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901 | Associations or companies engaged in the production or broadcast of audio news or audio visuals or current affairs programmes through any electronic mode, or any other electronic form as defined in clause (r) of sub-section (i) of Section 2 of the Information Technology Act, 2000 or any other mode of mass communication;Correspondents or columnists, cartoonists, editors, owners of the Associations or companies referred to in clause (g); andIndividuals or Associations who have been prohibited from receiving foreign contribution.ii) Category II [Section 11]:Section 11 of the Act provides that no Association having a definite cultural, economic, educational, religious or social programme can receive foreign contribution without seeking registration or prior permission from the Central Government. |
902 | Individuals or Associations who have been prohibited from receiving foreign contribution.ii) Category II [Section 11]:Section 11 of the Act provides that no Association having a definite cultural, economic, educational, religious or social programme can receive foreign contribution without seeking registration or prior permission from the Central Government.Any Association which has a definite programme for carrying out specific activities, which may fall in the five generic categories as mentioned above, may seek registration or prior permission for receipt of foreign contribution. |
903 | Section 11 of the Act provides that no Association having a definite cultural, economic, educational, religious or social programme can receive foreign contribution without seeking registration or prior permission from the Central Government.Any Association which has a definite programme for carrying out specific activities, which may fall in the five generic categories as mentioned above, may seek registration or prior permission for receipt of foreign contribution.After grant of registration or prior permission under the Act, the Association is permitted to receive foreign contribution only in the single Bank Account mentioned in the order for registration or prior permission granted by the Central Government. This account number would be the same as has been intimated by the organisation in their application for registration/prior permission. However, one or more accounts, in one or more scheduled banks, may be opened for utilizing the foreign contribution provided that no funds other than the foreign contribution received should be deposited in such account or accounts. An Association which has received foreign contribution is also required to inform the Central Government of the amount of each foreign contribution received by it, the sources thereof, the manner in which such foreign contribution was received and the purposes for which such foreign contribution was utilized by it. |
904 | Any Association which has a definite programme for carrying out specific activities, which may fall in the five generic categories as mentioned above, may seek registration or prior permission for receipt of foreign contribution.After grant of registration or prior permission under the Act, the Association is permitted to receive foreign contribution only in the single Bank Account mentioned in the order for registration or prior permission granted by the Central Government. This account number would be the same as has been intimated by the organisation in their application for registration/prior permission. However, one or more accounts, in one or more scheduled banks, may be opened for utilizing the foreign contribution provided that no funds other than the foreign contribution received should be deposited in such account or accounts. An Association which has received foreign contribution is also required to inform the Central Government of the amount of each foreign contribution received by it, the sources thereof, the manner in which such foreign contribution was received and the purposes for which such foreign contribution was utilized by it. |
905 | Any Association which has a definite programme for carrying out specific activities, which may fall in the five generic categories as mentioned above, may seek registration or prior permission for receipt of foreign contribution.After grant of registration or prior permission under the Act, the Association is permitted to receive foreign contribution only in the single Bank Account mentioned in the order for registration or prior permission granted by the Central Government. This account number would be the same as has been intimated by the organisation in their application for registration/prior permission. However, one or more accounts, in one or more scheduled banks, may be opened for utilizing the foreign contribution provided that no funds other than the foreign contribution received should be deposited in such account or accounts. An Association which has received foreign contribution is also required to inform the Central Government of the amount of each foreign contribution received by it, the sources thereof, the manner in which such foreign contribution was received and the purposes for which such foreign contribution was utilized by it.(iii) Category III (Sections 9 and 12): |
906 | After grant of registration or prior permission under the Act, the Association is permitted to receive foreign contribution only in the single Bank Account mentioned in the order for registration or prior permission granted by the Central Government. This account number would be the same as has been intimated by the organisation in their application for registration/prior permission. However, one or more accounts, in one or more scheduled banks, may be opened for utilizing the foreign contribution provided that no funds other than the foreign contribution received should be deposited in such account or accounts. An Association which has received foreign contribution is also required to inform the Central Government of the amount of each foreign contribution received by it, the sources thereof, the manner in which such foreign contribution was received and the purposes for which such foreign contribution was utilized by it.(iii) Category III (Sections 9 and 12):Section 9 of the Act empowers the Central Government to prohibit any individual or Association not specified in Section 3 from accepting any foreign contribution, or to require any Association specified in Section 11 to receive foreign contribution only after obtaining prior permission of the Central Government. Such prohibition or requirement for prior permission is made only after the Central Government is satisfied that the receipt of foreign contribution by such Association or person or class of persons, as the case may be, is likely to prejudicially affect: |
907 | After grant of registration or prior permission under the Act, the Association is permitted to receive foreign contribution only in the single Bank Account mentioned in the order for registration or prior permission granted by the Central Government. This account number would be the same as has been intimated by the organisation in their application for registration/prior permission. However, one or more accounts, in one or more scheduled banks, may be opened for utilizing the foreign contribution provided that no funds other than the foreign contribution received should be deposited in such account or accounts. An Association which has received foreign contribution is also required to inform the Central Government of the amount of each foreign contribution received by it, the sources thereof, the manner in which such foreign contribution was received and the purposes for which such foreign contribution was utilized by it.(iii) Category III (Sections 9 and 12):Section 9 of the Act empowers the Central Government to prohibit any individual or Association not specified in Section 3 from accepting any foreign contribution, or to require any Association specified in Section 11 to receive foreign contribution only after obtaining prior permission of the Central Government. Such prohibition or requirement for prior permission is made only after the Central Government is satisfied that the receipt of foreign contribution by such Association or person or class of persons, as the case may be, is likely to prejudicially affect: |
908 | (iii) Category III (Sections 9 and 12):Section 9 of the Act empowers the Central Government to prohibit any individual or Association not specified in Section 3 from accepting any foreign contribution, or to require any Association specified in Section 11 to receive foreign contribution only after obtaining prior permission of the Central Government. Such prohibition or requirement for prior permission is made only after the Central Government is satisfied that the receipt of foreign contribution by such Association or person or class of persons, as the case may be, is likely to prejudicially affect:the sovereignty and integrity of the nation; orthe security, strategic, scientific or economic interest of the State;orharmony between religious, racial, social, linguistic or regional groups, castes or communities; orfriendly relation with any foreign State; orthe public interest; orfreedom or fairness of election to any legislature; and that the acceptance of foreign contribution- |
909 | harmony between religious, racial, social, linguistic or regional groups, castes or communities; orfriendly relation with any foreign State; orthe public interest; orfreedom or fairness of election to any legislature; and that the acceptance of foreign contribution-shall not lead to incitement of an offence;shall not endanger the life or physical safety of any person.Foreign Hospitality“Foreign Hospitality” means any offer, not being a purely casual one, made in cash or kind by a foreign source for providing a person with the costs of travel to any foreign country or territory or with free boarding, lodging, transport or medical treatment. |
910 | shall not endanger the life or physical safety of any person.Foreign Hospitality“Foreign Hospitality” means any offer, not being a purely casual one, made in cash or kind by a foreign source for providing a person with the costs of travel to any foreign country or territory or with free boarding, lodging, transport or medical treatment.The Act regulates acceptance of foreign hospitality by certain individuals, which includes members of a legislature, office-bearers of a political party, judges, government servants or employees of any Corporation, while visiting any country or territory outside India. Such individuals can receive foreign hospitality only with the prior permission of the Central Government by applying in Form FC-2.Maintenance of AccountsAn association granted prior permission or registration should maintain |
911 | Maintenance of AccountsAn association granted prior permission or registration should maintaina separate set of accounts and records, exclusively for foreign contribution received and utilised. If the foreign contribution relates only to articles, the intimation should be submitted in Form FC-7. If the foreign contribution relates to foreign securities, the intimation should be submitted in Form FC-8. Every report submitted shall be duly certified by a chartered accountant. |
912 | An association granted prior permission or registration should maintaina separate set of accounts and records, exclusively for foreign contribution received and utilised. If the foreign contribution relates only to articles, the intimation should be submitted in Form FC-7. If the foreign contribution relates to foreign securities, the intimation should be submitted in Form FC-8. Every report submitted shall be duly certified by a chartered accountant.Every account giving details of the receipt and purpose-wise utilisation of the foreign contribution, including the interest earned on the foreign contribution amount, should be maintained on an yearly basis, commencing on the 1st day of April each year, and every such yearly account is to be submitted, in prescribed Form FC – 6 along with the income and expenditure statement, balance sheet and statement of receipt and payment, duly certified by a chartered accountant in duplicate, within nine months of the closure of the year, i.e., before 31st December. Every such return in Form FC-6 should also be accompanied by a copy of a statement of account from the bank where the exclusive foreign contribution account is maintained by the person, duly certified by an officer of such bank. The cash book and ledger account on double entry basis, where the foreign contribution relates to currency received and utilised. The annual return in Form FC-6 should reflect the foreign contribution received in the exclusive bank account and include the details in respect of the funds transferred to other bank accounts for utilisation. |
