THE COMPANIES ACT,

2013
IMPORTANT PROVISIONS RELATING TO
SHARES, DEBENTURES AND DEPOSITS
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CS Kalidas Vanjpe
Practising Company Secretary

FEATURES

No change in basic concepts.

Emphasis on rules.
Objective: to bring flexibility and adoption of
internationally
accepted
practices,
self
regulation with more disclosures, stringent
punishment for violation etc.

CS Kalidas Vanjpe
Practising Company Secretary

FEATURES (Contd.)

Most of the privileges, concessions

exemptions of a private company will go.

and

e.g. Rights issue, private placement of shares.

Will be on par with public companies for most of
the matters.

CS Kalidas Vanjpe
Practising Company Secretary

SHARE CAPITAL

Two types of share capital: equity and

preference.

Equity shares can

differential rights.

Variation of rights, if affecting the rights of

another class , then consent of three
fourths of such other class required.

be

issued

with

CS Kalidas Vanjpe
Practising Company Secretary

SHARE CERTIFICATES

Share certificates to subscribers to M/A within

two months. (new).

Minimum subscribed capital to be brought in

within two months as share certificates need to
be issued within that time.

Other cases of allotment two months as against

three earlier.

One month in case of transfer/ transmission

against two.
CS Kalidas Vanjpe
Practising Company Secretary

ISSUE OF
SHARES/SECURITIES

A public company:
A) Public Offer
B) Private Placement
C) Rights Issue
D) Bonus Issue
A private company:
A) Rights Issue
B) Bonus Issue
C) Private Placement (sec 23)
Both can issue under Emp Stock Option scheme or
preferential issue (sec 62)
CS Kalidas Vanjpe
Practising Company Secretary

TRANSFER/TRANSMISSION OF
SHARES
Instrument of transfer duly stamped,
dated and executed to be delivered within
sixty days of execution.
Applicable to all companies including listed
ones.
No need to present to prescribed
authority.

CS Kalidas Vanjpe
Practising Company Secretary

TRANSFER/TRANSMISSION
(Contd.)
In case of refusal by pvt co, time limit for
sending notice is thirty days (earlier 2 m)
Appeal in such case- thirty days (earlier 2
m). If no notice is sent then sixty days
(earlier 4 m)
Only transferee can appeal (earlier
transferor or the person who gave
intimation of transmission were also there)

CS Kalidas Vanjpe
Practising Company Secretary

TEANSFER/TRANSMISSION
(contd.)
If a public co refuses to transfer within 30
days (2 m), then appeal within 60 days
(earlier 2 m). If no notice is sent, then 90
days (no period earlier).
Important penal provision: Contravention
of order of the Tribunal punishable with
imprisonment of not less than one year
and may be upto three years and fine mini
1 lakh maxi 5 lakh (earlier only fine)

CS Kalidas Vanjpe
Practising Company Secretary

PROSPECTUS
Not much changes in disclosures.
Any variations in the terms of the contract
referred to in prospectus or objects for
which the prospectus was issued shall be
made only with the approval of the
members accorded by way of a special
resolution.
Notice of meeting in 2 newspapers.

CS Kalidas Vanjpe
Practising Company Secretary

PROSPECTUS (Contd.)
Detailed explanatory statement to include:
original object
total amount raised and utilised, extent of
achievement of the object
unutilised amount
details of variation
reason and justification
time limit within which it will be achieved

CS Kalidas Vanjpe
Practising Company Secretary

PROSPECTUS (Contd.)
Such cos cannot use such amount for
buying , trading or otherwise dealing in
equity shares of any other listed company.
Dissenting shareholders should be given
exit offer terms etc to be decided by
SEBI

CS Kalidas Vanjpe
Practising Company Secretary

RIGHTS ISSUE
Earlier applicable to public companies.
Now applicable to private also.
Liberty to issue shares to anyone at any
time at such price is gone.
All conditions like letter of offer,
renunciation etc will apply. Easy target for
takeover or entry of outside shareholders
possible.

