Urgent Query-Allotment of of Equity shares-Unlisted Public Co.

[Pranay Patel]

Respected Members,

 

Your valuable suggestions are required for my following query;

 

1. If a unlisted public co. wants to allot equity shares to a person other than the existing shareholder, which section will govern this, does it require Special Resolution in GM or Board Resolution will do??

 

2. If a unlisted Public co. wants to allot equity shares to the existing share holder (Right Isuue), does it require Special Resolution in GM or Board Resolution will do??

 

3. In the 2nd point, is it necessary to give offer documents before allotment, if yes pls let me know the complete procedure.

 

Early reply is expected.

 

Thanks in anticipation.

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Best Regards

 

Pranay

 

 

 

[Prem Tripathi]

Dear Mr. Pranay

 

1. Sec. 81(1A) of the Companies Act, 1956 and Unlisted Public Companies (Preferential Allotment) Rules, 2003 needs to be followed. You can have a Special Resolution passed by shareholder or Ordinary Resolution backed by approval of Central Govt.

Board alone has no authority to issue shares under this section.

 

2. Sec. 81(1) of the Companies Act, 1956 will govern the Right Issue. Board has authority in this matter and no need to go for shareholders approval.

3. If the offer of Right issue is to more than 50 person then Offer document will require to be issued.

 

Regards,

 

CS. Premnarayan Tripathi

PRT & Associates

Company Secretaries

Ahmedabad

M: +91 89800 26497

 

 

 

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[Pranay Patel]

Dear Prem Sir,

 

Many Thanks for your guidance.

 

Please suggest for following;

 

Our’s is a unlisted Public Co., allotted equity shares under the authority of Board Resolution to the existing shareholder without any offer document.

 

Now while submitting the corporate action form for this allotment to NSDL (since the co. has taken electronic connectivity with NSDL). NSDL is asking us to submit the offer documents & asking the reason for why the shareholders resolution is not required.

 

Please guide me, what is the proper reply for this query raised by NSDL duly mentioning the sections. We already given a reply but was not sufficient for them, they want the reply with properly mentioning the sections of Companies Act.

 

I’ll be very thankful, if you or any of the members can help me in this.

 

With Best Regards

 

Pranay Patel

 

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Best Regards

 

Pranay Patel

 

‎" I believe that our background & circumstances may have influenced who we are, but we are responsible for who we become "

 

 

 

[CS.Sunil Kumar B.G.]

Dear Mr. Pranay,

as it is evident from your mail that your company allotted share to the  "existing shareholder" through board meeting. ....this is not the proper procedure.

you can allot the share to the existing shareholders through preferential allotment. follow  Sec. 81(1A) of the Companies Act, 1956 and Unlisted Public Companies (Preferential Allotment) Rules, 2003.

its bad practice to suggesting for creating back dated GM resolution for allotment (but if EGM cannot be held in current date then go ahead with this). but again for preferential allotment PCS certificate required. hence its quiet complicated.

i would suggest you to ignore the earlier allotment and follow the above rules and conduct EGM for current date and pass resolution and get the shares allotted.

Thanks & Regards,

CS.Sunil Kumar B.G.
Sunil B.G. & Associates
Company Secretaries
Mysore
http://cssunilbangerabg.blogspot.com/

http://works.bepress.com/cs_sunil_kumar

Follow me@Twitter- iSunilCS

[Prem Tripathi]

Dear Pranay,

 

If the Co. has allotted shares to existing sharehoders, who are not >50 in nos., in accordance with the Sec. 81(1) as produced below, then you can convince to them.

 

Regards,

 

CS. Premnarayan Tripathi

 

81. FURTHER ISSUE OF CAPITAL

(1) Where at any time after the expiry of two years from the formation of a company or at any time after the expiry of one year from the allotment of shares in that company made for the first time after its formation, whichever is earlier, it is proposed to increase the subscribed capital of the company by allotment of further shares, then, -

a) such further shares shall be offered to the persons who, at the date of the offer, are holders of the equity shares of the company, in proportion, as nearly as circumstances admit, to the capital paid-up on those shares at that date ;

b) the offer aforesaid shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days from the date of the offer within which the offer, if not accepted, will be deemed to have been declined ;

c) unless the articles of the company otherwise provide, the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person; and the notice referred to in clause (b) shall contain a statement of this right ;

d) after the expiry of the time specified in the notice aforesaid, or on receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the Board of directors may dispose of them in such manner as they think most beneficial to the company.

Explanation. - In this sub-section, "equity share capital" and "equity shares" have the same meaning as in section 85.