913 | a separate set of accounts and records, exclusively for foreign contribution received and utilised. If the foreign contribution relates only to articles, the intimation should be submitted in Form FC-7. If the foreign contribution relates to foreign securities, the intimation should be submitted in Form FC-8. Every report submitted shall be duly certified by a chartered accountant.Every account giving details of the receipt and purpose-wise utilisation of the foreign contribution, including the interest earned on the foreign contribution amount, should be maintained on an yearly basis, commencing on the 1st day of April each year, and every such yearly account is to be submitted, in prescribed Form FC – 6 along with the income and expenditure statement, balance sheet and statement of receipt and payment, duly certified by a chartered accountant in duplicate, within nine months of the closure of the year, i.e., before 31st December. Every such return in Form FC-6 should also be accompanied by a copy of a statement of account from the bank where the exclusive foreign contribution account is maintained by the person, duly certified by an officer of such bank. The cash book and ledger account on double entry basis, where the foreign contribution relates to currency received and utilised. The annual return in Form FC-6 should reflect the foreign contribution received in the exclusive bank account and include the details in respect of the funds transferred to other bank accounts for utilisation. |
914 | a separate set of accounts and records, exclusively for foreign contribution received and utilised. If the foreign contribution relates only to articles, the intimation should be submitted in Form FC-7. If the foreign contribution relates to foreign securities, the intimation should be submitted in Form FC-8. Every report submitted shall be duly certified by a chartered accountant.Every account giving details of the receipt and purpose-wise utilisation of the foreign contribution, including the interest earned on the foreign contribution amount, should be maintained on an yearly basis, commencing on the 1st day of April each year, and every such yearly account is to be submitted, in prescribed Form FC – 6 along with the income and expenditure statement, balance sheet and statement of receipt and payment, duly certified by a chartered accountant in duplicate, within nine months of the closure of the year, i.e., before 31st December. Every such return in Form FC-6 should also be accompanied by a copy of a statement of account from the bank where the exclusive foreign contribution account is maintained by the person, duly certified by an officer of such bank. The cash book and ledger account on double entry basis, where the foreign contribution relates to currency received and utilised. The annual return in Form FC-6 should reflect the foreign contribution received in the exclusive bank account and include the details in respect of the funds transferred to other bank accounts for utilisation.The accounting statements should have to be preserved by the NGO/ association for a period of six years. |
915 | Every account giving details of the receipt and purpose-wise utilisation of the foreign contribution, including the interest earned on the foreign contribution amount, should be maintained on an yearly basis, commencing on the 1st day of April each year, and every such yearly account is to be submitted, in prescribed Form FC – 6 along with the income and expenditure statement, balance sheet and statement of receipt and payment, duly certified by a chartered accountant in duplicate, within nine months of the closure of the year, i.e., before 31st December. Every such return in Form FC-6 should also be accompanied by a copy of a statement of account from the bank where the exclusive foreign contribution account is maintained by the person, duly certified by an officer of such bank. The cash book and ledger account on double entry basis, where the foreign contribution relates to currency received and utilised. The annual return in Form FC-6 should reflect the foreign contribution received in the exclusive bank account and include the details in respect of the funds transferred to other bank accounts for utilisation.The accounting statements should have to be preserved by the NGO/ association for a period of six years. |
916 | Every account giving details of the receipt and purpose-wise utilisation of the foreign contribution, including the interest earned on the foreign contribution amount, should be maintained on an yearly basis, commencing on the 1st day of April each year, and every such yearly account is to be submitted, in prescribed Form FC – 6 along with the income and expenditure statement, balance sheet and statement of receipt and payment, duly certified by a chartered accountant in duplicate, within nine months of the closure of the year, i.e., before 31st December. Every such return in Form FC-6 should also be accompanied by a copy of a statement of account from the bank where the exclusive foreign contribution account is maintained by the person, duly certified by an officer of such bank. The cash book and ledger account on double entry basis, where the foreign contribution relates to currency received and utilised. The annual return in Form FC-6 should reflect the foreign contribution received in the exclusive bank account and include the details in respect of the funds transferred to other bank accounts for utilisation.The accounting statements should have to be preserved by the NGO/ association for a period of six years.Even if no foreign contribution is received during a year, a ‘Nil’ return is required to be filed with the Ministry of Home Affairs. Any transfer of foreign contribution should be reflected in the returns in Form FC-6 as well as in Form FC-10 by the transferor and the recipient. |
917 | The accounting statements should have to be preserved by the NGO/ association for a period of six years.Even if no foreign contribution is received during a year, a ‘Nil’ return is required to be filed with the Ministry of Home Affairs. Any transfer of foreign contribution should be reflected in the returns in Form FC-6 as well as in Form FC-10 by the transferor and the recipient.Associations/NGOs granted registration or prior permission, which have received foreign contribution in excess of one crore rupees, or equivalent thereto, in a financial year, should place the summary data on receipts and utilisation of the foreign contribution pertaining to the year of receipt as well as for one year thereafter in the public domain.PenaltyAny person who gives false information or seeks prior permission or registration by fraud or false representation or concealment of materialfact will be punishable with imprisonment for a term which may extend to six months or with fine or with both. |
918 | Any person who gives false information or seeks prior permission or registration by fraud or false representation or concealment of materialfact will be punishable with imprisonment for a term which may extend to six months or with fine or with both.Any person who contravenes any other provisions of the Act will be punishable with imprisonment for a term which may extend to five years or with fine or with both.Companies Act, 2013The Companies Act, 2013 was passed by Lok Sabha on the 18th of December 2012 and passed by the Rajya Sabha on 8th August 2013 and is all set to replace the 57 year old Companies Act, 1956. The Companies Act, 2013 received the Assent of the President on 29th August, 2013 and was notified in the Gazette of India on 30th August, 2013. |
919 | Companies Act, 2013The Companies Act, 2013 was passed by Lok Sabha on the 18th of December 2012 and passed by the Rajya Sabha on 8th August 2013 and is all set to replace the 57 year old Companies Act, 1956. The Companies Act, 2013 received the Assent of the President on 29th August, 2013 and was notified in the Gazette of India on 30th August, 2013.The Ministry of Corporate Affairs has also notified 98 sections for implementation of the provisions of the Companies Act, 2013 on 12th September, 2013. Rest of the provisions will come into force on such date as the Central Government may appoint by notification/s in the Official Gazette. Towards the proper implementation of the Companies Act 2013, draft rules were also placed on the website of the Ministry of Corporate Affairs in three phases, for comments and objections/ suggestions from the general public/stakeholders. |
920 | The Companies Act, 2013 was passed by Lok Sabha on the 18th of December 2012 and passed by the Rajya Sabha on 8th August 2013 and is all set to replace the 57 year old Companies Act, 1956. The Companies Act, 2013 received the Assent of the President on 29th August, 2013 and was notified in the Gazette of India on 30th August, 2013.The Ministry of Corporate Affairs has also notified 98 sections for implementation of the provisions of the Companies Act, 2013 on 12th September, 2013. Rest of the provisions will come into force on such date as the Central Government may appoint by notification/s in the Official Gazette. Towards the proper implementation of the Companies Act 2013, draft rules were also placed on the website of the Ministry of Corporate Affairs in three phases, for comments and objections/ suggestions from the general public/stakeholders.The Companies Act sets out the code of conduct for the corporate sector in relation to issue, allotment and transfer of securities, and disclosures to be made in public issues of capital, particularly in the fields of company management and projects, information about other listed companies under the same management, and management perception of risk factors. It also regulates underwriting, the use of premium and discounts on issues, rights and bonus issues, payment of interest and dividends, supply of annual report and other information. |
921 | The Ministry of Corporate Affairs has also notified 98 sections for implementation of the provisions of the Companies Act, 2013 on 12th September, 2013. Rest of the provisions will come into force on such date as the Central Government may appoint by notification/s in the Official Gazette. Towards the proper implementation of the Companies Act 2013, draft rules were also placed on the website of the Ministry of Corporate Affairs in three phases, for comments and objections/ suggestions from the general public/stakeholders.The Companies Act sets out the code of conduct for the corporate sector in relation to issue, allotment and transfer of securities, and disclosures to be made in public issues of capital, particularly in the fields of company management and projects, information about other listed companies under the same management, and management perception of risk factors. It also regulates underwriting, the use of premium and discounts on issues, rights and bonus issues, payment of interest and dividends, supply of annual report and other information. |
922 | The Ministry of Corporate Affairs has also notified 98 sections for implementation of the provisions of the Companies Act, 2013 on 12th September, 2013. Rest of the provisions will come into force on such date as the Central Government may appoint by notification/s in the Official Gazette. Towards the proper implementation of the Companies Act 2013, draft rules were also placed on the website of the Ministry of Corporate Affairs in three phases, for comments and objections/ suggestions from the general public/stakeholders.The Companies Act sets out the code of conduct for the corporate sector in relation to issue, allotment and transfer of securities, and disclosures to be made in public issues of capital, particularly in the fields of company management and projects, information about other listed companies under the same management, and management perception of risk factors. It also regulates underwriting, the use of premium and discounts on issues, rights and bonus issues, payment of interest and dividends, supply of annual report and other information.The new law has mandated the setting up of a National Financial Reporting Authority, which will monitor compliance with accounting and auditing standards. It will also have the power to investigate auditors that are registered under section 22 of the Chartered Accountants Act, 1949. |
