Prospectus, Allotment of securities & Private Placement under Cos Act 2013

Prospectus, allotment of securities & Private Placement under the Companies Act 2013

Chapters III & IV

Sections 23 to42

-----------------------------------------------------------------

Sec 24: Power of SEBI to regulate issue and transfer of securities etc....

SEBI shall make regulation and administer the following activitiesof the listed companies / those companies who are intending to get their securities listed on the stock exchange:

a.    Issue and transfer of securities &

b.    Non payment of dividend

Sec 25: Document containing offer of securities for sale is deemed to be prospectus:

When a company allots securities to the public based on an offer that has been made, then,any document through which such an offer is made is considered to be a prospectus and it has to fulfil all the requirements of a prospectus.

-          Securities to be offered for sale to the public

o   Within 6 months after the allotment or agreement to allot or

o   At the date when the allotment was made andthe whole of the consideration was received.

In order to give effect to sec 26 the prospectus has to contain the following:

o   Net amount of consideration received or to be received and

o   The time and place of inspecting the allotments made

o   The names of the persons making the allotment

o   The prospectus has to be signed by 

·               2 directors in case of directors

·               Firm – ½ of the partners in case of firm

Sec 26: Information to be stated in the Prospectus:

Prospectus issued by any person on behalf of the company who is/ has been engaged in the formation of the company shall state the following information in the prospectus.

-          Prospectus to contain the objective of the offer, the main object of the company.

-          Name and address of the registered office of the company, CFO, Auditors, legal advisors and such other persons as may be prescribed and their consent and interest on issue of prospectus.

-          The date of opening and closing of the issue (time schedule for the allotment)

-          A declaration about the issue of allotment letters and refunds

-          A statement by the board of directors on the separate bank account that would be opened to deposit the money received on application and the details of their utilization and un-utilization.

-          Details on minimum subscription and underwriting of the shares if any

-          Information on management perception, risk factors, gestation period of the project, deadlines for completion of the project, progress details

-          Any litigation or legal action pending during the last 5 years immediately preceding the year of issue of prospectus.

-          Financial information for the last 5 years. If 5 years has not been completed by the company then information till the last date before the issue of prospectus.

-          A declaration about the compliance is to be given

-          Before issuing prospectus the same has to be registered with the ROC in the prescribed manner. (ie.) along with the signatures and a written consent as the case may be.

-          The prospectus is valid for a period of 90 days after the date on which a copy thereof is delivered to the registrar.

Sec 27: Variation in terms of contract or objects in prospectus:

-          The terms of the contract/ prospectus can be modified by

§  Holding a general meeting and

§  Passing a special resolution

o   The modified notice to be published in the newspapers (English and vernacular lang. in the place where the registered office is situated).

Note: money raised through prospectus can not be used for buying trading or dealing in equity shares of other listed companies.

Q: Does it mean you can use it for dealing in securities other than equity shares?

o   Exit option is to be given to the dissenting shareholders. (SEBI regulations shall be applicable).

  

Sec 28: Offer of sale of shares by certain members of company

When certain members of the company make an offer for issue of securities onbehalf of the company to the public then such an offer is treated to be a prospectus as allotment is being made on such offer.

Prospectus issued in such manner to contain all the information as required under law.

Sec 29: Public offer of securities to be in DEMAT form:

-          Every company making public offer and

-          The promoter of every public company making a public offer of any securities to hold such securities in dematerialised form only.

-          Such other class of companies as may be prescribed.

Sec 30: Advertisement of prospectus:

The prospectus shall be advertised along with the following:

-          Object of the company given in the memorandum of the company

-          Liability of members

-          Amount of share capital of the company

-          Names of signatories of the Memorandum and the number of shares subscribed

Sec 31: Shelf Prospectus:

-          Shelf prospectus along with the Information Memorandum is to be filed with the registrar at the stage of the first offer of securities

-          It shall be valid for a period of 1 year from the date of first offer

-          No further prospectus is required to be issued if further offer is made during the validity period.

Sec 32: Red Herring prospectus (RHP):

-          Red herring prospectus may be issued prior to the issue of prospectus.

-          RHP shall be filed with the Registrar atleast 3 days prior to the opening of the subscription list and the offer

-          In case of any variations in the RHP and the prospectus the same shall be highlighted.

