Companies Act, 2013 B K SHARMA ACA, FCS, LL.B. B K Sharma & Associates Company Secretaries Former Chairman, NIRC of ICSI bksharma162@yahoo.co.in M-9314517929

Issue of Securities and other matter incidental thereto Under the Companies Act, 2013 & Companies Rules, 2014

Share Capital and Debentures Kinds of Share Capital : Equity Share Capital With voting rights; or With differential rights as Dividend, voting or otherwise Preference Share Capital Others: Shares/ Debentures are Transferable/ Movable Property Every Share in a company has its distinctive Number (Not Required in case of Demat Form) Certificate of Share shall be the prime facie evidence of the title of the person. Shares held in Demat Form - the Record of Depository is Prime Facie evidence of the interest of BO.

Voting Rights Every Member of a Company shall have right to vote. Preference share holders have a right to vote only on resolutions- Which directly affect their rights. For winding up of the company . For re-payment or reduction of equity or preference share Capital. Proportion of voting rights of equity share holders and preference share holders shall be in the proportion of paid up share capital. Preference Shares holder can exercise right to vote on all the Resolutions if Dividend Payable to them are in arrear for a Period of two years or more.

Equity Shares with Differential Voting Rights Conditions to be complied with : AOA authorised the company to do so Authorized by Ordinary Resolution in General Meeting In case of listed company Resolution by Postal Ballot Max. Limit share with differential voting right – 26% Co. Having consistent Track Record of Profits for 3 years Co. has not defaulted in filing FS and Annual Returns Co. has no default in payment of Declared dividend Co. has not defaulted in payment of Pref. Dividend or repayment of Term Loan from Fis/Bank Co. has not been penalised by Court/ Tribunal in Last 3 years under RBI Act, SEBI Act, SCRAct, FEMA

Issue of Securities (S.23) A Public Company may issue securities:- To Public through Prospectus Through Private Placement Through a Right Issue or Bonus issue A Private Company may issue Securities:- By way of Right issue of Bonus issue

Issue of Securities by Private Placement (S. 42) A Company may make Private Placement through issue of Offer Letter in Form No. PAS.4 Offer of Securities or invitation to subscribe securities shall be made to such number of persons not exceeding 200 (excluding Qualified Institutional Buyers &Employees of the Co. under ESOP) in a Financial Year. All Moneys payable towards Subscription –Not by Cash. Allotment shall be made within 60 days from the date of receipt of Application Money. If Co. fails to allot shares within 60 days then Refund of Application Money within 15 days otherwise Interest @ 12% p.a. from expiry of 60th day.

Private Placement (S. 42) Money received on Application shall be kept in a Separate Bank Account . All offers shall be made only to such persons whose names are recorded by the Co. prior to invitation. Such persons shall receive the offer by Name. A Complete record of such offers shall be maintained by the Co. (Form PAS-5) Complete information of such Offer shall be filed with ROC within 30 days of circulation of Offer Letter.

Private Placement (S. 42) Offer Letter shall be accompanies by an Application Form serially numbered and addressed specifically to the Person to whom offer is made. No other Person shall be allowed to apply . Special Resolution has been passed in General Meeting for Further issue of Shares. (Sec. 62) Minimum Subscription amount – Rs. 20,000/- On Allotment of Securities, Company shall file a Return of Allotment with ROC. (Form PAS-3) with details Full Name, address, PAN and E-mail ID of Security Holder.

Private Placement (S. 42) Punishment on Contravention The Company, its promoters and Directors shall be liable for Penalty which may extend to: The amount involved in the Offer or invitation; or Rs. Two Crores Whichever is Higher. The Co. shall refund all the money to Subscribers within 30 days of the order of imposing Penalty.

Prohibition on issue of shares at Discount (S.53) Co. shall not issue shares at Discount Sweat Equity Shares can be issued at Discount If co. issued Shares at Discount shall be void Punishment in case of contraventions: Co. shall be punishable with fine not less than Rs. One Lakh but may extend to Rs. Five Lakh Every Officer in default shall be punishable: With imprisonment which may extend to 6 Months; or With fine not less than Rs. . One Lakh but may extend to Rs. Five Lakh; or With both

Issue of Sweat Equity Shares (S. 54) Issue of shares is authorized by SR Resolution specifies No. of Shares, the Current Market Price, consideration (if any), and class or classes of Directors or Employees to whom such shares are to be issued. One year has elapsed since date of Commencement of Business by Co. In case of Listed Co., the share shall be issued as per Regulations of SEBI In case of unlisted Co. – as per Rules Such shares shall rank pari passu with existing shares

Issue of Sweat Equity Shares (S. 54) In case of Unlisted Company:- Special Resolution to be passed at General Meeting. Explantory Statement shall contain the specific particulars. SR shall be valid for making allotment within 12 Months Co. shall not issue Sweat Eq. Shares more than 15% of existing paid up Equity Capital in a year or Shares of issue value of Rs. FIVE Crores, whichever is higher. Issuance of Sweat Equity Shares shall not exceed 25% of Paid up Equity Capital. Share in Lock-in period of THREE Years Issue Price determined by Registered Valuer

Issue and redemption of Preference Shares (S.55) Company may issue Preference Shares for a Period exceeding Twenty Years but not exceeding Thirty Years for Infrastructure Projects as per Schedule VI. Redemption of such Preference Shares may be done on Annual Basis (minimum 10%) at the option of such Preferential Shareholders from Twenty First Year In case Co. is not in position to redeem any Preference Shares or to pay dividend on such shares:- With the consent of Three-fourth Shareholders; and With approval of the Tribunal Co. may issue further Redeemable Preference Shares.

Transfer & Transmission of Securities (S.56) Instrument of Transfer of Securities held in Physical Form shall be in Form No. SH.4 duly stamped, dated and executed . Form No. SH.4 shall be delivered to Co. within 60 days from date of execution. In case of Transfer of partly paid Shares: Application for Transfer is made by Transferor. the Co. shall give Notice in Form No. SH.5 to Tansferee and Transferee has to give No Objection within Two weeks

Delivery of Certificates of Securities by Co. Within Two Months from the date of Incorporation Within Two Months from the date of Allotment of Shares. Within One month from the date of Receipt by the Company of the Instrument of Transfer (Form SH.4) Within Six Months from the date of Allotment of Debentures. In case of Securities are dealt with in a Depository, the intimation of allotment of securities to Depository immediately on allotment of such securities. Punishment in case of contraventions: Co. shall be punishable with fine not less than Rs. 25,000/- but may extend to Rs. Five Lakh Every Officer in default shall be punishableWith fine not less than Rs. 10,000/- but may extend to Rs. One Lakh; or

Further Issue of Share Capital (S.62) Applicable to Private Limited Cos. Also A Company, proposes to increase its Subscribed Capital by issue of further shares at any time whenever it plans to increase. Such Shares shall be offered :- To existing Equity share holders in proportion to the paid-up share capital. (Right Shares) not lees than 15 days and not exceeding 30 days. To Employees under a Scheme of ESOP, subject to SR To any person, if authorized by SR either for cash or for consideration other than Cash. (on Preferential Basis).

Issue of Employees Stock Option (Rule 12) ESOP Scheme approved by Special Resolution. Employee means:- A permanent employee of the Co. A Director of the Co. (excluding Independent Director) An Employee of a Subsidiary or Holding Co. Does not include:- An Employee who is Promoter or from Promoter Group A Director holds more than 10% of Equity Shares The Company shall maintain a Register of Employee Stock Option in Form No. SH.6