Issuing shares by pvt ltd company under companies act, 2013

Applicable provisions for private placement/preferential  offer: 

               - Sec.62(1)(c);

               - Section 42;

                - Rule 14 of Companies (Prospectus & Allotment of Securities) Rules 2014

                   (Min.value of offer per person: Rs.20,000 of face value of shares)

                 - Rule 13 of Companies (Share Capital & Debentures) Rules 2014.

Procedure in brief:

- Get certificate for valuation  of shares from CA with minimum 10 years experience

- Prepare draft EGM notice for passing special resolution for the issue

- Pass Board resolution for convening EGM and approving draft notice of EGM

- Hold EGM and pass special resolution

- File Form MGT.14 with ROC with copy of special resolution

- Prepare draft letter of offer in Form PAS.4 to be issued with application form

- Pass Board resolution (only in Board meeting) for (a) issue of shares; (b) approval of letter of offer; (c) opening of separate bank a/c for getting application money

- File Form MGT.14 with ROC with copy of Board resolution

- Issue letter of offer and maintain record in Form PAS.5

- File letter of offer with ROC within 30 days of circulation

- Get share  application money

- Pass Board resolution (only in Board meeting) for allotment

- File return of allotment in form PAS.3 with copy of CA certificate

- Issue share certificate after payment of stamp duty and make entry in register of members

Enjoy Companies Act 2013!

Thanks sir for the quick and prompt reply. But in your reply you have also stated that minimum value of offer per person in case of private placement of shares is Rs.20,000 of face value of shares. However in the present case, the face value of shares to be issued to the investors is around Rs. 5,000 only. In such a case, what would be the provisions applicable to the company?

(You can consider a hypothetical case where only 10 shares are to be alloted to a investor, what would be the applicable provisions? Would it be required to undergo all the formalitites applicable to a public offer or what?)

Considering the urgency of query, would highly appreciate an early response to this.

Requirement  of minimum face value of Rs.20,000/- is not applicable  to rights issue u/s 62(1)(a).  Procedure is:

- Prepare draft offer letter with application form

- Pass Board resolution for issue of rights shares and approval of letter of offer

- File Form MGT.14 with letter of offer

- Issue letter of offer to existing  shareholders & offer shares in proportion to their shareholding

- If existing shareholders do not accept the offer (or renounce their right in favour of non-members), the Board can allot shares to non-members u/s 62(1)(a)(iii).

- File return of allotment with ROC and make entry in register of members.

Caution:  Allotment of shares to non-members in private companies could lead to litigation.  Hence provisions in Articles should be checked thoroughly before adopting above procedure.

Originally posted by : P C Agrawal
	Requirement  of minimum face value of Rs.20,000/- is not applicable  to rights issue u/s 62(1)(a).  Procedure is:

Sir, on the basis of facts in the present case, the case of allotment of shares should get covered under section 62(1)(c) (further issue of share capital to other persons than the existing shareholders). Sec 62(1)(c) directs us to Rule 13 of Co.(Share Capital and Debentures) Rules. Also Sec 62(1)(c) requires the co. to comply with conditions provided in sec 42 of the Act.

Now coming to Sec 42 (dealing with Private Placement), it directs us to refer Rule 14 or Co.(Prospectus and allotment of securities) Rules. Rule 14 states that no private placement of shares shall be made unless the offer size is of Rs. 20000 face value per offer. So, as per this, private placement cannot be made by the company in present case. And further your response is in regard to rights issue of shares, which is not the case here.

So, what would be your response on the basis of above. The brief facts are recapitulated as under:

1. issue of shares is covered u/s 62(1)(c)

2. Doesn't qualify as private placement as per Rule 14 stated supra

Originally posted by : P C Agrawal
	Requirement  of minimum face value of Rs.20,000/- is not applicable  to rights issue u/s 62(1)(a).  Procedure is:

Sir, on the basis of facts in the present case, the case of allotment of shares should get covered under section 62(1)(c) (further issue of share capital to other persons than the existing shareholders). Sec 62(1)(c) directs us to Rule 13 of Co.(Share Capital and Debentures) Rules. Also Sec 62(1)(c) requires the co. to comply with conditions provided in sec 42 of the Act.

Now coming to Sec 42 (dealing with Private Placement), it directs us to refer Rule 14 or Co.(Prospectus and allotment of securities) Rules. Rule 14 states that no private placement of shares shall be made unless the offer size is of Rs. 20000 face value per offer. So, as per this, private placement cannot be made by the company in present case. And further your response is in regard to rights issue of shares, which is not the case here.

So, what would be your response on the basis of above. The brief facts are recapitulated as under:

1. issue of shares is covered u/s 62(1)(c)

2. Doesn't qualify as private placement as per Rule 14 stated supra

Dear Agarwal Sir,

Thanks for sharing such excellent and valuable information.

Can you please guide me how to file PAS-4 because this is only draft letter, it is not  an e form, is it filled with PAS-3.

I recently filled a PAS-3 form with ROC and make attachment of PAS-4 ,P AS-5 form along with SR ,BR and valuation certificate with list of allotees.

Is it correct to file PAS-4 along with PAS-3 because as per my study PAS-4 need to be filled prior to PAS-3.

Pls advise.

Regards,

Sandip 

Originally posted by : P C Agrawal
	- If existing shareholders do not accept the offer (or renounce their right in favour of non-members), the Board can allot shares to non-members u/s 62(1)(a)(iii). - File return of allotment with ROC and make entry in register of members.   Caution:  Allotment of shares to non-members in private companies could lead to litigation.  Hence provisions in Articles should be checked thoroughly before adopting above procedure.

Sir, I think you are suggesting the following action steps for issue of shares:

1. Issue letter to offer to existing members who shall reject the offer

2. After that, the company to issue these shares to the persons it want

In this way, the requirement of 20,000 face value shares per offer shall not be attracted. Please confirm.

Also, please confirm that in this case, is the action mentioned below is the only step required after the offer for shares is not accepted by the members:

1. File return of allotment with ROC and make entry in register of members

Further, would the company be also required to obtain valuation report.

Please reply asap.

Dear Agarwal Sir,

Can a pvt ltd company go for rights issue under section 62(1)(a) of the Companies Act, 2013, even if the face value of shares per offer is more than Rs. 20,000. Please let me know the process regarding rights issue of shares.

Dear Agarwal Sir,

Can u please send me a format of the special resolution for approval of private placement offer to be filed with ROC.

Dear Agarwal Sir,

We want issue differential equity shares of a private co. for which we have already filled form MGT-14,SH-7 but when we proceed to next step we are facing some difficulties.

Old authorized capital of the company was 1 lac and raised capital is 1 lac 5 thousand ,company wants to issue shares to one of its director and one other person but its not clear to me that is it a private placement or not and if it is a private placement what is the procedure to file return of allotment?

sir a private limited company wants to allot the shares to its existing shareholders with premium.

and the application money is already taken from the shareholders. so please tell me the whole procedure for the allotment which form should be filed and also the resolutions.

Please send me the format of resollution according to new companies act 2013 which i have to file to ROC in the procedure of allotment. Please reply as soon as possible. my id is kapila200590 @ gmail.com

Dear Shri PCAggarwal Ji,

I and many others may be interested in the ongoing topic on right issue/preferential issue. Very valuable information you have given. Thanks for the same. The question raised by Mr Kapila seems also to be of importance and may kindly be replied on this sight or with cc to me on my mail-ramkumar_associates @ yahoo.co.in

Again thanks a lot.

RKGoel

Please help me with the provisions as per the Companies Act, 2013 for stamping of Securities.