CS Kalidas Vanjpe
Practising Company Secretary

FURTHER ISSUE OF
CAPITAL
Earlier applicable to public cos, now to all
cos.
Earlier applicable only if the Company, at
any time after the expiry of two years
from the formation of the Company or
after one year from the allotment of
shares in that company made for the first
time after its formation, wants to increase
capital.
Now any time it wants to increase.

CS Kalidas Vanjpe
Practising Company Secretary

FURTHER ISSUE OF CAPITAL

(Contd.)

Further shares may be offered on rights

basis or to employees under stock option,
if special resolution is passed and subject
to prescribed conditions or to any person
including these two categories if special
resolution is passed and valuation by a
registered valuer is done and subject to
rules.

CS Kalidas Vanjpe
Practising Company Secretary

PRIVATE PLACEMENT OF
SECURITIES
private placement means any offer of
securities or invitation to subscribe
securities to a select group of persons by a
company (other than by way of public
offer) through issue of a private placement
offer letter and which satisfies the
conditions specified in section 42.
Thus applicable to all securities.

CS Kalidas Vanjpe
Practising Company Secretary

PRIVATE PLACEMENT
-REQUIREMENTS
Special resolution for each offer.
Explanatory statement to give justification
of price
Private placement offer letter
List of persons to whom the letter to be
sent
No offer to more than 200 persons in a fin
year excl qualified institutional buyers or
employees under stock option scheme

CS Kalidas Vanjpe
Practising Company Secretary

REQUIREMENTS (Contd.)

Application form serially numbered addressed to

a specific person.
form to be sent in writing or electronic form
no right of renunciation. Only that person has to
apply and from his own bank a/c
Co to file details with ROC including the names of
persons etc. Also SEBI if co. is listed.
Co to maintain all records including PAN, Bank
account details

CS Kalidas Vanjpe
Practising Company Secretary

PRIVATE PLACEMENT
(Contd.)
No fresh offer unless previous offer
completed/withdrawn/abandoned. This is
applicable even if earlier offer is for
different kind of security.
Minimum investment size Rs. 20,000/face value.
Separate bank account for application
money.
No advt, no distribution channel.

CS Kalidas Vanjpe
Practising Company Secretary

ALLOTMENT

Time limit 60 days

Otherwise refund within next 15 days from the
same account.
Delay in refund beyond this period : 12%
interest. Also the amount will be treated as
deposit. So penalty under those provisions.
Penalty for contravention of sec 42: Higher of
amount involved in the offer or Rs. 2 cr and also
refund all money to subscribers

CS Kalidas Vanjpe
Practising Company Secretary

ALLOTMENT (Contd.)
Return of Allotment PAS 3- thirty days.
complete list of all security holders
containing the full name, address,
Permanent Account Number (PAN) and Email ID of such security holder, the class
of security held, the date of allotment etc.
No benami holding in view of PAN

CS Kalidas Vanjpe
Practising Company Secretary

PREFERNTIAL ISSUE

May be issued as further issue of capital.

Elaborate disclosures in the expl st e.g. price
band, basis for pricing, relevant date with
reference to which price is arrived at , class or
classes of persons to whom allotment is proposed
to be made, justification for allotment proposed
to be made for consideration other than cash, pre
and post shareholding pattern etc
also to comply with the conditions in sec 42 i.e.
provisions applicable to Private placement.