923 | The Companies Act sets out the code of conduct for the corporate sector in relation to issue, allotment and transfer of securities, and disclosures to be made in public issues of capital, particularly in the fields of company management and projects, information about other listed companies under the same management, and management perception of risk factors. It also regulates underwriting, the use of premium and discounts on issues, rights and bonus issues, payment of interest and dividends, supply of annual report and other information.The new law has mandated the setting up of a National Financial Reporting Authority, which will monitor compliance with accounting and auditing standards. It will also have the power to investigate auditors that are registered under section 22 of the Chartered Accountants Act, 1949.While the new legislation has been pruned to around 470 clauses, compared with 700 sections in the older law, several key changes have |
924 | The new law has mandated the setting up of a National Financial Reporting Authority, which will monitor compliance with accounting and auditing standards. It will also have the power to investigate auditors that are registered under section 22 of the Chartered Accountants Act, 1949.While the new legislation has been pruned to around 470 clauses, compared with 700 sections in the older law, several key changes havebeen introduced to promote transparency in investments, strengthening the rights of minority shareholders, making it tough for companies to hide illegal transactions, and promoting gender equality on company boards.The following provisions and chapters of the new Act are relevant for companies dealing with Indian Financial Markets:Chapter III of the new Companies Act, 2013 deals with public offer and allotment of securities. This Chapter has two parts to it:Part I deals with Public Offer (Sections 23 to 41)Part II deals with Private Placement (Section 42) |
925 | The following provisions and chapters of the new Act are relevant for companies dealing with Indian Financial Markets:Chapter III of the new Companies Act, 2013 deals with public offer and allotment of securities. This Chapter has two parts to it:Part I deals with Public Offer (Sections 23 to 41)Part II deals with Private Placement (Section 42)Chapter IV deals with Share Capital And Debentures (Sections 43 to 72)Chapter V deals with Acceptance of Deposits by (Sections 73 to 76)Chapter III of the Companies Act, 2013 deals with the following:Public Offer And Private Placement-Section 23, 24, 25, 28 and42Prospectus-Section 25, 26 and 27Variants of Prospectus-Section 30, 31, 32 And 33Allotment of Securities-Section 29, 39, 40 And 41Penal Provisions Under Public Offer-Section 34, 35, 36, 37, 38,39 and 40Section 23 - Public offer and private placementA public company may issue securities--to public through prospectus which is nothing but public offer or |
926 | 39 and 40Section 23 - Public offer and private placementA public company may issue securities--to public through prospectus which is nothing but public offer orthrough private placement by complying with the provisions of Part II of this Chapter; orthrough a rights issue or a bonus issue in accordance with the provisions of this Act and in case of a listed company or a company which intends to get its securities listed also with the provisions of the Securities and Exchange Board of India Act, 1992 (15 of 1992) and the rules and regulationsmade thereunder.A private company may issue securities--by way of rights issue or bonus issue in accordance with the provisions of this Act; orthrough private placement by complying with the provisions of Part II of this Chapter. |
927 | made thereunder.A private company may issue securities--by way of rights issue or bonus issue in accordance with the provisions of this Act; orthrough private placement by complying with the provisions of Part II of this Chapter.Note: The term “public offer” includes initial public offer or further public offer of securities to the public by a company, or an offer for sale of securities to the public by an existing shareholder, through issue of a prospectus.Section 24 - Power of Securities and Exchange Board to regulate issue and transfer of securities, etc.This section authorises the SEBI to regulate the listed companies and also those companies which intend to get their securities listed on any recognised stock exchange in India on the following matters:issue and transfer of securities; andnon-payment of dividend, |
928 | This section authorises the SEBI to regulate the listed companies and also those companies which intend to get their securities listed on any recognised stock exchange in India on the following matters:issue and transfer of securities; andnon-payment of dividend,In case of other companies, which are not listed or have no intention of getting listed on any stock exchange in India, the powers to regulate lie with the Central Government.Note: All powers relating to all other matters like issue of prospectus return of allotment, redemption of preference shares and any other matter specifically provided in this Act, shall be exercised by the Central Government, the Tribunal or the Registrar, as the case may be.Section 25 - Document containing offer of securities for sale to be deemed prospectus |
929 | Note: All powers relating to all other matters like issue of prospectus return of allotment, redemption of preference shares and any other matter specifically provided in this Act, shall be exercised by the Central Government, the Tribunal or the Registrar, as the case may be.Section 25 - Document containing offer of securities for sale to be deemed prospectusThis section says that when a company allots or agrees to allot any securities of the company for sale to the public, any document by which the offer for sale to the public is made should be deemed to be a prospectus issued by the company; and all enactments and rules of law as to the contents of prospectus and as to liability in respect of mis- statements, in and omissions from, prospectus, or otherwise relating to prospectus, shall apply.According to this section, it is understood that the securities have been offered to the public if |
930 | This section says that when a company allots or agrees to allot any securities of the company for sale to the public, any document by which the offer for sale to the public is made should be deemed to be a prospectus issued by the company; and all enactments and rules of law as to the contents of prospectus and as to liability in respect of mis- statements, in and omissions from, prospectus, or otherwise relating to prospectus, shall apply.According to this section, it is understood that the securities have been offered to the public ifthat an offer of the securities or of any of them for sale to the public was made within six months after the allotment or agreement to allot; orthat at the date when the offer was made, the whole consideration to be received by the company in respect of the securities had not been received by it. |
931 | According to this section, it is understood that the securities have been offered to the public ifthat an offer of the securities or of any of them for sale to the public was made within six months after the allotment or agreement to allot; orthat at the date when the offer was made, the whole consideration to be received by the company in respect of the securities had not been received by it.This section also says that the offer document or prospectus needs to be signed on behalf of the company or firm by two directors of the company or by not less than one-half of the partners in the firm, as the case may be.Requirement in Deemed Prospectus (Section 25):Section 26 as applied by Section 25 shall have effect as if —it required a prospectus to state in addition to the matters required by section 26 to be stated in a prospectus—the net amount of the consideration received or to be received by the company in respect of the securities to which the offer relates; and |
932 | it required a prospectus to state in addition to the matters required by section 26 to be stated in a prospectus—the net amount of the consideration received or to be received by the company in respect of the securities to which the offer relates; andthe time and place at which the contract where under the said securities have been or are to be allotted may be inspected; the persons making the offer were persons named in a prospectus as directors of a company.Prospectus Section 26:Definition of Prospectus:Clause (70) of Section 2 of the Companies Act, 2013 defines “prospectus” means any document described or issued as a prospectus and includes a red herring prospectus referred to in section 32 or shelf prospectus referred to in section 31 or any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate.Matters to be stated in Prospectus (Section 26): |
933 | Definition of Prospectus:Clause (70) of Section 2 of the Companies Act, 2013 defines “prospectus” means any document described or issued as a prospectus and includes a red herring prospectus referred to in section 32 or shelf prospectus referred to in section 31 or any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate.Matters to be stated in Prospectus (Section 26):A prospectus may be issued by or behalf of a public company either with reference to its formation or subsequently, or by or on behalf of any person who is or has been engaged or interested in the formation of a public company.Information in Prospectus:Every prospectus shall state following information:-names and addresses of the registered office of the company, company secretary, Chief Financial Officer, auditors, legal advisers, bankers, trustees, if any, underwriters and such other persons as may be prescribed; |
934 | Information in Prospectus:Every prospectus shall state following information:-names and addresses of the registered office of the company, company secretary, Chief Financial Officer, auditors, legal advisers, bankers, trustees, if any, underwriters and such other persons as may be prescribed;dates of the opening and closing of the issue, and declaration about the issue of allotment letters and refunds within the prescribed time;a statement by the Board of Directors about the separate bank account where all monies received out of the issue are to be transferred and disclosure of details of all monies including utilised and unutilised monies out of the previous issue in the prescribed manner;details about underwriting of the issue;consent of the directors, auditors, bankers to the issue, expert’s opinion, if any, and of such other persons, as may be prescribed;the authority for the issue and the details of the resolution passed there for; |
935 | a statement by the Board of Directors about the separate bank account where all monies received out of the issue are to be transferred and disclosure of details of all monies including utilised and unutilised monies out of the previous issue in the prescribed manner;details about underwriting of the issue;consent of the directors, auditors, bankers to the issue, expert’s opinion, if any, and of such other persons, as may be prescribed;the authority for the issue and the details of the resolution passed there for;procedure and time schedule for allotment and issue of securities;capital structure of the company in the prescribed manner;main objects of public offer, terms of the present issue and such other particulars as may be prescribed;main objects and present business of the company and its location, schedule of implementation of the project;particulars relating to—management perception of risk factors specific to theproject;gestation period of the project; |
936 | management perception of risk factors specific to theproject;gestation period of the project;extent of progress made in the project;deadlines for completion of the project; andany litigation or legal action pending or taken by a Government Department or a statutory body during the last five years immediately preceding the year of the issue of prospectus against the promoter of the company;minimum subscription, amount payable by way of premium, issue of shares otherwise than on cash;details of directors including their appointments and remuneration, and such particulars of the nature and extent of their interests in the company as may be prescribed; andDisclosures in such manner as may be prescribed about sources of promoter’s contribution.Reports with Prospectus:Every prospectus shall set out following reports for the purpose of financial information: |
937 | Disclosures in such manner as may be prescribed about sources of promoter’s contribution.Reports with Prospectus:Every prospectus shall set out following reports for the purpose of financial information:Reports by the auditors of the company with respect to its profits and losses and assets and liabilities and such other matters as may be prescribed;Reports relating to profits and losses for each of the five financial years immediately preceding the financial year of the issue of prospectus including such reports of its subsidiaries and in such manner as may be prescribed. Where company has not completed five financial years than such report for all financial years is required. |
938 | Every prospectus shall set out following reports for the purpose of financial information:Reports by the auditors of the company with respect to its profits and losses and assets and liabilities and such other matters as may be prescribed;Reports relating to profits and losses for each of the five financial years immediately preceding the financial year of the issue of prospectus including such reports of its subsidiaries and in such manner as may be prescribed. Where company has not completed five financial years than such report for all financial years is required.Reports made in the prescribed manner by the auditors upon the profits and losses of the business of the company for each of the five financial years immediately preceding issue and assets and liabilities of its business on the last date to which the accounts of the business were made up, being a date not more than one hundred and eighty days before the issue of the prospectus. Where company has not completed five financial years than such report for all financial years is required. |
939 | Every prospectus shall set out following reports for the purpose of financial information:Reports by the auditors of the company with respect to its profits and losses and assets and liabilities and such other matters as may be prescribed;Reports relating to profits and losses for each of the five financial years immediately preceding the financial year of the issue of prospectus including such reports of its subsidiaries and in such manner as may be prescribed. Where company has not completed five financial years than such report for all financial years is required.Reports made in the prescribed manner by the auditors upon the profits and losses of the business of the company for each of the five financial years immediately preceding issue and assets and liabilities of its business on the last date to which the accounts of the business were made up, being a date not more than one hundred and eighty days before the issue of the prospectus. Where company has not completed five financial years than such report for all financial years is required.Reports about the business or transaction to which the proceeds of the securities are to be applied directly or indirectly. |
940 | Reports by the auditors of the company with respect to its profits and losses and assets and liabilities and such other matters as may be prescribed;Reports relating to profits and losses for each of the five financial years immediately preceding the financial year of the issue of prospectus including such reports of its subsidiaries and in such manner as may be prescribed. Where company has not completed five financial years than such report for all financial years is required.Reports made in the prescribed manner by the auditors upon the profits and losses of the business of the company for each of the five financial years immediately preceding issue and assets and liabilities of its business on the last date to which the accounts of the business were made up, being a date not more than one hundred and eighty days before the issue of the prospectus. Where company has not completed five financial years than such report for all financial years is required.Reports about the business or transaction to which the proceeds of the securities are to be applied directly or indirectly. |
941 | Reports relating to profits and losses for each of the five financial years immediately preceding the financial year of the issue of prospectus including such reports of its subsidiaries and in such manner as may be prescribed. Where company has not completed five financial years than such report for all financial years is required.Reports made in the prescribed manner by the auditors upon the profits and losses of the business of the company for each of the five financial years immediately preceding issue and assets and liabilities of its business on the last date to which the accounts of the business were made up, being a date not more than one hundred and eighty days before the issue of the prospectus. Where company has not completed five financial years than such report for all financial years is required.Reports about the business or transaction to which the proceeds of the securities are to be applied directly or indirectly.Declaration of Compliance: |
942 | Reports made in the prescribed manner by the auditors upon the profits and losses of the business of the company for each of the five financial years immediately preceding issue and assets and liabilities of its business on the last date to which the accounts of the business were made up, being a date not more than one hundred and eighty days before the issue of the prospectus. Where company has not completed five financial years than such report for all financial years is required.Reports about the business or transaction to which the proceeds of the securities are to be applied directly or indirectly.Declaration of Compliance:Every prospectus shall make a declaration about the compliance of the provisions of this Act and a statement to the effect that nothing in the prospectus is contrary to the provisions of this Act, the Securities Contracts (Regulation) Act, 1956 and the Securities and Exchange Board of India Act, 1992 and the rules and regulations made there under. |
943 | Declaration of Compliance:Every prospectus shall make a declaration about the compliance of the provisions of this Act and a statement to the effect that nothing in the prospectus is contrary to the provisions of this Act, the Securities Contracts (Regulation) Act, 1956 and the Securities and Exchange Board of India Act, 1992 and the rules and regulations made there under.Other matters in Prospectus:Clause (d) of Sub – section (1) of section 26 give unlimited power to central government to list other matters and set out other reports to be included in a prospectus.Delivery of Prospectus with Registrar:A copy of prospectus shall be delivered to the Registrar for registration signed by every person who is named as a director or proposed director of the company or by his duly authorised attorney on or before the date of its publication and only then it shall be issued by or on behalf of a company or in relation to an intended company.Statement of an Expert: |
944 | Delivery of Prospectus with Registrar:A copy of prospectus shall be delivered to the Registrar for registration signed by every person who is named as a director or proposed director of the company or by his duly authorised attorney on or before the date of its publication and only then it shall be issued by or on behalf of a company or in relation to an intended company.Statement of an Expert:A statement made by an expert shall be included only if expert is or was engaged or interested in the formation or promotion or management of the company and has given his written consent to the issue of the prospectus. Such consent of expert must not be withdrawn by his before the delivery of prospectus to the Registrar for registration and a statement to that effect shall be included in the prospectus.Every prospectus issued shall state that a copy has been delivered to the Registrar and specify attached documents. |
945 | A statement made by an expert shall be included only if expert is or was engaged or interested in the formation or promotion or management of the company and has given his written consent to the issue of the prospectus. Such consent of expert must not be withdrawn by his before the delivery of prospectus to the Registrar for registration and a statement to that effect shall be included in the prospectus.Every prospectus issued shall state that a copy has been delivered to the Registrar and specify attached documents.The registrar shall not register a prospectus all requirements has been complied with and the prospectus is accompanied by the consent in writing of all the person named in the prospectus.Prospectus shall not be valid if it is issued more than ninety days after the date on which a copy thereof delivered to the Registrar.Note: If a prospectus is issued in contravention of the provisions of |
946 | Prospectus shall not be valid if it is issued more than ninety days after the date on which a copy thereof delivered to the Registrar.Note: If a prospectus is issued in contravention of the provisions ofsection 26, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees and every person who is knowingly a party to the issue of such prospectus shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees, or with both.Variation in terms of contract or objects in prospectus (Section 27):A company may vary the terms of a contract refered in the prospectus or object for which the prospectus was issued, only under approval or authority given by way of special resolution. |
947 | Variation in terms of contract or objects in prospectus (Section 27):A company may vary the terms of a contract refered in the prospectus or object for which the prospectus was issued, only under approval or authority given by way of special resolution.The notice of such resolution to shareholders shall also be published in the newspapers (one in English and one in vernacular language) in the city where the registered office of the company is situated. These notices shall clearly indicate justification for such variation.The shareholders who have not agreed to the proposal to vary the terms of contracts or objects referred to in the prospectus, shall be given an exit offer by promoters or controlling shareholders at exit price as determined in accordance with regulation made by the Securities and Exchange Board of India.Section 28- Offer for Sale: |
948 | The shareholders who have not agreed to the proposal to vary the terms of contracts or objects referred to in the prospectus, shall be given an exit offer by promoters or controlling shareholders at exit price as determined in accordance with regulation made by the Securities and Exchange Board of India.Section 28- Offer for Sale:Where certain members of company propose to offer whole or part of their holding of share to public, they may do so in accordance with prescribed procedure. This proposal must be in consultation with the Board of Directors and in accordance with the any law for the time being in force.Any such offer document shall be deemed to be prospectus issued by the company and all law and related to prospectus shall apply to this document.All these members shall collectively authorise the company to take all actions in respect of offer of sale for and on their behalf. They will reimburse the company all expenses incurred by it on that matter. |
949 | Any such offer document shall be deemed to be prospectus issued by the company and all law and related to prospectus shall apply to this document.All these members shall collectively authorise the company to take all actions in respect of offer of sale for and on their behalf. They will reimburse the company all expenses incurred by it on that matter.Securities in De-materialised Form (Section 29):As per this Section, every company making public offer; and such other class or classes of companies as may be prescribed shall issue the securities only in the de-materialised form.When any company issue its securities in de-materialised form, provisions of the Depositories Act, 1996 and regulations made under that Act shall be applicable.There is no bar for any other company to issue its securities in any form. Any other company may convert its securities into de-materialised form.Advertisement of prospectus (Section 30): |
