Shares for Consideration other than Cash

[Pracheta]

Can a new company issue the shares at a consideration other than cash to a Non Resident for providing technical know how? The technical know how will be valued by a Certified Valuer

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Best Regards,

CS.Pracheta.M

[Kamesh]

Sure

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Best Regards,
CS.Pracheta.M

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[Ramaswami Mohan]

as sweat equity ? there is a limit of 5% for such shares . pl check.

views of other members welcome.

regards,

Mohan

PCS Hyderabad

[sudhir kumar]

Dear Pracheta

 

From the query i understand that the subject company is not even one year old.

 

As per Sec.79A (c) to issue swat equity shares,

 

not less than one year must has at the date of the issue elapsed since the date on which the company was entitled to commence business.

 

Regards

 

CS Sudhir kumar

On Tue, Mar 22, 2011 at 3:31 PM, Pracheta <m.pra...@gmail.com> wrote:

[Bharat Hegde]

Dear All,

 

It is the case of allotment of shares for a consideration otherwise than in cash and not the allotment of sweat equity shares. Even a newly incorporated company can also issue shares for a consideration otherwise than in cash.

 

Under FEMA also, general permission is available for issue of shares against lump-sum technical know-how fee (Point No.23(ii) of the Master Circular on FDI dated July 01, 2010), subject to fulfillment of other conditions.

 

Other views are welcome.

 

Regards,

Bharat Hegde

[sudhir kumar]

Dear Bharat Hegde

 

Any circulars from FEMA or any other acts have to read with Companies Act,1956.

 

I request you to understand exactly what is meant by allotment of shares other than cash.

[Jayashree Chandrasekaran]

Dear Sudhir,

allotment of shares for consideration other than cash can be done...only for sweat equity you will have the one year period...

Jayashree

C.JAYASHREE

PARTNER

S.GANESH&ASSOCIATES

CHENNAI

98840 17120

[sudhir kumar]

Dear Jayashree Madam

 

Kindly read explanation provided to section 79A of the Companies Act,1956 and get back again.

 

Regards

 

CS Sudhir kumar

[Jayashree Chandrasekaran]

yes sudhir...79A talks of sweat equity...but in this case we are talking of issuing equity shares for technical know how...hence this section will not apply...pls elaborate your views

Jayashree

[Bharat Hegde]

Dear CS Sudhir Kumar,

 

Kinldy note that allotment of shares for a consideration otherwise than in cash and issue of sweat equity shares are not one and the same.

 

Sweat equity shares are issued to employees and directors at a discount or for a consideration otherwise than in cash (for providing know how or making available rights in the nature of intellectual property rights or for value additions) as per the provisions of Section 79A read rules/ regulations made thereunder. The main advantage of issuing sweat equity shares is, the company can issue shares at a discount without complying with the requirements of Section 79.

 

The Companies Act does not prohibit the issue of shares for a consideration otherwise than in cash and it need not be in the form of sweat equity shares.

 

Contrary views are always welcome.

 

Regards,

Bharat Hegde

[sudhir kumar]

If at all you allot shares against transfer of technical know how tell me under which section of companies act, you will make allotment.

[Kamesh]

I second Bharat views

Kamesh

Sent from my Nokia E- 71 phone
-----Original Message-----

Dear CS Sudhir Kumar,

Regards,
Bharat Hegde

[vikram jhawar]

Frndz,

Mr. Bharat is right. Allotment of Shares for a consideration otherwise than in cash and issue of Sweat Equity Shares are not the same.

Thanks and Regards

Vikram Jhawar


"Effort may fail but don't fail to make effort"

[Bharat Hegde]

Under Section 75. The consideration for allotment of shares need not be in the form of cash - 75(1)(b)

 

Regards,

Bharat

[Jayashree Chandrasekaran]

Dear Sudhir,

I hope this clarifies you totally

PROCEDURE FOR ALLOTMENT OF SHARES FOR CONSIDERATION OTHERWISE THAN IN CASH

 

Issue of shares for consideration other than in cash can be made for any of the following considerations:—

 

(a) acquisition of assets of other company;

(b) acquisition of shares of other company;

(c) acquisition of technical know-how;

(d) other purposes.

 

Where shares are being issued in lieu of acquisition of assets of other company, it should be ensured that the transferor company has passed appropriate ordinary resolution in general meeting under section 293(1)(a) of the Companies Act, 1956.

 

In case if acquisition of assets of other company results in amalgamation with other company the Court/Tribunal order, if any, shall be forwarded with the Registrar.

 

In case the shares (not being bonus shares) are allotted as fully or partly paid up otherwise than in cash, the company shall produce, for the inspection and examination of the Registrar a contract duly stamped in writing constituting the title of the allottee to the allotment together with any contract of sale or a contract for service or other consideration in respect of which the allotment was made. [Section 75(1)(b)]

 

In such case the following documents shall be filed by company with the concerned Registrar of Companies:—

 

(1) Copies of all contracts, as aforesaid, verified in the prescribed manner to be filed by a company with the Registrar pursuant to section 75(1)(b) by an affidavit of a responsible officer of the company stating that they are true copies.

 

(2) Where a contract such as stated under section 75(1)(b) has not been reduced in writing, the company shall, within 30 days after the date of allotment, file with the Registrar of Companies the prescribed particulars of the contract stamped with the same stamp duty as would have been payable if the contract has been reduced to writing. The prescribed particulars shall be filed electronically in e-Form 3 in addition to the e-Form 2. [Section 75(2)].

 

If the Registrar is satisfied that in the circumstances of any particular case the period of thirty days specified in sections 75(1) and 75(2) for compliance with the requirements of this section is/was inadequate, he may, on application made in that behalf by the company, whether before or after the expiry of the said period, extend that period as he thinks fit, and if he does so, the provisions of sections 75(1) and 75(2) shall have effect in that particular case as if for the said period of thirty days the extended period allowed by the Registrar were substituted.

Jayashree

[Pracheta]

Thanks to all. It was a great discussion on the topic.

Best Regards,

CS.Pracheta.M

[ALPESH DHANDHLYA (PCS Ahmedabad)]

Dear CS.Pracheta.M Ji,

Can we issue the Shares on the basis of the Technical Know How etc. under the provision of the Companies Act, 2013 ?

Moreover, here the Company is not acquiring the technology but it is just sub-allocated to it then can it issue the shares.

[CS Anuja Verma]

Dear All,

I have a query regarding Form FC-GPR. 

An Indian Company issued Shares at the time of incorporation to a US based Incorporation without any consideration. Said issue was shown in lieu of Technical Know-How. Form FC-GPR was filed for it but now RBI demands for UIN No. in resubmission of the same form. UIN cant be allotted since no AFR was filed due to non - receipt of any consideration amount. What possible reply could be made to RBI so that the said form be approved??

Warm Regards,

Anuja Verma

On Tuesday, March 22, 2011 at 3:31:44 PM UTC+5:30, manchali pracheta Ms. wrote: