Optionally convertible shares check list

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Section Heading Particulars Yes/No Remarks
Section
43
Kinds of share
capital
if company has issued equity shares with
r Differential rights:-
1. Whether the articles of association of the
company authorizes the issue of shares with
differential rights or not.
2. whether the issue of shares was authorized by
an ordinary resolution passed at a general
meeting of the shareholders or not.( in case of
listed company issue approved through postal
ballot is also valid)
3. Whether the shares with differential rights
shall exceed 26 % of total post issue paid up
equity share capital along with equity shares
with differential voting rights issued at any
point of time.
4. Whether company has a consistent track
record of distributable profits for the last three
years or not.
5. Whether company has defaulted in filling
financial statements and annual returns for
three financial years immediately preceding
the financial year in which it is decided to
issue such shares or not
6. whether company has any kind of subsisting
defaults in payment of a declared dividend to
its shareholders or repayment of its matured
deposits or redemption of its preference share
s or debentures that have become due for
redemption or payment of interest on such
deposits or debentures or payment of dividend
or not
7. Whether company has defaulted in payment
of the dividend on preference shares or
repayment of any term loan from a public
financial institution or state level financial
institution or schedule bank that has become
repayable or interest payable thereon or dues
with respect to stator payment relating to its
employees to any authority or default in
crediting the amount in IEPF to the central
government or not.
8. Whether company has penalized by court or
tribunal during the last three years of any
offence under which such company being
regulated by sectoral
9. Regulators.
10. Whether company has annexed explanatory
statement along with notice of general
meeting containing full details of issue of
shares with differential rights.
11. Whether company has converted its existing
equity share capital with voting rights into
equity share capital carrying differential rights
and vice –versa.
12. Whether the board of directors in their board
report for the financial year in which this
issue was completed disclosed complete
information regarding issue.
Section
46
certificate of
shares
1. Whether issue of share certificate was
approved by a board resolution passed by the
board or not;
2. Whether every certificate of share was framed
properly in FORM NO –SH.1 specifying the
name of person in whose favor the certificate
is issued, amount paid-up their on ;
3. Whether every share certificate was issued
under the common seal of company or not;
4. Whether issued certificate was signed by :-
a. Two directors duly authorized by the
board of directors
b. The secretary or any person
authorized by board
5. Whether company has entered particulars of
every share certificate in the register of
members or not;
6. Whether all books and documents relating to
issue of share certificate including the blank
forms of share certificate shall be preserved in
safe custody either by
a. The committee of the board or
b. The company secretary , if company
has a company secretary ; or
c. A director specially authorized by
board for such purpose , if company
has no company secretary;
7. Whether all the books and documents relating
to issue of share certificate shall be preserved
in good order for at least 30years and in case
of disputed case shall be preserved
permanently by the company.
Section
49
Calls on
shares of same
class to be
made on
uniform basis
Whether any calls for further share capital
was made on a uniform basis on all share
falling under that class or not

Section
50
Company to
accept unpaid
share capital,
although not
called up.
Whether it is authorized by company articles
and if not company has first altered its
articles or not

Section
52
Application of
premiums
received on
issue of shares
Whether company has applied the security
premium account only for five option
mentioned therein

Section
53
Prohibition on
issue of shares
at discount
Whether company has issued shares at a
discount at any time during a financial year.

Section
54
Issue of sweat
equity shares (in
case of unlisted
company)
1. Whether issue of sweat equity share
are of a class of shares already issued
or not;
2. Whether the issue of sweat equity
shares was authorized by a special
resolution passed by the company in
general meeting or not;
3. Whether while issuing sweat equity
shares company has termed employee
only to :
 A permanent employee who has
been working in India or outside
India ,for at least one year; or
 A director of the company ,
whether a whole time director or
not ; or
 An employee or a director as
defined in above clause of a
subsidiary / holding company in
India or outside India
4. Whether the explanatory statement
annexed with notice of general
meeting contained the particulars viz.
 The date of board meeting at
which the proposal for issue of
sweat equity shares was approved;
 The reason or justification for the
issue;
 The total number of shares to be
issued as sweat equity;
 The class or classes of directors or
employees to whom such equity
shares are to be issued;
 The principle terms and condition
of issue including basis of
valuation;
 The price at which the sweat
equity shares are proposed to be
issued;
 Diluted EPS pursuant to the issue
of sweat equity share
5. Whether company has issued sweat
equity shares for more than 15% of the
existing paid up equity paid up share
capital in a year or whether value of
shares issued was rupees 5 Crore

whichever is higher;
6. Whether the sweat equity shares
issued shall locked for a period of
three years from the date of allotment
or not;
7. Whether the issued sweat equity
shares was valued at a price
determined by a registered valuer or
not.
8. Whether the board of directors provide
details of issue of sweat equity shares
in their board report for the year in
which such shares are issued;
9. Whether company has maintained a
register of sweat equity shares in
Form No .SH-3 or not;
10. Whether the entries in the register
shall be authenticated by
 The company secretary of the
company ;or
 Any other person authorized by
board
11. Whether at the date of issue , one year
has elapsed since the date on which
the company had commenced business
or not;
12. Whether the register of sweat equity
shares is maintained by company at
the
 Registered office of the company;
or
 Such other place as board may
decide;
13. Whether the rights, limitations ,
restrictions , and provisions as are for
the time being applicable to the sweat
equity shares issued under this section
shall rank pari passu with other equity
shareholders or not
Section
55
Issue and
redemption of
1. Whether company has been authorized
by its articles to issue preference share

