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Capital Raising & Deposits – Companies ACT, 2013

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Presentation on theme: "Capital Raising & Deposits – Companies ACT, 2013"— Presentation transcript:

1 Capital Raising & Deposits – Companies ACT, 2013
WELCOME Capital Raising & Deposits – Companies ACT, 2013 Presentation by CS. Prashant Jain R&A Associates 6th June, 2014

2 Kinds of Share Capital (sec. 43)
Equity Share Capital With Voting Rights With Differential Voting rights Preference Share Capital

3 Voting Rights & Variation Of Rights (sec. 47)
Equity Share holders Right To Vote On Every Resolution Resolutions which Directly affects The Rights Reduction Of Its Equity Or Preference Share Capital * Winding Up Of The Company *Repayment / Preference Shareholders

4 Equity with differential rights (sec. 43)
Authorised by the AOA Ordinary resolution (for listed companies through postal ballot) Shall not exceed 26% of the total post-issue paid up equity share capital at any point of time Should have 3 years track record of distributable profits No default in payment of declared dividend, repayment of matured deposits or redemption of preference shares/debentures, if any including interest there on No default in filing Financial Statement & Annual Return for preceding 3 years Not be penalized by Court or Tribunal of any offence under RBI, SEBI, SCRA,FEMA and any other special act where such cos., are regulated, if any Conversion into share with differential rights and vice versa is not allowed

5 Continued… Structuring different economic rights for different class of equity shareholders may become difficult given the conditions that companies have to comply with under the Companies (Share Capital and Debentures) Rules, However, it is important to note that the rules issued under this chapter specifically mention that existing equity shares issued with differential rights will continue to have the rights provided at the time of their issuance

6 Kinds of Issues of share capital (sec. 62, 42, 63, 54, 23 etc.)
Right Issue ESOP’s Other Issue’s Private Placement Preferential offer Bonus Issue Sweat Equity Public Issue

7 Rights Issues – sec. 62(1)(a)
Offered to existing holder of equity share Issue can be of any kinds of Shares (Equity or Preference) Proportion to their paid up equity capital Letter of Offer shall be issued Right to renounce No valuation and no special resolution

8 Rights Issues -Procedure
Conduct a Board Meeting and pass resolution for right issue and approve the letter to offer Issue of Letter of Offer which shall specify the no. of shares offered. Time Limit is 15 to 30 days – Offer to be accepted If not accepted with in time, deemed to be declined Can be renounce within the time to any other person

9 Section 42. Part II – 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 No Invitation shall be made to such number of persons not exceeding 50 or such higher number as may be prescribed in a financial year (i.e., 200) and on such conditions in the form and manner of Private Placement as may be prescribed Excluding: QIB’s Employees Such concept was not there in the Companies Act, 1956.

10 Private Placement Rules
No fresh offer of Private Placement is allowed unless the previous offer, either have been completed or withdrawn or abandoned If the Private Placement is turned to be a public offer the provisions of SCRA and SEBI should be complied with The allotments must be completed within 60 days, failing which the amount should be refunded within 15 days form the date of completion of 60 days. Otherwise it shall be liable to repay that money with 12% per annum from the expiry of the 60th day The subscription money should be kept in a separate bank account in a scheduled bank The company shall maintain a Register and should keep all the offers received in such manner as may be prescribed and complete information about such offer shall be filed with the Registrar within a period of 30 days of circulation of relevant private placement offer letter No advertisement shall be released

11 key points… Max allotment to 200 number
of Investors (excl. QIBs & ESOP) in one FY Cash Payment prohibited Allotment to be made within 60 days, else refund @ 12% interest p.a. Share application money to be kept in Separate Account

12 Preferential Offer – sec. 62
Special Resolution Comply with Private Placement Rules Valuation of Shares Disclosures in explanatory statement Fully Paid Up Shares shall be allotted Offer should be completed with in 12 months

13 Employee Stock Option Scheme – sec. 62
Issued to Directors and Employees including Subsidiary & Holding Co Passing by Special Resolution Freedom to fix price and lock in period Same definition, but excludes - independent directors, promoter/’PG, director directly or indirectly holds > 10% of outstanding equity shares and includes – employee of associated company minimum one year gap between grant of options and vesting of options Amount forfeited by the company if the option is not exercised by the employees within the exercise period Options not transferable Options not be pledged, hypothecated, mortgaged

14 Employee Stock Option Scheme
Legal heirs or nominees are entitled in case of death of employee Disclosure in the board's report In the event of resignation or termination, options not yet vested will expire and options vested can exercise as per the terms at the time of grant of options Same definition, but excludes - independent directors, promoter/’PG, director directly or indirectly holds > 10% of outstanding equity shares and includes – employee of associated company listed companies regulated by SEBI

