Act, 1956, the provisions related to the preferential allotment of securities are designed to regulate the issuance of shares or other securities by a company in a manner that ensures transparency and fairness. Specifically, this section addresses the restrictions on further allotments of securities once a preferential allotment has been made.

### **Section 81(1A) of the Companies Act, 1956**

1. **Provisions for Preferential Allotment:**
- Section 81(1A) stipulates that if a company makes a preferential allotment of shares or other securities, it must comply with certain regulations, including those related to disclosure and approval by the shareholders.

2. **Restrictions on Further Allotments:**
- After making a preferential allotment, the company is generally required to adhere to a restriction on further allotments of securities. The key restriction is that the company must not make any further allotments of shares or other securities that would result in the dilution of the existing shareholders’ rights unless it is done in compliance with the provisions of Section 81(1A).

3. **Two-Year Restriction:**
- The restriction under Section 81(1A) specifically states that a company cannot make any further allotment of securities for a period of two years from the date of the preferential allotment, unless the further allotment is made in accordance with the guidelines and procedures specified under the Act.

### **Key Points to Consider:**

1. **Applicability of Restriction:**
- The restriction applies to any further issuance of securities that could affect the rights of the shareholders or impact the equity structure of the company. This includes issuing new shares, convertible securities, or any other form of securities.

2. **Compliance with Procedures:**
- If the company wishes to make any further allotments of securities within the two-year period, it must ensure compliance with the legal requirements specified under the Act. This includes obtaining approval from the shareholders and following the prescribed procedures for such allotments.

3. **Exceptions and Approvals:**
- There might be exceptions or specific provisions allowing further allotments under certain circumstances, such as rights issues or bonus issues, subject to compliance with the relevant provisions of the Companies Act.

4. **Legal Consultation:**
- Given the complexity of securities regulations and the potential impact on shareholder rights, it is advisable for the company to consult with legal and financial advisors to ensure compliance with the relevant provisions and to address any issues related to further allotments.

### **Summary**

Under Section 81(1A) of the Companies Act, 1956, a company is restricted from making any further allotment of securities for a period of two years following a preferential allotment, unless such further allotments are made in accordance with the applicable legal requirements. It is crucial for the company to adhere to these provisions and seek appropriate approvals to avoid legal and regulatory issues.

For the most current and applicable regulations, it's important to consult the updated Companies Act and any related legal provisions, as well as seek advice from legal professionals.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now