preference shares and if not authorized whether
company has altered its articles or not;
2. Whether the issue of preference share
has been authorized by passing special
resolution in the general meeting of
the company or not;
3. Whether the company at the time of
issue has any subsisting default in the
redemption of preference shares or in
payment of dividend due on any
preference shares;
4. Whether special resolution authorizing
issue of preference share shall include
complete matters of the issue viz.
 The priority with respect to
payment of dividend or repayment
of capital;
 The participation in surplus fund;
 The voting rights;
 The conversion of preference
shares into equity shares;
 The redemption of preference
shares;
5. Whether the explanatory statement
annexed with notice of general
meeting contained the complete
material facts concerned with and
relevant to the issue of such shares
including size , objective & manner of
issue; terms of issue, current
shareholding pattern and expected
dilution in equity share capital upon
conversion of preference shares;
6. Whether company has contained
particulars of preference share holder
in the register of members or not;
7. Whether company is going to redeem
preference shares within 20 years from
the date of their issue or not;
Section
56
Transfer and
Transmission of
Securities
1. Whether company has received a
proper instrument of transfer in
FORM NO .SH.4 within 60 days from
the date of its execution or not;

Whether company has given a notice
in Form .No.SH-5 to the transferee;
3. Whether company has received no
objection for transfer from the
transferee within 2 weeks from the
date of notice;
4. Whether company has complied with
all the requirements of transfer /
transmission as mentioned in its article
of association;
5. Whether company ha s entered all the
entries of transfer in its register of
transfer or not;
6. Whether company has delivered the
certificate of securities transferred
within 1 month from the date of
receipt of instrument of transfer or
from the date of intimation of
transmission ;as the case may be;
Section
621(b)
Employee Stock
Option Scheme
1. Whether The issue of ESOS has been
approved by the share holders of the
company by passing a special
resolution;
2. Whether while issuing sweat equity
shares company has termed employee
only to :
 A permanent employee who has
been working in India or outside
India ;or
 A director of the company ,
whether a whole time director or
not but excluding an independent
director; or
 An employee or a director as
defined in above clause of a
subsidiary / holding company in
India or outside India but does not
include; an employee who is a
promoter or a person belonging to
the promoter group ;or a director
who either himself or through his
relatives or through anybody
corporate, directly or indirectly
holds more than 10% of the
outstanding equity shares of the
company ;
3. Whether the explanatory statement
annexed with notice of general
meeting contained the particulars viz.
 The total number of option to be
granted;
 Maximum period within which the
option shall be vested;
 Exercise price or the formula for
arriving at the same;
 Lock in period ,if any;
 Maximum number of option to be
granted per employee ;
 Conditions under which option
vested in employees may lapse;
 Specified period within which
employee shall exercise the vested
option;
4. Whether there was a minimum period
of one year between the grant of
option and vesting of option or not;
5. Whether the option granted to
employees by companies is transferred
to any other person or not;
6. Whether the option granted to
employees was pledged ,
hypothecated , mortgaged or
otherwise encumbered or alienated in
any other manner by the company;
7. Whether board of director has
disclosed complete details of ESPS in
their directors report such as:-
 Option granted;
 Option vested;
 Option exercised;
 Option lapsed;
 Exercise price;
 Variation of terms of option;
 Money realized by exercise of
options ;
 Total number of option in force;
8. Whether company has maintained a
register of ESPS in Form.No.SH-6 and
entered complete particulars of option
granted;
9. Whether company has maintained the
register of ESPS at the
 Registered office of the company;
or
 Such other place as the board may
decide;
10. Whether the entries in the register of
ESPS was authenticated by the
 Company secretary of the
company; or
 By any other person authorized by
the board for this purpose;
11. Whether a copy of special resolution
has been filed ROC in
Form.No.MGT-14;
Section
63
issue of bonus
shares
1. Whether company has made bonus
issue by capitalizing reserves created
by the revaluation of assets or not;
2. Whether bonus issue is authorized by
articles; if not than whether proper
steps have been taken to alter articles
for issue of bonus shares;
3. Whether such bonus issue was after
recommended by board of directors
has been authorized by members in
the general meeting of the company or
not;
4. Whether company has defaulted in
payment of interest or principal in
respect of fixed deposits or debt
securities;
5. Whether company has defaulted in
respect of payment of statuary dues of
the employees such as, contribution to
provident fund ,gratuity and bonus;
6. Whether the shares are fully paid up or
not;
7. Whether company has issued bonus
share in lieu of dividend;