15 Bonus Issue – sec. 63 Existing Members
Out of Free Reserve , Security Premium, Capital Redemption Reserve Authorized by Articles Recommended by Board and Authorize in General Meeting No default in payment in interest or principal amount in FD’s or Debt Securities No default in payment of Statutory dues of employees (PF, Bonus & Gratuity) Partly paid shares shall be made fully paid up. Once issued should not be withdrawn

16 Sweat Equity Shares – sec. 54
Issued to Directors and Employees including Subsidiary & Holding Co. Can be issued at discount or for consideration other than cash For providing Technical Know How , Intellectual Property Rights or Value addition Authorised by a special resolution one year should have elapsed since the commencement of business listed companies are regulated by SEBI Offer should be completed with in 12 months Shall not issue more than 15% of Paid up Capital Shares shall be locked in for 3 years Valuation of Equity Shares & Know How, Intellectual Property shall be done by RV

17 Comparative analysis Companies Act, 1956 Companies Act, 2013
Particulars Private Public Rights Issue No provisions were prescribed. Sec. 81 Preferential Allotment Sec. 81(1A) ESOP’s Sweat Equity Sec. 79A Bonus Issue Particulars Private Public Rights Issue Sec. 62(1)(a) Preferential Allotment Sec. 62(1)(c) ESOP’s Sec. 62(1)(b) Sweat Equity Sec. 54 Bonus Issue Sec.63

18 Issue of Preference Shares – sec. 55
Irredeemable Preference Shares are not allowed to issue Maximum redemption period shall not exceed 20 years & Infrastructure projects – 30 years Passing by Special Resolution Explanatory statement to be annexed to the notice listed companies are regulated by SEBI

19 Redemption of Preference Share
Shall be redeem out of Profit or Proceeds of fresh issue No such shares redeemed unless fully paid up

20 Issue of Debentures – sec. 71 read with sec. 42 & 62
A company may issue debentures with an option to convert such debentures into shares, either wholly or partly at the time of redemption. Provided that the issue of debentures with an option to convert such debentures into shares, wholly or partly, shall be approved by a special resolution passed at a general meeting. No company shall issue any debentures carrying any voting rights. Where debentures are issued by a company under this section, the company shall create a debenture redemption reserve account out of the profits of the company available for payment of dividend and the amount credited to such account shall not be utilised by the company except for the redemption of debentures.

21 Deposits – sec’s 73-76 read with (Acceptance of Deposits Rules by Companies)
Deposit means Any receipt of money by way of deposit or loan or in any other form, by a company. Depositor means Any member who has made deposit with the Company

22 What is not a Deposit Amount received from CG, SG or guarantee provided by them Amount received from Foreign Govt., Banks, FI, ADB, IFC, etc., Amount received from any Banking Co. or SBI or its Subsidiaries Amount received from Banks, Public Financial Institutions, Insurance Co. etc., Amount raised through Commercial Paper Amount raised from one Co. to other Co Amount received from Subscription of Securities Amount received from Director Amount raised by issue of secured bonds & debentures or issue of CCD’s convertible into shares within 5 years Amount received from Employee under Contract Any non-interest bearing amount held in trust Advance received for Supply of Goods Security deposit for performance of contract Advance consideration received for transfer of Property Loan bought in by Promoters as stipulated by Banks and FI Amount accepted by Nidhi Co

23 From whom to accept Eligibility Criteria Net worth 100 Cr or more
Public Co. in order to accept from other than members (Eligible Co.) Net worth 100 Cr or more Turnover 500 Cr or more Every other Co. only from Members

24 Tenure of Deposit Deposits shall be accepted Minimum for 6 months
Maximum for 36 months If accepted for less than 6 months Such deposits shall not be more than 10% of paid up capital + free reserves Minimum 3 months shall elapse before repayment of deposits

25 Threshold limits Threshold limits for accepting or renewal of Deposits by various Co. Eligible Co. from members only, then till 10% of Paid up Capital + free reserves from other than members, then till 25% of Paid up Capital + free reserves Govt. Eligible Co. till 35% of Paid up Capital + free reserves Other than Eligible Co. from members only, then till 25% of Paid up Capital + free reserves

26 About existing Deposits
File within a period of 3 months from commencement of this act Form DPT – 4 Shall repay all the deposits within one year or on the date on which deposits are becoming due whichever is earlier

27 Insurance Its mandatory
Contract to be entered with insurance agency before 30 days of issuing Circular In default to repay and if amount is more than Rs. 20,000/-, the Insurance Co. shall repay not less than Rs. 20,000/- for each depositor

28 Every new beginning comes from some other beginning’s end
Thank You Every new beginning comes from some other beginning’s end Every new beginning comes from some other beginning’s end

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