-          On the closure of the offer the prospectus stating the details of the capital raised, closing price, and other information that was not available on the RHP shall be filed with the Registrar and SEBI.

Sec 33: Issue of application forms for securities:

The application form for purchase of securities shall be accompanied by an abridged prospectus containing the salient features of the Memorandum.

However it is not required if the application was issued:

o   To enter into an underwriting agreement or

o   In relation to those securities that were not offered to the public

Sec 34, 35 and 36: Criminal& civil liability on the company:

Every person making the offer shall be liable in case any un-true or misleading statements are given in the prospectus

If any person has sustained any loss or damage due to any untrue or misleading statements, then the company and every officer in default shall be liable to pay compensation as the case may be.

However, if the concerned personproves that he is not guilty then he shall not be liable.

-          Fraudulently inducing persons to invest money.

Sec 38: punishment to such persons who acquires or makes an application to acquire shares illegally:

-          Any person who:

o   Makes an application to the company in a fictitious name

o   Makes multiple applications in different names

o   Directly or indirectly induces the company to allot securities in fictitious names

Punishment:

Shall be punishable by the court and the court may order disgorgement of gain, if any and to seizure and disposal of the securities in his possession.

Such recovered fund shall be transferred to Investor Education and Protection Fund.

Sec 39: Allotment of Securities of Company:

-          The company shall allot securities on obtaining the minimum subscription amount statement in the prospectus or 5% of the nominal amount of the securities or such other sum as may be prescribed by SEBI.

-          The return of allotment shall be filed with the ROC on allotment.

-          If the minimum subscription amount is not received within 30 days from the date of issue of prospectus or such other date then the amount received shall be refunded.

Sec 40: Securities to be dealt with stock Exchanges:

-          The prospectus to contain the details of the stock exchange where the securities are going to be listed.

-          The amount received on application shall be deposited in a separate bank account and shall be used

o   for adjusting against the allotment of securities or

o   for repayment of money to the applicants

Sec 41: Global Depository Receipt:

-          A company canissue GDR in any foreign country after fulfilling the following criteria.

o   Hold General meeting &

o   Pass Special Resolution

Private Placement

Sec 42: Offer or invitation for subscription of securities on private placement:

-          The private placement offer letter or invitation can not be issued to more than 50 people or such higher number as may be prescribed in one financial year.

o   Exemption: Qualified Institutional Buyers and Employees of the company (ESOP)

Note: The offer shall be made to only such persons whose names are recorded by the company prior to the invitation to subscribe.

No offer shall be made to the public through any media, advertisement, or through any distribution channels.

The complete information of the offer shall be filed with the Registrar within 30 days from the date of circulation of the respective private placement offer letter.

-          No fresh offer letter can be issued until the process of the earlier issue is completed.

-          In case of any non – compliance of the law then the same shall be treated as public offer and all the criteria and laws applicable to a public offer shall be attracted.

-          The subscription money can be collected only through cheque, DD or through any other banking channel BUT NOT BY CASH.

-          Allotment shall be made within 60 days from the date of receipt of the money and return of allotment shall be filed with the ROC within 30 days of allotment.

-          In case of non-allotment of securities then the money received on application shall be refunded within 15 days and in case of any delay in refunding within the said period then 12% interest shall be payable.

Sanka Indrani, Company Secretary

Achuthan R, Company Secretary

Various Limits under Companies Act 2013

Limits under Companies Act 2013

CS. Mohan Kumar, Company Secretary, Chennai 

Companies Act 2013 has prescribed various limits for each of the Section. In this article, we have tried to compile most of the "Limits" mentioned under the Companies Act 2013.

In case if this article misses out any limit , you may kindly write to  - needamohan@gmail.com and I shall be much obliged & add it in this article.