Whether company has withdrawn the
bonus issue once it was announced by
the board of directors to recommend
a bonus issue;
9. Whether company has filed Form.No
.PAS-3 with ROC Return of
Allotment;
Section
68
Power of
company to
purchase its own
securities (Buy –
Back of
Securities)
1. Whether the buy back is authorized
by the articles of association of
company if not then whether company
has passed special resolution for
altering the articles of association;
2. Whether the but-back was authorized
by board of directors by passing a
board resolution ,if buy- back of
securities are upto 10% of total paid
up equity capital & free reserve;
3. Whether the buy- back was authorized
by shareholders by passing a special
resolution in a general meeting ( in
case of buy back of securities are more
than 10% of total paid up equity
capital & free reserve);
4. Whether the maximum amount of buy
back is
 25% or less of the aggregate of
paid up capital and free reserves of
the company;
 Total paid up equity capital in that
financial year( in case of buy back
of equity shares)
5. Whether the ratio of aggregate of
secured and unsecured debts owed by
the company after buy back was more
than twice of the paid up capital & free
reserve;
6. Whether all the shares or other
specified securities for buy back
were fully paid up or not;
7. Whether an offer of buy back was
made within a period of one year
reckoned from the date of the closure

of the preceding offer of buy back; If
any
8. Whether the explanatory statement
annexed with notice of general
meeting contained the particulars viz.
 A full and complete disclosure of
all material facts ;
 necessity for the buy back;
 class of shares or securities
intended to be purchased under the
scheme of buy back;
 amount to be invested under the
buy back;
 Time limit for completion of buy-
back;
9. Ensure that buy- back must be made
through
 From the existing security holders
on a proportionate basis;
 From the open market;
 By purchasing the securities
issued to employees of the
company pursuant to a scheme of
stock option or sweat equity;
10. Ensure that buy back must be
completed within a period of one year
from the date of passing of the special
resolution or board resolution, as the
case may be;
11. Ensure that company extinguish and
physically destroy the shares or
securities so bought back within 7
days of the last date of completion of
buy back;
12. Ensure that once company completed
buy back under this section , it shall
not further make a further issue of
same kind of securities within a period
of 6 months except by way of bonus
issue or in discharge of subsisting
obligations;
13. Whether company maintains a register
of buy backs in Form.No.SH-10 and

entered therein full details viz.
 Consideration paid for the shares
or securities buy back
 Date of cancellation of securities
 Date of extinguish and physically
destroying the securities
 Such other particulars as may be
prescribed;
14. Whether company filed a letter of
offer in Form.No.SH-8 with the ROC
before the buyback of shares;
15. Whether company after completing
buy back under this section filed a
return with ROC in Form No –SH.11;
16. Whether company along with return
filed a certificate in Form.No.SH-15
signed by two directors of the
company including the managing
director ; certifying that the buyback
of securities has been made in
compliance with the provisions of the
act and the rules made there under;
Section
71
Debentures 1. Whether the issue of debentures with
an option to convert such debentures
into shares, wholly or partly shall be
approved by a special resolution
passed at a general meeting;
2. Ensure that company has not issued
any debentures carrying any voting
right;
3. Whether company has created
debentures redemption reserve account
out of the profits of the company
available for payment of dividend for
redemption of debentures;
4. Ensure company has not utilized the
DRR account for any purpose other
than redemption of debentures;
5. Ensure that in case of issue of secured
debentures its redemption shall not
exceed 10 years from the date of
issue.( however in case of a company
engaged in setting up of infrastructure

projects ,it may issue secured
debentures for a period exceeding10
years but not exceeding 30 years);
6. Ensure that company has secured the
issue of debentures by way of creation
of a charge, on the assets or the
properties of the company ,which is
sufficient for the due repayment of the
amount of debentures and interest
thereon;
7. Whether company has appointed a
debenture trustee before the issue of
letter of offer or prospectus for
subscripttion of its debentures or not;
8. Whether company has executed a
debenture trust deed in Form.No.SH-
12 within 60days after the date of
allotment of the debentures;
9. Whether company has mentioned the
name of debenture trustees in letter of
offer and also in all the subsequent
notices or other communications sent
to debentures holders or not;
10. Whether company has obtained a
written consent from debenture trustee
for the proposed appointment or not;
11. Whether company has appointed
debenture trustee after assuring that he
does not contains the disqualifications
such as
 beneficially holds shares in the
company;
 is a promoter , director, key
managerial person or any officer
or an employee of the company or
its holding or subsidiary or
associate company;
 is indebted to company or its
holding or subsidiary or associate
company;
 has furnished any guarantee in
respect of the principal debts
secured by debentures or interest
thereon

 has any pecuniary relationship
with company amounting to 2%or
more of its gross turnover or total
income or 50,00,000 rupees
whichever is lower ,during the two
immediately preceding financial
years or during the current
financial year;
12. Ensure that debentures trustee has
with due care protect the interest of the
debentures holders;
13. Ensure that company has created the
DRR Account on or before 30th day of
April of each year, a sum which shall
not be less than 15%, of the amount of
its debentures maturing during the
year ending on the 31st day of march
of the next year.

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