950 | There is no bar for any other company to issue its securities in any form. Any other company may convert its securities into de-materialised form.Advertisement of prospectus (Section 30):When a company issues an advertisement of prospectus, the advertisement shall specify the following:contents of its memorandum;the objects, the liability of members,amount of share capital,name of signatories, andnumber of shares subscribed for by these signatories andits capital structure.Shelf Prospectus (Section 31):Any class of company may file a shelf prospectus with the Registrar of Companies at the stage of first offer of securities.“Shelf prospectus” means a prospectus in respect of which the securities or class of securities included therein are issued for subscription in one or more issues over a certain period without the issue of a further prospectus. |
951 | Any class of company may file a shelf prospectus with the Registrar of Companies at the stage of first offer of securities.“Shelf prospectus” means a prospectus in respect of which the securities or class of securities included therein are issued for subscription in one or more issues over a certain period without the issue of a further prospectus.The shelf prospectus shall indicate that validate period of the shelf prospectus is a period not exceeding one year from the date of first offer of securities under that prospectus. Once, a shelf prospectus has been issued, there will be no requirement of any further prospectus for any subsequent offer of these securities issued during this validityperiod.For any subsequent issue, company shall file an “Information Memorandum”. This information memorandum shall contain all material facts relating tonew charges created; and |
952 | For any subsequent issue, company shall file an “Information Memorandum”. This information memorandum shall contain all material facts relating tonew charges created; andchanges in financial position of the company from first/ previous offer to this second/subsequent offer under this Shelf Prospectus.It may be possible that a company or any other person has received an application and advance payment of subscription before any material changes like new charges or financial position. In these cases, the company or that other person shall intimate these changes to the applicants. If they express a desire to withdraw their application, the company or other person shall refund all the money received as share application money for subscription within fifteen days.When an offer of securities is made on shelf prospectus, the information memorandum together with shelf prospectus shall be deemed to be a prospectus.RED HERRING PROSPECTUS (SECTION 32): |
953 | When an offer of securities is made on shelf prospectus, the information memorandum together with shelf prospectus shall be deemed to be a prospectus.RED HERRING PROSPECTUS (SECTION 32):A company may issue a red herring prospectus before the issue of a prospectus.“Red herring prospectus” means a prospectus which does not include complete particulars of the quantum or price of the securities included therein.The company shall file red herring prospectus with Registrar of companies at least three days before the opening of the subscription list and the offer.A red herring prospectus shall carry the same obligation as are applicable to a prospectus. In case there is any variation between red herring prospectus and a prospectus shall be highlighted as variation in the prospectus.Upon the closing of the offer of securities, the prospectus shall be filedwith the Registrar and the Securities and Exchange Board of India. This prospectus shall statetotal capital raised, |
954 | with the Registrar and the Securities and Exchange Board of India. This prospectus shall statetotal capital raised,whether debt capital or share capital,closing price of the securities andany other details not included in red herring prospectus.Issue of Application Forms and Abridged Prospectus (Section 33):Every application form for the purchase of the securities of a company shall be issued unless the form is accompanied by an “Abridge Prospectus”.There is no need for abridge prospectus in case of:Underwriting Agreement; andPrivate placement.Any person may make a request for a copy of the prospectus before closing of the subscription list and the offer. The company shall furnish a copy to him.Any default in under this section, company shall be liable to a penalty of fifty thousand rupees for each default.Some Penal Provisions under Chapter III:Criminal liability for mis-statement in prospectus (Section 34): Where a prospectus, issued, circulated or distributed: |
955 | Any default in under this section, company shall be liable to a penalty of fifty thousand rupees for each default.Some Penal Provisions under Chapter III:Criminal liability for mis-statement in prospectus (Section 34): Where a prospectus, issued, circulated or distributed:includes any statement which is untrue or misleading in form or context in which it is included; orwhere any inclusion or omission of any matter is likely to mislead;Every person who authorises the issue of such prospectus shall be liable under section 447 i.e. fraud of the Companies Act, 2013.Defences available in this section are:Person proves that statement or omission was immaterial;Person has reasonable ground to believe and did believe that statement was true; orPerson has reasonable ground to believe and did believe that the inclusion or omission was necessary.Civil liability for mis-statements in prospectus (Section 35): |
956 | Person proves that statement or omission was immaterial;Person has reasonable ground to believe and did believe that statement was true; orPerson has reasonable ground to believe and did believe that the inclusion or omission was necessary.Civil liability for mis-statements in prospectus (Section 35):Where a person has subscribed for securities of a company acting upon any misleading statement, inclusion or omission and has sustained any loss or damage as its consequence, the company and every person who –is a director at the time of the issue of prospectus;has named as director or as proposed director with his consent;is a promoter of the company;has authorised the issue of the prospectus; andis an expert; shall be liable to pay compensation to the affected person.This civil liability shall be in addition to the criminal liability under section36. |
957 | is an expert; shall be liable to pay compensation to the affected person.This civil liability shall be in addition to the criminal liability under section36.Where it is proved that a prospectus has been issued with an intent to defraud the applicants for the securities of a company or any other person or for any fraudulent purpose, every person shall be personally responsible, without any limitation of liability, for all or any of the losses or damages that may have been incurred by any person who subscribed to the securities on the basis of such prospectus.Defences under this section are:he has withdrawn his consent or never given his consent;the prospectus was issued without his knowledge or consent and when he become aware, gave a reasonable public notice that prospectus was issued without his knowledge or consent.Punishment for fraudulently inducing persons to invest money (Section 36): |
958 | he has withdrawn his consent or never given his consent;the prospectus was issued without his knowledge or consent and when he become aware, gave a reasonable public notice that prospectus was issued without his knowledge or consent.Punishment for fraudulently inducing persons to invest money (Section 36):Any person who, either knowingly or recklessly makes any statement, promise or forecast which is false, deceptive or misleading, or deliberately conceals any material facts, to induce another person to enter into, or to offer to enter into,—any agreement for, or with a view to, acquiring, disposing of, subscribing for, or underwriting securities; orany agreement, the purpose or the pretended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the value of securities; or |
959 | Any person who, either knowingly or recklessly makes any statement, promise or forecast which is false, deceptive or misleading, or deliberately conceals any material facts, to induce another person to enter into, or to offer to enter into,—any agreement for, or with a view to, acquiring, disposing of, subscribing for, or underwriting securities; orany agreement, the purpose or the pretended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the value of securities; orany agreement for, or with a view to obtaining credit facilities from any bank or financial institution; shall be liable for action under section 447 i.e. fraud of the Companies Act, 2013.Action by affected person (Section 37): |
960 | any agreement for, or with a view to, acquiring, disposing of, subscribing for, or underwriting securities; orany agreement, the purpose or the pretended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the value of securities; orany agreement for, or with a view to obtaining credit facilities from any bank or financial institution; shall be liable for action under section 447 i.e. fraud of the Companies Act, 2013.Action by affected person (Section 37):A suit may be filed or any other action may be taken under section 34 or section 35 or section 36 by any person, group of persons or any association of persons affected by any misleading statement or the inclusion or omission of any matter in the prospectus.Punishment for personation for acquisition etc of Securities (Section 38):Any person who— |
961 | Punishment for personation for acquisition etc of Securities (Section 38):Any person who—makes or abets making of an application in a fictitious name to a company for acquiring, or subscribing for, its securities; ormakes or abets making of multiple applications to a company in different names or in different combinations of his name or surname for acquiring or subscribing for its securities; orotherwise induces directly or indirectly a company to allot, or register any transfer of, securities to him, or to any other person in a fictitious name, shall be liable for action under section 447i.e. fraud of the Companies Act, 2013This provision shall be prominently reproduced in every prospectus issued by a company and in every form of application for securities.Where a person has been convicted under this section, the Court may also order disgorgement of gain, if any, made by, and seizure and disposal of the securities in possession of, such person. |
962 | This provision shall be prominently reproduced in every prospectus issued by a company and in every form of application for securities.Where a person has been convicted under this section, the Court may also order disgorgement of gain, if any, made by, and seizure and disposal of the securities in possession of, such person.The amount received through disgorgement or disposal of securities under subsection (3) shall be credited to the Investor Education and Protection Fund.Allotment of Securities by Company (Section 39):After public offer, any allotment shall be made only if the amount stated in the prospectus as minimum amount. The sum payable on application for the amount so stated as minimum amount has been paid to and received by the company by cheque or other instrument.The amount payable on application on every security shall not be less than five percent of he nominal amount of security or such other percentage or amount as may be specified. |
963 | After public offer, any allotment shall be made only if the amount stated in the prospectus as minimum amount. The sum payable on application for the amount so stated as minimum amount has been paid to and received by the company by cheque or other instrument.The amount payable on application on every security shall not be less than five percent of he nominal amount of security or such other percentage or amount as may be specified.If the stated minimum amount has not been subscribed and the sum payable on application is not received within a period of thirty days from the date of issue of the prospectus, all amount received shall be returned within prescribed time and in prescribed manner.The company shall file with the Registrar of Companies a “Return of Allotment” in prescribed manner. |
