Sec 42 and sec 62(1)(c) of companies act 2013

Both are same under the Companies Act, 2013 insofar as the Company going for preferential allotment under Section 62(1)(c) also needs to comply with the conditions laid down in Section 42. Pls refer Rule 13 (1) of the Companies (Share Capital and Debentures) Rules, 2014.

Regards

Ashish

Hi Hemant,

Please open the attached file. I hope this will help you in understanding the concept.

With regards

Procedure for Private Placement / Preferential Allotment

1.Send Notice of Board Meeting as per section 173 of the Companies Act, 2013.

2.Convene a Board Meeting and pass following resolution:

a) Decide the names of the subscribers to the issue.

b) Prepare and Approve the Offer Letter in PAS-4.

c) Prepare Share Application Form.

d) Fix the Date, time, place of General Meeting and approve the notice and explanatory statement.

3.Send notice (along with explanatory statement) of the General Meeting to members, Directors as per section 101 and 102 of the Companies Act, 2013.

4.Send Offer Letter (Form PAS-4) alongwith Share Application Form to subscribers to issue within 30 days from the date of recording the name of the Persons in PAS-5

5.Hold EGM on the convened date and pass special resolution under section 62.

6.File Form MGT-14 within 30 days of passing Special Resolution along with Explanatory statement.

7.File Return of Allotment in PAS-3 within 30 days. Attachment to Form

a) List of Allottees (LOA)

b) LOA shall be certified by the signatory (Director/ CS) of Form.

c) Valuation Report

8. Maintain the record of the Allotment of securities issued.

9. File PAS-4 and PAS-5 with ROC within 30days of circulation of relevant private placement Offer Letter in GNL-2.

Both private placement under section 42  and preferential allotment u/s 62(1)(c) are not same . The first one is an alternative machanism in the hands of public companies ( listed & unlisted public companies) and that is to approach public for raising further funding by avioding the routine procedures of issuing prospectus and complying with all others sebi 's compliance .wheraas the second one was specifically designed for the company which  decides to issue shares to outsiders whenever  it could not get further funding from the existing shareholders     . Simplying saying that the conditions stated under section 42 should be complied with once the company has preferred the route stated under section 62(1)(c) for raising further funding was not right if we could not understand the intended purposes that to be separately served by these two sections         

Pls refer to Q25 of the discussion paper between ICSI and ROC Karnataka (attached herewith for reference).

Hope this clarifies.

Regards

Ashish Gupta

What will be the procedure if company want to convert its loan into equity shares.

Kindly note: At the time of sanction of loan in 2010 company entered into agreement with bank that if company fails to repay the loan amount the unpaid loan amount will be converted into equity shares at par value. 

ROC replied that there is no difference between private placement & preferential allotment under the companies act  2013. It is ROC opinion or comments on the question of similarity between the private placement & preferential allotment .  Once we get into practice side  we would understand that if a company , which could not able to raise further capital  from the existing sharesholders  under section 62 (1)(a) , could  raise the required fund from the outsiders under section 62 (1)(c) by passing a special resolution in general body meeting ,but in this circumtance  the company can not approach any unknown public becuase it is against the basic provisions of  private limited or against the provisions stated in part I of chapter III of new companies Act  2013 if it is public company . The main underlying point emphasised in section 42 is that the  pvt ltd company should be restricted from approaching  unknown common public by issuing any kind of invitation for subscribing in shares  and the public company should be prevented from escaping compliance of provisions stated in part I of chapter III of new company act because the sebi wants to protect interest of common investors  

And hence it may be inferred that irrespective of fact that whether a company has complied with section 42 while going thru 62(1)(c) or not , the company would not go beyond  the provisions stated in clause 2 ( 68 ) if it is pvt limited company  or  the  provisions contained in part I of chapter III of new act if it is public ltd company . So additional compliance with sec 42 while going thru sec 62(1)(c) route  would not be necessciated if the company concerned takes care of compliances of relevant applicable provisions stated in the nature of restriction as explained above                

Thanks all for your valuable comments.

Hello..

Can any one provide me the Draft Board Resolutions and Special resolution (Passed in EGM) for issue of shares under section u/s 62(1)(c) of the companies act, 2013. and what are the sequence of filling Forrm MGT 14. GNL 2 with ROC?

Do we need to attach Valuers report for price justification attached to GNL 2 or MGT 14?

Plz Reply as early as possible .

I will be very  thankful for your early responce.

please tell me wheather allotment of shares below book value in prefrential allotment is possible or not

for example book value is Rs.140/- and i want to allot a director for Rs. 40/- wheather it is possible or not

please tell me wheather allotment of shares below book value in prefrential allotment is possible or not

for example book value is Rs.140/- and i want to allot a director for Rs. 40/- wheather it is possible or not

Yes, it is possible you can issue shares even at the face value but not less than face value otherwise it will be issued at discount which isn't allowed as per CA, 2013.

Caution from Company's perspective:

The only thing which you should take care of is obatining a consent letter in writing from the current shareholders of the company that the said issue would not result in any disadvantage to them.

Caution from the new shareholder's POV:

Please make sure that the difference between the book value of shares and their face value (multiplied by no. of shares) is less than Rs. 50,000. If it is more than Rs. 50,000 then it would become taxable as gift in the hands of the new shareholder u/s 56 of the Income Tax Act.

Thanks

WE HAVE CONVERTED UNSECURED LOAN INTO SHARE APPLICATION MONEY ON 31.03.2014 IN THE BOARD MEETING . WE HAVE FILE MGT 14 ON 01.07.2014 FOR  BOARD MEETING DATED 28.06.2014 BUT NOT ATTECHED THE RESOLUTION REGARDING INCREASE OF PAIDUP SHARE CAPITAL. NOW AS PER COMPANIES ACT 2013 WHAT SHOULD BE THE DATES FOR EOGM,BOARD MEETING FOR ALLOTMENT AND ALSO WILL THESE BE AFFECTED BY 60 DAYS RETURN RULES OF SHARE APPLICATION MONEY.
 

Our Company wants to Issue Debentures under Section 62 of the act, so can debentures at the time of conversion in to equity shares be issued at discount