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