Category Archives: Chapter IV – CA2013

SHARE CAPITAL AND DEBENTURES

Amendment in Share Capital Rules


Ministry of Corporate Affairs came out with 4th amendment of the year to the Companies (Share Capital and Debentures) Rules, 2013. The Companies (Share Capital and Debentures) 4th Amendment Rules, 2016 published in Official Gazette on 12th August 2016 and came into force from that date, is available online now.

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Amendment in Share capital and Debentures Rules


Ministry of Corporate Affairs came with yet another amendment to the Companies (Share Capital and Debentures) Rules, 2014, a third amendment this year to the rules. These rules has been published in official gazette on 19th July 2016 and came into force on that date. In this post, we will discuss these amendments.

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WARRANT THE FINANCIAL SWEETENER


In an earlier post here, we discussed warrant in corporate law and Securities law. In another post here we discussed, we discussed issues related to Share warrant and bottle neck making it impossible to issue share warrant as we know in corporate law. In this post we will discuss warrant as in securities law.

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SHARE WARRANT – BEARER INSTRUMENT


In last post, we discussed meaning of warrant in with particular reference to share warrant. There are two questions pertinent to issue of share warrant:

  1. May Share Warrants be issued under the Companies Act, 2013 as fresh securities without pre – existence of underlying shares? or
  2. May share warrants be issued under the Companies Act, 2013 as conversion of underlying shares already existence?

In this post, we will discuss these questions.

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WARRANT vs WARRANT


In simple dictionary meaning warrant is to make particular activity necessary. In criminal law, warrant is term clearly defined term meaning a legal document permitting an action by authority and making its compliance necessary to the person named therein. In corporate and financial word, warrant is an instrument with different meaning at different financial and legal jurisdiction. In this post, we will discuss these meaning of warrant with reference to Share Warrant.

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Amendment in Buyback Law


The Ministry of Corporate Affairs bring out two draft notifications to be published in Official Gazette of India to amend the Act by a draft order under proviso to Section 68(2)(d) and by a draft amendment in the Companies (Share Capital and Debentures) Rules, 2014.

Post Buyback Debt – Equity Ratio:

As we discussed earlier here, Section 68(2)(d) read as under:

“The ratio of the aggregate of secured and unsecured debts owed by the company after buy-back is not more than twice the paid-up capital and its free reserves:

Provided that the Central Government may, by order, notify a higher ratio of the debt to capital and free reserves for a class or classes of companies;”

Now draft notification read as under:

In exercise of the powers conferred under the proviso to clause (d) of sub-section (2) of section 68 of the Companies Act, 2013, the Central Government has notified that –

The debt to capital and free reserves ratio shall be 6:1 for government companies within the meaning of clause (45) of Section 2 of the Companies Act, 2013 which carry on Non Banking Finance Institution activities and Housing Finance activities.

This order give effect that for all companies post buyback Debt Equity Ratio shall be 2:1 except government companies which are Non banking Finance companies or Housing Finance companies.

Unaudited Accounts limited reviewed:

As we discussed earlier here, Rule 17(1)(n)(iii) of the companies (Share Capital and Debentures) Rules, 2014 read as under:

“That the audited accounts on the basis of which calculation with reference to buy back is done is not more than six months old from the date of offer document;”

The draft of the companies (Share Capital and Debentures) Amendment Rules 2016 insert following proviso to this sub – clause:

“Provided that where the audited accounts are more than six months old, the calculations with reference to buy back shall be on the basis of un-audited accounts not older than six months from the date of offer document which are subjected to limited review by the auditors of the company.”

This is a removal of practical difficulty. Due to present clause, for practical purpose buyback resolution is possible only within six month from date of audited annual account. Now, buyback resolution may be possible any time on the basis of unaudited accounts limited reviewed by the auditors of the company.

Please note: This blog invite readers to share their comments, suggestions, hardship, queries and everything in comment section. This blog post is not a professional advice but just a knowledge sharing initiative for mutual discussion.

YEAR’S SECOND AMENDMENT IN SHARE CAPITAL RULES


The Ministry of Corporate Affairs placed here on its website a draft of the Companies (Share Capital and Debentures) Second Amendment Rules, 2015. These amendment Rules will come into force from the date of its publication in Official Gazette.

These amendment rules proposed to amend Rule 5(3) of the Companies (Share Capital and Debentures) Rules, 2014. Earlier this sub – rule was amended in 18th March 2015 by the Companies (Share Capital and Debentures) Amendment Rules, 2015. Before comment, I read this copy of amended Rule 5(3), with amendment by this amendment rule in bold letters:

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