964 | If the stated minimum amount has not been subscribed and the sum payable on application is not received within a period of thirty days from the date of issue of the prospectus, all amount received shall be returned within prescribed time and in prescribed manner.The company shall file with the Registrar of Companies a “Return of Allotment” in prescribed manner.In case of any default, the company and its officer who is in default shall be liable to a penalty, for each default, of one thousand rupees for each day during which such default continues or one lakh rupees, whichever is less.Listing of Shares (Section 40):Every company making public offer shall make an application to at least one stock exchange before making the public offer. This is duty of company to obtain permission of stock exchange or stock exchanges for the dealing of securities there. |
965 | Listing of Shares (Section 40):Every company making public offer shall make an application to at least one stock exchange before making the public offer. This is duty of company to obtain permission of stock exchange or stock exchanges for the dealing of securities there.Prospectus for the public offer shall also state the name or names of the stock exchange in which application for dealing of the securities has been made.All money received on application from the public for subscription of the securities shall be kept in a separate bank account in a schedule bank. This money shall not be utilised for any purpose other than –For adjustment against allotment of securities where the permission from the stock exchanges named in prospectus has been received; orFor repayment of money within the time specified by the Securities and Exchange Board, where the company is for any other reason unable to allot securities. |
966 | For adjustment against allotment of securities where the permission from the stock exchanges named in prospectus has been received; orFor repayment of money within the time specified by the Securities and Exchange Board, where the company is for any other reason unable to allot securities.A company may pay commission to any person in connection with the subscription to its securities subject to such conditions as may be prescribed.Any condition which require or bind any applicant for securities to waive compliance with any of the requirement of this section shall be void. |
967 | A company may pay commission to any person in connection with the subscription to its securities subject to such conditions as may be prescribed.Any condition which require or bind any applicant for securities to waive compliance with any of the requirement of this section shall be void.If a default is made in complying with the provisions of this section, the company shall be punishable with a fine which shall not be less than five lakh rupees but which may extend to fifty lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees, or with both.Global Depository Receipt (Section 41):A company may, after passing a special resolution in its general meeting, issue depository receipts in any foreign country in such manner, and subject to such conditions, as may be prescribed. |
968 | Global Depository Receipt (Section 41):A company may, after passing a special resolution in its general meeting, issue depository receipts in any foreign country in such manner, and subject to such conditions, as may be prescribed.Section 42- Private Placement:Private placement provisions under Companies Act, 1956As per the proviso to section 67(3) of the 1956 Act, when a company makes an offer or invitation to subscribe for shares or debentures to 50 or more persons, such offers is treated as made to public.Where an invitation in made by the management of a company to selected persons for subscription or purchase by less than fifty persons receiving the offer or invitation, the shares or debentures and such invitation or offer is not calculated directly or indirectly to be availed of by other persons, such invitation or offer shall not be treated as an offer or invitation to the public.[1]Definition of private placement under Companies Act, 2013: |
969 | Where an invitation in made by the management of a company to selected persons for subscription or purchase by less than fifty persons receiving the offer or invitation, the shares or debentures and such invitation or offer is not calculated directly or indirectly to be availed of by other persons, such invitation or offer shall not be treated as an offer or invitation to the public.[1]Definition of private placement under Companies Act, 2013:Part II of Chapter III of the Act deals exclusively with private placements.Private placement has been defined in explanation II(ii) to section 42 of the Act.“private placement” means any offer of securities or invitation to subscribe securities to a select group of persons by a company (other than by way of public offer) through issue of a private placement offer letter and which satisfies the conditions specified in this section |
970 | Private placement has been defined in explanation II(ii) to section 42 of the Act.“private placement” means any offer of securities or invitation to subscribe securities to a select group of persons by a company (other than by way of public offer) through issue of a private placement offer letter and which satisfies the conditions specified in this sectionIt is to be noted that the provisions for private placement apply to issue of “securities” and not “shares”. The new provisions cover a whole host of instruments such as shares, bonds, debentures and other marketable securities.Section 42(4) provides that any offer or invitation not in compliance with the provisions of the section shall be treated as a public offer and all provisions of the Act, SCRA and SEBI Act shall be required to be complied with in such a case.Offer can be made only to 200 persons in a financial year [Section 42(2) and rule 3.12(2)]Chapter IV of the Companies Act, 2013 |
971 | Offer can be made only to 200 persons in a financial year [Section 42(2) and rule 3.12(2)]Chapter IV of the Companies Act, 2013Chapter IV of the Companies Act, 2013 deals with Share Capital and Debentures:Share Capital-Section 43, 44, 45, 46, 47 and 48Financial treatment related to Share Capital-Section 49, 50, 51, 52, 53, 54 and 55Transfer and transmission of Securities-Section 56, 57, 58, 59and 72Alteration of Share Capital-Section 60, 61, 62, 63, 64 and 65Reduction of Share Capital-Section 66Purchase of own shares and buyback-Section 67, 68,69 and 70Debenture-Section 71Kinds of Share Capital (SECTION 43):The share capital of companies limited by share shall be of two kinds, namely;Equity share capital;Preference share capital.This Section uses the terms “Shall be” and “and” denote that having these two kinds of share capital is a requirement but, according to further reading, a company may have zero equity or preference share capital.Equity Share Capital: |
972 | Preference share capital.This Section uses the terms “Shall be” and “and” denote that having these two kinds of share capital is a requirement but, according to further reading, a company may have zero equity or preference share capital.Equity Share Capital:For this Section, “Equity share capital” means all share capital which is not preference share capital. Equity share capital may be of divided into;Equity share capital With voting right; orEquity share capital with differential voting rights.This differential voting right may have difference related to dividend, voting or otherwise in accordance with rules. The term otherwise brings scope for innovation within the limits of rules. It may be difference related to managing control, power to appoint director, or power to appoint proxy and so on.Preference Share Capital:Preference share capital of the issued share capital of the company which carries or would carry a preference right with respect to – |
973 | Preference Share Capital:Preference share capital of the issued share capital of the company which carries or would carry a preference right with respect to –Payment of dividend, either as a fixed amount or an amount calculated at a fixed rate. Which may be either be free of or subject to income tax; andRepayment of amount of share capital or share capital deemed to be paid up, whether or not, there is preferential right specified in the memorandum or article of the company.This Act does not interfere in rights of preference shareholders who are entitled to participate in the proceeds of winding up before commencement of this Act.Nature of Shares or Debentures (Section 44):The shares or debentures or other interest of any member in a company shall be movable property transferable in the manner provided by the articles of the company.Issue of Sweat Equity Shares (Section 54): |
974 | Nature of Shares or Debentures (Section 44):The shares or debentures or other interest of any member in a company shall be movable property transferable in the manner provided by the articles of the company.Issue of Sweat Equity Shares (Section 54):If the following conditions are fulfilled, a company may issue sweat equity shares of a class of shares already issued –the issue is authorised by a special resolution passed by the company;the resolution specified the number of shares, the current market price, consideration and the class or classed of directors or employees to whom such equity shares are to be issued;not less than one year has, at the date of such issue, elapsed since the date on which the company had commenced business; andListed company shall follow regulation made by SEBI, and other companies shall follow rules by MCA. |
975 | the issue is authorised by a special resolution passed by the company;the resolution specified the number of shares, the current market price, consideration and the class or classed of directors or employees to whom such equity shares are to be issued;not less than one year has, at the date of such issue, elapsed since the date on which the company had commenced business; andListed company shall follow regulation made by SEBI, and other companies shall follow rules by MCA.The rights, limitations, restrictions and provisions as are for the time being applicable to equity shares shall be applicable to the sweat equity shares issued under this section and the holders of such shares shall rank pari passu with other equity shareholders.Issue and Redemption of Preference Shares (Section 55):No company limited by shares shall issue any preference shares which are irredeemable. |
976 | Issue and Redemption of Preference Shares (Section 55):No company limited by shares shall issue any preference shares which are irredeemable.All these preference shares shall be redeemable within a period not exceeding twenty years from the date of their issue subject to such conditions as may be prescribed.However a company may issue preference shares for a period exceeding twenty years for infrastructure projects subject to the redemption of such percentage of shares as may be prescribed on an annual basis at the option of such preferential shareholders.The following are the conditions for issue of preference shares –Preference shares shall be redeemed only out of the profit of the company which would otherwise be available for dividend or out of the proceeds of a fresh issue of shares made for the purpose of such redemption;Only fully paid preference shares shall be redeemed; |
977 | The following are the conditions for issue of preference shares –Preference shares shall be redeemed only out of the profit of the company which would otherwise be available for dividend or out of the proceeds of a fresh issue of shares made for the purpose of such redemption;Only fully paid preference shares shall be redeemed;Where such shares are proposed to be redeemed out of the profits of the company, there shall out of such profits be transferred a sum equal to the nominal amount of shares to be redeemed to a reserve, called Capital Redemption Reserve Account. The provision of this Act relating to reduction of shares capital of a company shall apply as if the Capital Redemption Reserve Account were paid – up share capital of the company. subject to the provisions of this section. |
