Through MCA Notification dated December 14, 2011 Ministry of Corporate Affairs has amended the Unlisted Public Companies (Preferential Allotment) Rules, 2003. There are quite a few changes in the above rules through the above said notification.
During my study of the same the most relevant change is regulation of acceptance of Share Application Money in an unlisted Public company. As per my understanding this change is a very big change to be taken note off.
Please find below the relevant and highlighted clause regarding Share Application Money:
8. Invitation and allotment of securities.-
(1) No fresh offer or invitation shall be made unless the allotment with respect to any offer or invitation made earlier have been completed in terms of sub-section (9) of section 60B of the Companies Act, 1956.
(2) Any offer or invitation not in compliance with sub-section (1A) of Section 81 read with sub-section (3) of section 67 of the said Act, shall be treated as a public offer and the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and the Securities and Exchange Board of India Act, 1992 (15 of 1992) shall be complied with.
(3) All monies payable on subscripttion of securities shall be paid through cheque or demand draft or other banking channels but not by cash.
(4) Any allotment of securities shall be completed within sixty days from the receipt of application money and in case the company is not able to allot the securities within the said period of sixty days, it shall repay the application money within fifteen days thereafter, failing which it will be required to be re-paid with interest at the rate of twelve percent per annum:
Provided that t he monies received on such application shall be kept in a separate bank account and shall not be utilised for any purpose other than—
(i) for adjustment against allotment of securities; or
(ii) for the repayment of monies where the company is unable to allot securities.
(5) No company offering securities shall release any public advertisements or utilise any media, marketing or distribution channels or agents to inform the public at large about such an offer.
You all are requested to please take note of the same.