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Issue of shares, private limited company

Pvt ltd 550 views 1 replies

Hatim

Company Secretary

49 Points Joined March 2013

Dear All,

I refered several sections related to issue of shares but nowehere i can find weather the shares of a pvt company can be issued at Book value or it can also be issued at Face value.

If any one here knows the specific section and/ or rule answering my above question then do let me know.

Generally my professional friends suggests to issue at book value, however i would like to know if we can also issue shares through private placement or right issue at face value too in a private limited company.

Thanking you in advance.

Replies (1)

P C Agrawal

Registered independent director Past Ch

8229 Points Joined March 2007

As far as unlisted companies are concerned, for issues to residents:

a) For rights issue u/s 62(1)(a): No pricing guideline has been prescribed in the Act/Rules. Hence one can say that in order to make the issue attractive for existing shareholders, the price could be less than price as per valuation report.

b) For private placement u/s 42: PAS-4 (Offer letter) requires justification of the issue price to be disclosed. In this case it will be difficult to give justification if the issue price is less than price as per valuation report since the directors must act in the interest of the company.

c) For preferential allotment u/s 62(1)(c): Rule 13 provides that the issue price shall not be less than the price as per valuation report of a registered valuer/independent CA having minimum 10 years of experience.

In case of issue to non-residents, FEMA regulations provide that the price shall not be less than price as per share valuation report.