Shares & preference shares

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Querist : Anonymous

Querist : Anonymous (Querist)

28 February 2013 Dear All,

I'd like to know whether there is any limitation of maximum no. of share holders for unlisted Limited Companies (not Pvt. Ltd.). If there is any, please tell me if the preference share holders are to be counted with them.

Thanking you in anticipation.

Best Regards,

Ankur Garg

Ankur Garg (Expert)

28 February 2013 There is no restriction on the number of shareholders in a unlisted public company.

Pref shareholders are also considered as shareholders of the company and there rights are governed by the terms of issue of pref shares.

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Querist : Anonymous

Querist : Anonymous (Querist)

28 February 2013 Thanks for your kind reply.

In connection to the above query, further I'd like to ask-

1. Can any unlisted limited company issue Cumulative Redeemable Preference Shares? If so, is any permission needed?

2. Should the collection from RPS along with the Share Capital be below the Authorize Capital of the Company?

3. Who can invest- relatives, friends or any person known to Promoters/Employees? Is there any restriction?

Thank you again for your support.

Best Regards,

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

25 July 2025 You're asking some excellent and very practical questions about **unlisted public companies** and their ability to issue **Cumulative Redeemable Preference Shares (CRPS)** in India. Let’s go through each of your follow-up queries in detail:

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## ✅ Clarifications to Your Questions:

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### 🔹 **1. Can an unlisted public limited company issue Cumulative Redeemable Preference Shares (CRPS)?**

**Yes**, an **unlisted public company** can issue **Cumulative Redeemable Preference Shares**, subject to compliance with:

* **Section 55 of the Companies Act, 2013**
* **Companies (Share Capital and Debentures) Rules, 2014**
* **Articles of Association (AoA)** must authorize the issue
* Board and **Shareholder (Special) Resolution** must be passed
* Terms like **tenure, dividend rate, redemption**, etc., must be clearly mentioned in the **offer document/resolution**

> ❌ No specific government or SEBI permission is required **unless** the offer is made to **more than 200 persons** (see next points).

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### 🔹 **2. Should the amount of CRPS + Equity be within the Authorised Capital?**

**Yes**, absolutely.

> 🔸 The total value of **Equity + Preference Share Capital** **must not exceed the Authorised Share Capital** mentioned in the **Memorandum of Association (MoA)**.

So if you want to issue additional preference shares, you may first need to **increase the Authorised Capital** by altering the MoA and paying additional ROC fees.

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### 🔹 **3. Who can invest? Are there restrictions on who can be offered CRPS?**

Yes, there are **restrictions on how many persons** you can privately offer shares to — under the **private placement rules**:

#### ✅ Key rules under Section 42 (Private Placement):

* Can be offered to **not more than 200 persons** in a financial year (excluding QIBs and employees under ESOP).
* Applies to **any security** (including CRPS) offered on a private basis.
* Each investor must receive a **private placement offer letter (PAS-4)**.
* Must file **Form PAS-3** with ROC within 15 days of allotment.
* Investors must bring money via **cheque, demand draft or bank transfer only** (no cash).
* No public advertisements or solicitations allowed.

> 🧾 **Who can invest?**
>
> * **Relatives**, **friends**, **employees**, **associates**, or **general public** — as long as the **number of offerees stays within the 200-person limit** and private placement norms are followed.

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## ✅ Summary:

| Question | Answer |
| ---------------------------------------- | ------------------------------------------------------- |
| Can unlisted public co. issue CRPS? | ✅ Yes, under Section 55 |
| Is ROC/SEBI approval required? | ❌ Not unless offer is public or exceeds 200 persons |
| Total capital within Authorised Capital? | ✅ Yes, must be within limit or increase it first |
| Who can invest in CRPS? | ✅ Anyone, if private placement rules (max 200) followed |

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