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Procedure to issue shares by existing private ltd company

sreejith v p (Articles Clerk) (26 Points)

30 April 2014

Dear Sir,

I want to issue shares to one of our employee, We want to appoint him as a director. Could you please tell me the steps and procedures to issue shares.

Please note I want to issue shares of an existing private Ltd company.

Thanks & Regards

Sreejith

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4 Replies

P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 30 April 2014

For appointment of director:

- Pass Board resolution

- File Form DIR.12+DIR.2 within 30 days

- Make entry in register of directors

For issue of shares to employee on private placement basis (assuming he is not a member at present) (subject to provisions of your Articles):

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

- Draft EGM notice and pass Board resolution for issuing the same

- Pass special resolution in EGM

- File Form MGT.14 with copy of special resolution within 30 days

- Prepare offer letter (in form PAS.4) with application form

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

- File Form MGT.14 with copy of Board resolution for issue of shares

- 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.

Process is quite lengthy. You have to check your Articles whether you could follow route of rights issue u/s 62(1)(a) with renunciation in favour of the employee who is not an existing member. In such a case, the process will be:

- Prepare draft letter of offer (no specific format prescribed) and application form

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

- File Form MGT.14 with copy of Board resolution for issue of shares

- Issue letter of offer

- Get share application money with application form

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

- File return of allotment in Form PAS.3

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

4 Like

Vandana J Doshi (Practising Company Secretary) (12562 Points)
Replied 30 April 2014

Thank you Agrawal Sir for the detailed answer....

CA ISHA (CA) (38 Points)
Replied 20 May 2014

1) I have a query regarding this private placement, I have to issue shares for a public ltd Co. through private placeement but I am little confused whether I have to valuation of the issue by the registered valuer and if, how can it be done and by whom.

Valuation is only required in case of issue of securities in cash?

2) Does a public company can issue securities only in dematerialised form only or can be done in physical from?

Thank you