978 | Preference shares shall be redeemed only out of the profit of the company which would otherwise be available for dividend or out of the proceeds of a fresh issue of shares made for the purpose of such redemption;Only fully paid preference shares shall be redeemed;Where such shares are proposed to be redeemed out of the profits of the company, there shall out of such profits be transferred a sum equal to the nominal amount of shares to be redeemed to a reserve, called Capital Redemption Reserve Account. The provision of this Act relating to reduction of shares capital of a company shall apply as if the Capital Redemption Reserve Account were paid – up share capital of the company. subject to the provisions of this section.In case of such class of companies as may be prescribed and whose financial statement comply with the accounting standard, the premium, if any payable on redemption shall be provided for out of the profits of the company, before the shares are redeemed. The premium if any payable on redemption of any preference shares issued on or before the commencement of this Act by any such company shall be provided for out of the profits of the company or pout of the company’s securities premium account before such shares are redeemed. In case of other companies the premium, if any, payable on redemption shall be provided for out of the profits of the company or put of the company’s securities premium account, before such shares are redeemed. |
979 | Preference shares shall be redeemed only out of the profit of the company which would otherwise be available for dividend or out of the proceeds of a fresh issue of shares made for the purpose of such redemption;Only fully paid preference shares shall be redeemed;Where such shares are proposed to be redeemed out of the profits of the company, there shall out of such profits be transferred a sum equal to the nominal amount of shares to be redeemed to a reserve, called Capital Redemption Reserve Account. The provision of this Act relating to reduction of shares capital of a company shall apply as if the Capital Redemption Reserve Account were paid – up share capital of the company. subject to the provisions of this section.In case of such class of companies as may be prescribed and whose financial statement comply with the accounting standard, the premium, if any payable on redemption shall be provided for out of the profits of the company, before the shares are redeemed. The premium if any payable on redemption of any preference shares issued on or before the commencement of this Act by any such company shall be provided for out of the profits of the company or pout of the company’s securities premium account before such shares are redeemed. In case of other companies the premium, if any, payable on redemption shall be provided for out of the profits of the company or put of the company’s securities premium account, before such shares are redeemed.Where a company is not in a position to redeem any preference share or to pay dividend, if any; it may issue further redeemable preference shares equal to the amount due including dividend thereon, in respect of the unredeemed preference shares and on issue of such further redeemed preference shares, the unredeemed preference shares shall be deemed to have redeemed. This means, preference shares may be redeemed by issuing further preference shares. The conditions to be fulfilled are – |
980 | Only fully paid preference shares shall be redeemed;Where such shares are proposed to be redeemed out of the profits of the company, there shall out of such profits be transferred a sum equal to the nominal amount of shares to be redeemed to a reserve, called Capital Redemption Reserve Account. The provision of this Act relating to reduction of shares capital of a company shall apply as if the Capital Redemption Reserve Account were paid – up share capital of the company. subject to the provisions of this section.In case of such class of companies as may be prescribed and whose financial statement comply with the accounting standard, the premium, if any payable on redemption shall be provided for out of the profits of the company, before the shares are redeemed. The premium if any payable on redemption of any preference shares issued on or before the commencement of this Act by any such company shall be provided for out of the profits of the company or pout of the company’s securities premium account before such shares are redeemed. In case of other companies the premium, if any, payable on redemption shall be provided for out of the profits of the company or put of the company’s securities premium account, before such shares are redeemed.Where a company is not in a position to redeem any preference share or to pay dividend, if any; it may issue further redeemable preference shares equal to the amount due including dividend thereon, in respect of the unredeemed preference shares and on issue of such further redeemed preference shares, the unredeemed preference shares shall be deemed to have redeemed. This means, preference shares may be redeemed by issuing further preference shares. The conditions to be fulfilled are – |
981 | Where such shares are proposed to be redeemed out of the profits of the company, there shall out of such profits be transferred a sum equal to the nominal amount of shares to be redeemed to a reserve, called Capital Redemption Reserve Account. The provision of this Act relating to reduction of shares capital of a company shall apply as if the Capital Redemption Reserve Account were paid – up share capital of the company. subject to the provisions of this section.In case of such class of companies as may be prescribed and whose financial statement comply with the accounting standard, the premium, if any payable on redemption shall be provided for out of the profits of the company, before the shares are redeemed. The premium if any payable on redemption of any preference shares issued on or before the commencement of this Act by any such company shall be provided for out of the profits of the company or pout of the company’s securities premium account before such shares are redeemed. In case of other companies the premium, if any, payable on redemption shall be provided for out of the profits of the company or put of the company’s securities premium account, before such shares are redeemed.Where a company is not in a position to redeem any preference share or to pay dividend, if any; it may issue further redeemable preference shares equal to the amount due including dividend thereon, in respect of the unredeemed preference shares and on issue of such further redeemed preference shares, the unredeemed preference shares shall be deemed to have redeemed. This means, preference shares may be redeemed by issuing further preference shares. The conditions to be fulfilled are –Consent of the holders of three – fourths in value of such preference shares, and |
982 | In case of such class of companies as may be prescribed and whose financial statement comply with the accounting standard, the premium, if any payable on redemption shall be provided for out of the profits of the company, before the shares are redeemed. The premium if any payable on redemption of any preference shares issued on or before the commencement of this Act by any such company shall be provided for out of the profits of the company or pout of the company’s securities premium account before such shares are redeemed. In case of other companies the premium, if any, payable on redemption shall be provided for out of the profits of the company or put of the company’s securities premium account, before such shares are redeemed.Where a company is not in a position to redeem any preference share or to pay dividend, if any; it may issue further redeemable preference shares equal to the amount due including dividend thereon, in respect of the unredeemed preference shares and on issue of such further redeemed preference shares, the unredeemed preference shares shall be deemed to have redeemed. This means, preference shares may be redeemed by issuing further preference shares. The conditions to be fulfilled are –Consent of the holders of three – fourths in value of such preference shares, andWith the approval of the Tribunal on petition made in this behalf. |
983 | Where a company is not in a position to redeem any preference share or to pay dividend, if any; it may issue further redeemable preference shares equal to the amount due including dividend thereon, in respect of the unredeemed preference shares and on issue of such further redeemed preference shares, the unredeemed preference shares shall be deemed to have redeemed. This means, preference shares may be redeemed by issuing further preference shares. The conditions to be fulfilled are –Consent of the holders of three – fourths in value of such preference shares, andWith the approval of the Tribunal on petition made in this behalf.The Tribunal shall, while giving approval under this sub-section, order the redemption forthwith of preference shares held by such persons who have not consented to the issue of further redeemable preference sharesThis further issue shall not be deemed to be an increase or a reduction in the share capital of the company. |
984 | The Tribunal shall, while giving approval under this sub-section, order the redemption forthwith of preference shares held by such persons who have not consented to the issue of further redeemable preference sharesThis further issue shall not be deemed to be an increase or a reduction in the share capital of the company.The capital redemption reserve account may, notwithstanding anything in this section, be applied by the company, in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares.One of the most essential characteristics of forming a company is that the shares are freely transferable subject to certain conditions specified by the Companies Act, 2013:Transfer and Transmission of Securities (Section 56): |
985 | One of the most essential characteristics of forming a company is that the shares are freely transferable subject to certain conditions specified by the Companies Act, 2013:Transfer and Transmission of Securities (Section 56):A company shall register a transfer of securities or interest of members only when such a proper instrument of transfer; duly stamped, dated and executed by or on behalf of the transferor and transferee and specifying the name, address and occupation has been delivered to the company by either party within a period of sixty days from date of execution, along with the certificate of security or the letter of allotment of securities.Power of Company to alter its Share Capital (Section 61):A limited company having a share capital may, if so authorised by its articles, alter its memorandum in its general meeting to—increase its authorised share capital by such amount as it thinks expedient; or |
986 | Power of Company to alter its Share Capital (Section 61):A limited company having a share capital may, if so authorised by its articles, alter its memorandum in its general meeting to—increase its authorised share capital by such amount as it thinks expedient; orconsolidate and divide all or any of its share capital into shares of a larger amount than its existing shares. No consolidation and division which results in changes in the voting percentage of shareholders shall take effect unless it is approved by the Tribunal.convert all or any of its fully paid-up shares into stock, and reconvert that stock into fully paid-up shares of any denomination;sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum, so, however, that in the sub-division the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived; |
987 | consolidate and divide all or any of its share capital into shares of a larger amount than its existing shares. No consolidation and division which results in changes in the voting percentage of shareholders shall take effect unless it is approved by the Tribunal.convert all or any of its fully paid-up shares into stock, and reconvert that stock into fully paid-up shares of any denomination;sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum, so, however, that in the sub-division the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived;cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled. |