Particulars	Provision
Annual return. Sec. 92 Certification by PCS is mandatory for….	Listed company or a company having paid-up share capital of 10 crore or more  or  turnover of 50  crore or more, shall be certified by a PCS
Women Directors – Existing companies to comply within 1 year from commencement of the Act. (Listed – 1st Oct)	1.Every Listed Company 2. Every public limited company having        i. Paid up share capital of 100 crore        ii. Turnover of 300 Crore or more
Independent Directors – Sec. 149 (4)	Min. 2 Ind. Director for all Public companies  having i)                paid up share capital of 10 crore rupees or more ii)               turnover of 100 crore rupees or more iii)             outstanding loans, debentures, deposits , exceeding 50 crores.
Vigil Mechanism is mandatory for… Sec 177(9)	a)      Listed Company b)      Companies which accept deposits from the public c)       Companies which have borrowed money from banks and public financial  institutions in excess of 50 crore rupees
OPC  to convert itself into a private co/ Small Company	Where paid up share capital of OPC exceeds 50 lakh or average annual turnover during the relevant period exceeds 2 crore. (Same limit for Small co definition also- “ Not to exceed these limits”)
Companies to have KMP- Sec. 203	1.Every Listed Company 2. Every public ltd co having Paid up share capital of 10 crore or more
Secretarial audit report Sec. 204	Listed Co & Public company having paid-up share capital of  50 crore or more  or Public company having a turnover of 250 crore or more
CSR applicability Sec. 135	Every Co having                       i)  Networth of 500 crore or more   or                                           ii) Turnover of 1000 crore or more   or                     iii)     Net profit of 5 crore or more
Audit Committee & Nomination and Remuneration Committee must	i)  All listed Companies ii) All public companies with a paid up capital of 10 crore or more; iii) All public companies having turnover of 100 crore or more; iv) All public companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding 50  crore
Annual performance evaluation of Board must…	1.Every Listed Company 2. Every public limited company having  Paid up capital of 25 crore
Companies required to appoint internal auditor (Sec.138) Existing Companies to comply within 6 months from 1.4.2014	(a) every listed company; (b) every unlisted Public company having- (i)                  paid up share capital of 50 crore or more (ii)                turnover of 200  crore or more iii)                 outstanding loans /borrowings exceeding 100 crore or more iv)                  outstanding deposits of 25 crore or more (c) every private company having- (i) turnover of 200 crore rupees or more or (ii) outstanding loans /borrowings exceeding 100 crore or more
Companies which need to rotate auditors	Compulsory rotation:  All Listed Companies Fully excluded:  OPC... As regards Public & Private Companies, following Companies alone need to compulsorily rotate auditors .... (a) all unlisted public companies having paid up share capital of rupees ten crore or more; (b) all private limited companies having paid up share capital of rupees twenty crore or more; (c) all companies having paid up share capital of below threshold limit mentioned in (a) and (b) above, but having public borrowings from financial institutions, banks or public deposits of rupees fifty crores or more.

FAQ on e-voting

FAQ on e-voting:

CS. Kutralanathan, Practising Company Secretary

Q1. What is e-voting?

As per rule 20 of Companies (Management and Administration) Rules, 2014, ‘‘voting by electronic means’’ or ‘‘electronic voting system’’ means a ‘secured system’ based process of display of electronic ballots, recording of votes of the members and the number of votes polled in favour or against, such that the entire voting exercised by way of electronic means gets registered and counted in an electronic registry in a centralized server with adequate ‘cyber security’;

Q2.To whom e-voting is applicable?

·         Every listed company or

·         a company having not less than one thousand shareholders,

shall provide to its members facility to exercise their right to vote at general meetings by electronic means.

Q3.What  is the  procedure to be followed by the company?

Dispatch  the notice:

            The notices of the meeting shall be sent to all the members, auditors of the company, or 

            directors either –                  

                (a) by registered post or speed post ; or

                (b) through electronic means like registered e-mail id;

                 (c) through courier service

             The company shall mention the internet link of  e-voting platform in  the notice.

             

           Place the notice on the website of the company:

           

            The notice shall also be placed on the website of the company, if any and of the 

             agency forthwith after it is sent to the members.

            

             Mention the business to be transacted:

            

            The notice of the meeting shall clearly mention that the business may be transacted through  electronic voting system and the company is providing facility for voting by electronic means.

