Tag Archives: Prospectus

DEMATERIALISATION, REFUND AND COMMISSION


In this post, we will discuss dematerialisation of shares, Refund of application money and payment of commission on issue of share capital.

DEMATERIALISATION OF SECURITIES

Section 29 of the Companies Act 2013, say every company making public offer; and such other class or classes of companies as may be prescribed shall issue the securities only in the dematerialised form. This section was discussed in detail earlier on this blog here.

Rule 9 of the Companies (Prospectus and Allotment of Securities) Rules 2014 prescribes that the promoters of every public company making a public offer of any convertible securities may hold such securities only in dematerialized form. The entire holding of convertible securities of the company by the promoters held in physical form up to the date of the initial public offer shall be converted into dematerialized form before such offer is made and thereafter such promoter shareholdings shall be held in dematerialized form only.
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PRIVATE PLACEMENT


Section 42 of the Companies Act, 2013 allows any company, whether private or public, to make private placement of securities through issue of a “Private Placement Offer Letter” (PPOL). We have discussed provision of the Section earlier here.

In addition of Section 42, Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules 2014 prescribes all fine prints of the private placement.

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RETURN OF ALLOTMENT


As we discussed earlier here, sub – section (4) of Section 39 of the Companies Act 2013 says, “Whenever a company having a share capital makes any allotment of securities, it shall file with the Registrar a return of allotment in such manner as may be prescribed”. Rule 12 of the Companies (Prospectus and Allotment of Securities) Rules 2014 prescribes this manner.

Whenever a company having a share capital makes any allotment of its securities, the company shall, within thirty days thereafter, file with the Registrar a return of allotment in Form PAS – 3, along with the fee as specified in the Companies (Registration Offices and Fees) Rules, 2014.

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SHELF PROSPECTUS AND INFORMATION MEMORANDUM


We have discussed Shelf Prospectus and Information Memorandum here in an earlier post. Rule 10 of the Companies (Prospectus and Allotment of Securities) Rules 2014 discuss it further.

The information memorandum shall be prepared in Form PAS – 2 and filed with the Registrar along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 within one month prior to the issue of a second or subsequent offer of securities under the shelf prospectus.

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OFFER OF SALE BY MEMBER


Where certain members of company propose to offer whole or part of their holding of share to public, they may do so in accordance with prescribed procedure. We have discussed provisions Section 28 of the Companies Act 2013 earlier here. Rule 8 of the Companies (Prospectus and Allotment of Securities) Rules 2014 prescribes procedure under Section 28 of the Companies Act, 2013.

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VARIATION IN TERMS OF A CONTRACT OR OBJECT OF PROSPECTUS


We have discussed provisions related to Variation in terms of a contract or object in the prospectus stated in Section 27 of the Companies Act, 2013 earlier here. Rule 7 of the Companies (Prospectus and Allotment of Securities) Rules 2014 under authority of Section 27 of the Companies Act, 2013 prescribed procedure related to variation in Term of a Contract or object stated in terms of prospects.

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ADDITIONAL MATTERS AND REPORTS IN PROSPECTUS


We have discussed provisions relating to prospectus under Section 26 of the Companies Act 2013 earlier here. Section 26 lists out details of information, Reports and other matters to be stated in the prospectus. The Companies (Prospectus and Allotment of Securities) Rules 2014 further elaborate these matters. Here, we will discuss, Reports to be set out in the Prospectus as per Rules 5 of these Rules.

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REPORTS IN PROSPECTUS


We have discussed provisions relating to prospectus under Section 26 of the Companies Act 2013 earlier here. Section 26 lists out details of information, Reports and other matters to be stated in the prospectus. The Companies (Prospectus and Allotment of Securities) Rules 2014 further elaborate these matters. Here, we will discuss, Reports to be set out in the Prospectus as per Rule 4 of these Rules.

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INFORMATION IN PROSPECTUS


We have discussed provisions relating to prospectus under Section 26 of the Companies Act 2013 earlier here. Section 26 lists out details of information, Reports and other matters to be stated in the prospectus. The Companies (Prospectus and Allotment of Securities) Rules 2014 further elaborate these matters. Here, we will discuss information to be stated in the Prospectus as per Rule 3 of these Rules.

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FOREIGN COMPANIES: CAPITAL AND OTHER MATTERS


In our last blog post, we discussed general provisions related to foreign companies. We will discuss provisions which are related to prospectus and penalties.

PROSPECTUS OF FOREIGN COMPANY (SECTION 387):

This provision is applicable to foreign companies, and there is no difference whether the company has or has not established or when formed will or will not establish a place of business in India.  No person shall issue, circulate or distribute in India any prospectus offering to subscribe for securities of a company incorporated or to be incorporated outside India unless the prospectus is dated and signed.

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MAJOR CAUTIONS UNDER PUBLIC OFFER (COMPANIES ACT, 2013)


In recent posts, we discussed provisions of Chapter III of the Companies Act, 2013. This is time to discuss major penal provisions in this chapter.

CRIMINAL LIABILITY FOR MIS-STATEMENT IN PROSPECTUS (SECTION 34):

Where a prospectus, issued, circulated or distributed:

a)    includes any statement which is untrue or misleading in form or context in which it is included; or

b)   where any inclusion or omission of any matter is likely to mislead;

Every person who authorises the issue of such prospectus shall be liable under section 447 i.e. fraud.

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ALLOTMENT OF SECURITIES (Companies Act 2013)


In recent posts, we have discussed matters related to prospectus. In this post we will discuss, matters related to issue and allotment of securities following public offer.

SECURITIES IN DEMATERIALISED FORM (SECTION 29):

Under this section;

  1. Every company making public offer; and
  2. Such other class or classes of companies as may be prescribed

shall issue the securities only in the dematerialised form.

When any company issue its securities in dematerialised form, provisions of the Depositories Act, 1996 and regulations made under that Act shall be applicable.

There is no bar for any other company to issue its securities in any form. Any other company may convert its securities into dematerialised form.

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VARIANTS OF PROSPECTUS (Companies Act, 2013)


In our last blog post Prospectus (Companies Act 2013) , we discussed provisions related to prospectus. We will continue our study in this post.

ADVERTISEMENT OF PROSPECTUS (SECTION 30):

When a company issue an advertisement of prospectus, the advertisement shall specify contents of its memorandum; the objects, the liability of members, amount of share capital, name of signatories, and number of shares subscribed for by these signatories and its capital structure.

SHELF PROSPECTUS (SECTION 31):

Any class of company may file a shelf prospectus with the Registrar of Companies at the stage of first offer of securities.

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PROSPECTUS (Companies Act 2013)


In last post, public offer and private placement we have discussed public offer. In this post we will discuss Prospectus under Companies Act, 2013

Clause (70) of Section 2 of this Bill define “prospectus” means any document described or issued as a prospectus and includes a red herring prospectus referred to in section 32 or shelf prospectus referred to in section 31 or any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate.

Section 26 deals with matters to be stated in prospectus.

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PUBLIC OFFER AND PRIVATE PLACEMENT


Any business cannot run without funds. In case of an incorporated company, initial capital always come from subscribers to the memorandum. As we have discussed in earlier post Commencement of Business, company should commence its business within 180 days by filing some documents with Registrar of Companies. This is legal requirement of Section 11, all subscribers should paid the value of shares agreed to be taken by him and company should receive that money before filing document for filing for commencement of business. But this initial capital may not be sufficient for running a business. [UPDATE: This  portion stand deleted due to the Companies (Amendment) Act, 2015.] Public funding is a fundamental proposition for legal structure called company.

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