988 | convert all or any of its fully paid-up shares into stock, and reconvert that stock into fully paid-up shares of any denomination;sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum, so, however, that in the sub-division the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived;cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled.Cancellation of these shares shall not be deemed to be a reduction of share capital.Further Issues of Shares (Section 62):Where a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares shall be offered – |
989 | Further Issues of Shares (Section 62):Where a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares shall be offered –to person who at the date of the offer are holders of equity shares of the company in proportion to the paid – up shares capital on those shares, by sending a letter of offer subject to following conditions, namely:-the offer shall be made by notice specifying the number of shares offered and limiting a time not less than fifteen days and not exceeding thirty days from the date of the offer within which the offer, if not accepted shall be deemed to have been declined;unless the article of the company otherwise provide, the offer shall be deemed to including a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person and the notice shall contain a statement of this right; |
990 | to person who at the date of the offer are holders of equity shares of the company in proportion to the paid – up shares capital on those shares, by sending a letter of offer subject to following conditions, namely:-the offer shall be made by notice specifying the number of shares offered and limiting a time not less than fifteen days and not exceeding thirty days from the date of the offer within which the offer, if not accepted shall be deemed to have been declined;unless the article of the company otherwise provide, the offer shall be deemed to including a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person and the notice shall contain a statement of this right;after the expiry of the time specified in the notice or receipt of earlier intimation from the person to whom the notice is given that he declines to accept the shares offered, the Board of Directors may dispose of them in such manner which is not dis – advantageous to the shareholders and the company; |
991 | to person who at the date of the offer are holders of equity shares of the company in proportion to the paid – up shares capital on those shares, by sending a letter of offer subject to following conditions, namely:-the offer shall be made by notice specifying the number of shares offered and limiting a time not less than fifteen days and not exceeding thirty days from the date of the offer within which the offer, if not accepted shall be deemed to have been declined;unless the article of the company otherwise provide, the offer shall be deemed to including a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person and the notice shall contain a statement of this right;after the expiry of the time specified in the notice or receipt of earlier intimation from the person to whom the notice is given that he declines to accept the shares offered, the Board of Directors may dispose of them in such manner which is not dis – advantageous to the shareholders and the company;to employees under a scheme of employees’ stock option to special resolution passed by company and subject to such conditions as may be prescribed; or |
992 | the offer shall be made by notice specifying the number of shares offered and limiting a time not less than fifteen days and not exceeding thirty days from the date of the offer within which the offer, if not accepted shall be deemed to have been declined;unless the article of the company otherwise provide, the offer shall be deemed to including a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person and the notice shall contain a statement of this right;after the expiry of the time specified in the notice or receipt of earlier intimation from the person to whom the notice is given that he declines to accept the shares offered, the Board of Directors may dispose of them in such manner which is not dis – advantageous to the shareholders and the company;to employees under a scheme of employees’ stock option to special resolution passed by company and subject to such conditions as may be prescribed; orto any person, if it is authorised by a special resolution, either for cash or for a consideration other than cash, if the price of such shares is determined by the valuation report of a registered valuer. |
993 | unless the article of the company otherwise provide, the offer shall be deemed to including a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person and the notice shall contain a statement of this right;after the expiry of the time specified in the notice or receipt of earlier intimation from the person to whom the notice is given that he declines to accept the shares offered, the Board of Directors may dispose of them in such manner which is not dis – advantageous to the shareholders and the company;to employees under a scheme of employees’ stock option to special resolution passed by company and subject to such conditions as may be prescribed; orto any person, if it is authorised by a special resolution, either for cash or for a consideration other than cash, if the price of such shares is determined by the valuation report of a registered valuer.The notice of letter of offer shall be despatched through registered post or speed post or electronic mode to all the existing shareholders at |
994 | after the expiry of the time specified in the notice or receipt of earlier intimation from the person to whom the notice is given that he declines to accept the shares offered, the Board of Directors may dispose of them in such manner which is not dis – advantageous to the shareholders and the company;to employees under a scheme of employees’ stock option to special resolution passed by company and subject to such conditions as may be prescribed; orto any person, if it is authorised by a special resolution, either for cash or for a consideration other than cash, if the price of such shares is determined by the valuation report of a registered valuer.The notice of letter of offer shall be despatched through registered post or speed post or electronic mode to all the existing shareholders atleast three days before opening of the issue. |
995 | The notice of letter of offer shall be despatched through registered post or speed post or electronic mode to all the existing shareholders atleast three days before opening of the issue.These conditions shall not apply to the increase of the subscribed capital of a company caused by the exercise of an option as a term attached to the debentures issued or loan raised by the company to convert such debentures or loan into share in the company. The terms of issue of such debentures or loan containing such an option to convert have been approved before the issue of such debentures or raising of loan by a special resolution passed by the company in general meeting. |
996 | least three days before opening of the issue.These conditions shall not apply to the increase of the subscribed capital of a company caused by the exercise of an option as a term attached to the debentures issued or loan raised by the company to convert such debentures or loan into share in the company. The terms of issue of such debentures or loan containing such an option to convert have been approved before the issue of such debentures or raising of loan by a special resolution passed by the company in general meeting.Where any debentures have been issued, or loan has been obtained from any Government by a company, and if that Government considers it necessary in the public interest so to do, it may, by order, direct that such debentures or loans or any part thereof shall be converted into shares in the company on such terms and conditions as appear to the Government to be reasonable in the circumstances of the case even if terms of the issue of such debentures or the raising of such loans do not include a term for providing for an option for such conversion. |
997 | These conditions shall not apply to the increase of the subscribed capital of a company caused by the exercise of an option as a term attached to the debentures issued or loan raised by the company to convert such debentures or loan into share in the company. The terms of issue of such debentures or loan containing such an option to convert have been approved before the issue of such debentures or raising of loan by a special resolution passed by the company in general meeting.Where any debentures have been issued, or loan has been obtained from any Government by a company, and if that Government considers it necessary in the public interest so to do, it may, by order, direct that such debentures or loans or any part thereof shall be converted into shares in the company on such terms and conditions as appear to the Government to be reasonable in the circumstances of the case even if terms of the issue of such debentures or the raising of such loans do not include a term for providing for an option for such conversion. |
998 | These conditions shall not apply to the increase of the subscribed capital of a company caused by the exercise of an option as a term attached to the debentures issued or loan raised by the company to convert such debentures or loan into share in the company. The terms of issue of such debentures or loan containing such an option to convert have been approved before the issue of such debentures or raising of loan by a special resolution passed by the company in general meeting.Where any debentures have been issued, or loan has been obtained from any Government by a company, and if that Government considers it necessary in the public interest so to do, it may, by order, direct that such debentures or loans or any part thereof shall be converted into shares in the company on such terms and conditions as appear to the Government to be reasonable in the circumstances of the case even if terms of the issue of such debentures or the raising of such loans do not include a term for providing for an option for such conversion.In determining the terms and conditions of conversion, the Government shall have due regard to the financial position of the company, the terms of issue of debentures or loans, as the case may be, the rate of interest payable on such debentures or loans and such other matters as it may consider necessary. |
999 | Where any debentures have been issued, or loan has been obtained from any Government by a company, and if that Government considers it necessary in the public interest so to do, it may, by order, direct that such debentures or loans or any part thereof shall be converted into shares in the company on such terms and conditions as appear to the Government to be reasonable in the circumstances of the case even if terms of the issue of such debentures or the raising of such loans do not include a term for providing for an option for such conversion.In determining the terms and conditions of conversion, the Government shall have due regard to the financial position of the company, the terms of issue of debentures or loans, as the case may be, the rate of interest payable on such debentures or loans and such other matters as it may consider necessary. |
1,000 | Where any debentures have been issued, or loan has been obtained from any Government by a company, and if that Government considers it necessary in the public interest so to do, it may, by order, direct that such debentures or loans or any part thereof shall be converted into shares in the company on such terms and conditions as appear to the Government to be reasonable in the circumstances of the case even if terms of the issue of such debentures or the raising of such loans do not include a term for providing for an option for such conversion.In determining the terms and conditions of conversion, the Government shall have due regard to the financial position of the company, the terms of issue of debentures or loans, as the case may be, the rate of interest payable on such debentures or loans and such other matters as it may consider necessary.Where the terms and conditions of such conversion are not acceptable to the company, it may, within sixty days from the date of communication of such order, appeal to the Tribunal which shall after hearing the company and the Government pass such order as it deems fit. |
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