Issue of Shares in Kind

[ankit tater]

Dear All,

A Nbfc wants to raise its authorised an paid up capital. It wants to issue such new shares to existing shareholders by way of right issue or preferential allotment.

Now, such shares are to be issued for consideration other than cash - The shareholder wants to acquire the shares by transferring the independent NCDs it holds as investments.

Is the transaction feasible or are there any restrictions as per the Companies Act, 2013 or RBI guidelines?

Regards, 

Ankit Tater 

[V Kartik]

You will have to go for private placement in this case. Rights issue cannot be done incase of consideration other than cash. Preferential allotment can only be made for equity shares or other convertible securities.

Kartik

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[ankit tater]

Hello Kartik,

Thanks for the response. Just one more query, can NCDs held as investment be paid for the consideration for acquiring such shares?

Regards, 

Ankit Tater 

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[V Kartik]

You can via Private Placement. Other views are welcome.

Kartik

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[Vineet Maheshwari]

Hi Kartik,

One point..do not see any restriction in C.Act for issue of right shares for consideration other than cash. If there is any pls. mention that.

Thanks

Vineet Maheshwari

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[V Kartik]

Read 62(1)(a). Unlike Sec 62(1)(c) for preferential allotment which says "for cash or for consideration other than cash" there's no such option given in Sec 62(1)(a). This indicates that for rights issue, you have to necessarily bring in cash to raise the capital.

V Kartik

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[Ramakrishnan J]

agree that Right issue can only be done for cash consideration.