My company listed on The Bombay Stock Exchange had forfeited certain shares after complying all the requirements & had informed the exchange.
Now the company has re-issued the forfeited shares to its existing shareholders after complying with pricing rules as laid down in Preferential issue guidelines.
On making an application, for listing of the said re-issued shares, the stock exchange says that the company ought to have passed a share holder's resolution in a General meeting.
I am of the opinion that as the shares are offered to existing shareholders of the company, shareholders approval is not required.
Also clause 23(a) of the listing agreement states as follows,
The Company agrees - - - (a) to issue or offer in the first instance all shares (including forfeited shares, unless the Exchange otherwise agrees), securities, rights, privileges and benefits to subscribe to pro rata to the equity shareholders of the Company unless the shareholders in the general meeting decide otherwise.
17 May 2012
BSE is right. Reissue of forfeited shares shall be governed by Section 81 of the Companies Act that deals with "further issue of capital". 1A of S81 requires a special resolution to be passed by the company in general meeting. Please go through teh details.
23 May 2012
I may be mistaken, and your contention may be right. The way I thought was on forfeiture equity share capital account is credited and on reissue of the forfeited shares it is debited again with the sale proceeds of the forfeited shares. To that extent further capital is being issued, and it is akin to issuing shares which were authorized and not issued so far. However S75 (5) makes it distinct from new issue. Right now I do not recall any authority supporting either view; and as I said I may be mistaken in making the earlier assertion. (Please however note that even offering of shares to exiting members is covered under teh special resolution requirement. )
You were right in 2012 when you asked query. All forefeited shares are the shares already issued so for re issue of the said share does not mean that the issue is fresh.For re issue of the Forefeited shares the Board had the power and resolution of the General meeting was not require.In light of this the demand of the Bombay stock Exchange was WRONG.
CAclubindia
