Now pvt co also cannot issue shares freely to anyone!

P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad)   (8224 Points)

17 September 2013  

Dear friends,

 

Presently provisions of Section 81 of Companies Act 1956 relating to further issue of shares are not applicable to private companies.  Even public companies issuing further shares within initial specified period ( two years from incorporation or one year after first issue of shares, whichever is earlier) are free to issue shares to anyone and need not be to existing shareholders on proportionate basis.

 

However, now corresponding new Section 62 of Companies Act 2013 (which is yet to be made effective) has taken away such exemption from private companies.  Further, even initial specified period as above has also been deleted.  As a result now all companies, whether private or public, will have to follow prescribed procedure (Rules yet to be notified) for further issue of shares right from the date of incorporation!

 

Compliance on the part of companies, particularly private companies, will increase substantially.

 

Thanks