Indicate the process and manner of voting:

The notice shall clearly indicate the process and manner for voting by electronic means and the time schedule including the time period during which the votes may be cast and shall also provide the login ID and create a facility for generating password and for keeping security and casting of vote in a secure manner

            

            Publish an advertisement:

The company shall publish an advertisement, not less than five days before  the date of  beginning of the voting period, at least;

                once in a vernacular newspaper in the  principal vernacular language of the district  in  which the registered office of the company is situated, and having a wide circulation in  that district, and

             once in English language in an English newspaper having a wide circulation in  

              that district, about having sent the notice of the meeting and specifying therein, inter   alia,  with the following particulars;

             Particulars of advertisement:

·         statement that the business may be transacted by e- voting;

·         the date of completion of sending of notices;

·         the date and time of commencement of voting through electronic means;

·         the date and time of end of voting through electronic means;

·         the statement that voting shall not be allowed beyond the said date and time;

·         website address of the company and agency, if any, where notice of the meeting is displayed

·         contact details of the person responsible to address the grievances connected with the e-voting.

           

 Q4. What is the duration of e-voting period?

 The e-voting shall remain open for not less than one day and not more than three days.

  In all such cases, such voting period shall be completed three days prior to the date of the  general meeting.

Q5. Whether shareholders holding shares in dematerialized form  only  eligible to caste    vote electronically?

 During the e-voting period, shareholders of the company, holding shares either in physical form or in dematerialized form, as on the record date, may cast their vote electronically.

  

      Q6. Whether change is allowed after casting vote electronically?

No, once the vote on a resolution is cast by the shareholder, he/she shall not be allowed to change it subsequently.

Q7. When the portal will be blocked?
At the end of the voting period, the portal where votes are cast shall forthwith be blocked.

Q8.Who can be appointed as a Scrutinizer?

The Board of directors shall appoint one scrutinizer, who may be;

·         Chartered Accountant in practice,

·         Cost Accountant in practice, or

·         Company Secretary in practice or

·         an advocate,

but not in employment of the company and is a person of repute who, in the opinion of the Board can scrutinize the e-voting process in a fair and transparent manner.

Q9. What are the duties of Scrutinizer?

The Scrutinizer shall;

·         Take assistance of a person who is not in employment of the company and who is well-versed with the e-voting system.

·         available for the purpose of ascertaining the requisite majority

·         within a period of not exceeding three working days from the date of conclusion of e-voting period, unblock the votes in the presence of at least two witnesses not in the employment of the company.

·         make a scrutinizer’s report of the votes cast in favour or against, if any, forthwith to the Chairman.

·         maintain a register either manually or electronically to record the assent or dissent, received, mentioning the particulars of name, address, folio number or client ID of the shareholders, number of shares held by them, nominal value of such shares and whether the shares have differential voting rights.

·         Keep the register and all other papers relating to electronic voting shall remain in the safe custody of the scrutinizer until the chairman considers, approves and signs the minutes and thereafter, the scrutinizer shall return the register and other related papers to the company.

           

Q10. What  are the details  to be placed on the website of the company after e-voting?

The results declared along with the scrutinizer’s report shall be placed on the website of the company and on the website of the agency within two days of passing of the resolution at the relevant general meeting of members.

Q11. Who are providing e-voting services ?

Particulars	Agency-1	Agency-2
Name of the agency	NSDL	CDSL ventures ltd (CVL)
Website Id	www.evoting.nsdl.com	http://www.evotingindia.com/
E-mail Id	Helpdesk@nsdl.co.in ; evoting@nsdl.co.in	helpdesk.evoting@cdslindia.com.

Q12. What are the steps to be taken by the company for e-voting ?

·         The company   through its Register and Transfer Agent (RTA) will set up the e-voting schedule on the website and upload the resolutions on which voting is required and generate the Electronic Voting Sequence Number (EVSN) / Electronic Voting Even Number.(EVEN)

·         The Company will then upload the Register of Members in the specified file format.

·         CDSL/NSDL will generate the password for each shareholder and print the same in a secured manner, which is to be sent to all the shareholders.

·         The company will then communicate the password, EVSN /EVEN and the procedure for e-voting along with the notice of resolution to all the shareholders.

·         After the voting period is over, the e-voting system will provide to the scrutinizer, a report containing the shareholder wise details of vote done, for the records of the company.

Q13. What are the steps to be taken by the shareholders for e-voting?

·         The shareholders can login to the e-voting system using their user –id (i.e,demat account number/folio number),PAN and password.

·         After logging in, demat shareholders will have to confirm their personal details and compulsorily change their password. This password can be used by demat shareholders for voting on resolutions of any other company in which they are eligible to vote.

·         During the voting period, the shareholders can visit the e-voting website and select the relevant   EVSN/EVEN/company for voting.

