Now pvt co also cannot issue shares freely to anyone!

Pvt ltd 693 views 4 replies

P C Agrawal

Registered independent director Past Ch

8229 Points Joined March 2007

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

Replies (4)

Sneha

Company Secretary

1594 Points Joined December 2010

It seems that the compliances by private companies will approximately come at par with Unlisted Public Companies.

P C Agrawal

Registered independent director Past Ch

8229 Points Joined March 2007

Friends,

Second set of draft rules released by MCA yesterday provide for stringent conditions for issue of shares by private companies on private placement basis. Rule 3.12 inter-alia provides for following conditions:

a) Offer letter to be given to selected persons in prescribed form alongwith application form for shares

b) Special resolution to be passed for the offer (Maximum one offer in a quarter)

c) Minimum investment value to be Rs.50,000 per person (to be paid from concerned person's bank account only)

d) Offer letter and special resolution to be filed with ROC in advance

e) Return of allotment to be filed with ROC as usual

Thanks

Ajay Mishra

Company Secretary

74342 Points Joined March 2009

Agreed with your views.

Now there is no difference between issue of further shares between private as well as public company.

Sarvesh

Company Secretary

179 Points Joined May 2012

It has been specified in the draft rule 3.12 (Private Placement) that the said rule will not apply to an NBFC which has been registered with RBI. Now my question is whether section 42 (Private Placement) will also not apply on an NBFC. However there is no such exemption will be given to an NBFC under the said section. Please share your view on the same.