Share warrants

Section 114 and 115 are applicable on public companies and generally on those matters the act is silent, we presume it allowable in other cases. Private Companies are majorly governed by their Articles. If the Articles permit, we can presume, it can issue share warrants. But in practical sense, it should not as it has to adhere section 3(1)(iii) which restrict free transfer of its shares. 

Further, warrants convertible into Equity Shares can atleast put a rider on transfer. Expert opinion is solicited.

Thanks for the correction Smriti...

A PUBLIC COMPANY LIMITED BY SHARES, if so authorised by its articles, may, with the previous approval of the Central Government, issue warrants, under the common seal of the Company with respect to any fully paid up equity shares, stating that the bearer of the warrant is entitled to the shares therein specified, and may provide for the payment of dividend on the shares specified in the warrants.

The above warrants shall referred to as a Share Warrants.

The share warrant shall entitle the buyer thereof to the shares therein specified and he shares may be transferred by delivery of the warrant.

Thus a Private Company can not issue Share Warrants, as it can be issued by a Public Company only with the previous approval of Central Government as specified under section 114 of the Act.

In my opinion a Private Company cannot issue share warrant , Share warrant states that its bearer  is entitled to a number of shares mentioned there in it. It is a negotiable document and is easily transferable by mere delivery to another person. 

Share Warrant are tranferable mere by delivery , such condition is opposed to restriction on tranferabilty which is essential requirement in case of Private Limited Company. 

But what if the instrument issued is simply warrant and not the share warrant  and such warrants are permitted by Articles and convertible into equity ?

Regards

CS Abhay Sharma

If Articles of the Company allow issue of Warrant (not share warrant)  a Private Company can issue the same . Warrant is an instrument allowing the subscriber the option to buy shares in a company at a pre-specified price at or before some future date. Thus, a warrant gives a right to the subscriber to buy a share but no obligation, it is totally differnt from Share Warrant and are not freely transferable, the person to whom Warrant is issued, only such person is entiltled to the Shares. Private Company can issue Warrant as they are not freely transferable. 

Can we consider the share warrants for net worth purpose?

Dear Experts,

Can any one send me reference of sections and rules applicable for  warrants ,under which a private company can issue warrants and I can refer details provisions for issuing warrants.

Regards

CMA Gopal Chaudhry

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