·         Shareholders can view the detailed resolutions on the website and cast their vote available for voting

Q14. What are the advantages of e-voting to the company/RTA?

·         Reduction in cost and paperwork.

·         No need to store physical ballot papers.

·         Accurate counting of votes.

·         Declaration of results in a very short time.

·         No need to verify the signatures.

Q15. What are the advantages of e-voting to the shareholders?

·         Voting can be done from anywhere.

·         Sufficient time will be available for voting as it can be casted even on the last day.

·         Voting can be done for different companies at the same time.

·         Increase of transparency

·         Increase of participation in the decision making process

Q16. What are the disadvantages of e-voting?

·         There may be a chance of misuse of user Id and Password of the shareholders, if it is fallen into wrong hands.

·         Lack of awareness among the shareholders about the new process of e-voting

·         It has to be ensured that the entire process of e-voting is not subject to any kind of manipulation.

·         Correct Data of Shareholders will have to be provided by the Registrar and Share Transfer Agents or the Company to the agency providing e-voting platform otherwise a shareholder may not get his user Id and password and thus may not be able to cast his vote.

·         No option is available to the shareholders to modify the casted vote.

Q17. When  the provision of e-voting will be applicable to the company?

As section 108 of the Companies Act, 2013 and the corresponding rules are made effective from 1^st April 2014, e-voting facility should be provided by the companies from the current Annual General Meeting. (i.e., AGM for FY 2013-14).

 As per SEBI’s recent circular dated April 17,2014, e-voting will be applicable to the listed companies with effect of 1^st October 2014.(Clause 35 B of Listing Agreement).

Q18. Whether Postal ballot option is also to be provided in addition to e-voting?

Yes.

The company has to provide e-voting facility to its shareholders, in respect of all shareholders' resolutions, to be passed at General Meetings or through postal ballot.

The company shall continue to enable those shareholders, who do not have access to e-voting facility, to send their assent or dissent in writing on a postal ballot as per the provisions of the Companies (Management and Administration) Rules, 2014 or amendments made thereto.        

Q19. Whether e-voting is mandatory for Private companies?

No, for private companies e-voting is not mandatory.

Q20.  What are the changes in the provisions of e-voting?

Companies Act,1956/ SEBI circular	Companies Act,2013 & Rules 2014
There  is no provision for e-voting under Companies Act,1956.	Sec.108 of the Companies Act,2013 and the corresponding rules  deals with the voting through electronic means .
As per  SEBI’s  recent circular dated April 17,2014,  The issuer agrees to provide e-voting facility to its shareholders, in respect of all shareholders' resolutions, to be passed at General Meetings or through postal ballot. Issuer shall continue to enable those shareholders, who do not have access to e-voting facility, to send their assent or dissent in writing on a postal ballot as per the provisions of the Companies (Management and Administration) Rules, 2014 or amendments made thereto	As per  Companies (Management and Administration) Rules, 2014,Every listed company or a company having not less than one thousand shareholders, shall provide to its members facility to exercise their right to vote at general meetings by electronic means.
As per the amended Clause 35B of the listing agreement,  such e-voting facility shall be kept open for  not less than one day and not more than three days  for shareholders to send their assent or dissent.	As per the Rules, the e-voting shall remain open for not less than one day and not more than three days. In all such cases, such voting period shall be completed three days prior to the date of the general meeting.
There is no provision for publishing an advertisement in the newspaper for e-voting under Companies Act,1956.	The company shall publish an advertisement , not less than five days before the date of beginning of the voting period, at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated, and having a wide circulation in that district, and at least once in English language in an English newspaper having a wide circulation in that district, about having sent the notice of the meeting and specifying therein related matters
The Company shall mention the Internet link of such e-voting platform in the notice to their shareholders.	The Company shall place the notice on the website of the company, if any and of the agency forthwith after it is sent to the members.
The revised Clause 35B would be applicable to all listed companies, w.e.f October 1, 2014 and the modalities would be governed by the provisions of Companies (Management and Administration) Rules, 2014	The relevant Section 108, voting by electronic means and corresponding rules are notified and effective from April 01,2014.
The Company shall utilize the service of any one of the agencies providing e-voting platform, which is in compliance with conditions specified by the Ministry of Corporate Affairs, Government of India, from time to time	There is no such provision