CS Kalidas Vanjpe
Practising Company Secretary

DEBENTURES
The Co can issue debentures with an
option to convert. For such option special
resolution is necessary
No debentures with voting rights
Only secured debentures or compulsorily
convertible debentures can be issued.
Secured debentures maximum tenure 10
yrs. But for infra it is 30 yrs

CS Kalidas Vanjpe
Practising Company Secretary

DEBENTURES (Contd.)
Appointment of debenture trustee.
Elaborate rules.
Trust deed form SH 12
Debenture redemption reserve
Maintenance of liquid assets of 15% of
debentures maturing during the year. Inv
by 30th April. This can be used only for
redemption and should not fall below 15%

CS Kalidas Vanjpe
Practising Company Secretary

DEPOSITS

In private company's definition, the clause of

prohibition of invitation or acceptance of deposits
from persons other than members, directors or their
relatives is gone
Now private companies can accept deposits from
Directors under exempted category. Director cannot
take loan and place the same as deposit.
They have to comply with the conditions and
procedure in case of deposits from members.
The term deposit includes any receipt of money by
way of deposit or loan or in any other form by the
company but excludes such categories as may be
prescribed.
CS Kalidas Vanjpe
Practising Company Secretary

DEPOSITS (Contd.)
All cos can accept deposits from members.
Limit 25% of the aggregate of the paid up
capital and free reserves. For companies
covered under sec 76, limit is 10%
Period mini 6 m maxi 36 m. To meet short
term requirements they can accept
deposits of shorter tenure of not less than
3 m. such dep should not exceed 10% of
puc and free reserves.

CS Kalidas Vanjpe
Practising Company Secretary

DEPOSITS (Contd.)
public companies having a net worth of
not less than one hundred crore rupees or
a turnover of not less than five hundred
crore rupees (eligible companies) can
accept deposits from public (sec 76
companies)
Special resolution required. Ordinary
resolution will do if aggregate of
borrowings do not exceed the aggregate of
puc and free reserves

CS Kalidas Vanjpe
Practising Company Secretary

LIMIT ON PUBLIC
DEPOSITS
Sec 76 cos can borrow up to 10% from
members and 25% from public.
For Govt co., the limit is 35%

CS Kalidas Vanjpe
Practising Company Secretary

PROCEDURE
Every co to issue a circular to members by
RPAD/Speed post or electronic mode (form
DPT1). In addition, advt of circular in two
newspapers for sec 76 cos
Credit rating must.
In case of adverse change in rating,
depositors to be given exit option
Sec 76 co to follow the procedure of advt,
filing the text with ROC etc

CS Kalidas Vanjpe
Practising Company Secretary

DEPOSIT INSURANCE
Compulsory for all companies.
at least thirty days before the issue of
circular or advertisement or at least thirty
days before the date of renewal. The
amount deemed to include principal and
int.
maximum cover Rs. 20,000/ Premium to be borne by the Co and
cannot be recovered from depositors

CS Kalidas Vanjpe
Practising Company Secretary

DEPOSIT INSURANCE
(Contd.)

If defect in insurance due to non payment,

the Co to rectify the defect or enter into a
fresh contract within 30 days. If not , the
co to repay the deposits and int covered
by such insurance within next 15 days. Fi
not, int at 15% applicable for period of
default and also penal provisions.

CS Kalidas Vanjpe
Practising Company Secretary

SECURITY FOR DEPOSITS

Concept of secured deposits introduced.
Although the Act makes it optional, the
rules make it compulsory for companies
accepting deposits from members, if
shortfall in insurance cover.
All companies accepting deposits from
members shall create a charge on their
assets excl intangible assets to the extent
amount remaining unsecured by
insurance.

CS Kalidas Vanjpe
Practising Company Secretary

DEPOSITS (Contd.)
For sec 76 co., the provisions of creation
of security will apply only in case of
secured deposits
In case of deposits which are secured, the
amount of such deposits and the interest
payable thereon shall not exceed the
market value of such assets as assessed
by a registered valuer
Security to be created in favour of trustee
(similar to debenture trustee)

CS Kalidas Vanjpe
Practising Company Secretary

DEPOSITS (Contd.)
Creation of Deposit Repayment Reserve
mandatory. This is in the form of liquid
assets. Amount equivalent to 15% of
deposits maturing during the year and
next year.
Earlier Private companies were not
required to maintain liquid assets. Now
even for deposits from members, it is
compulsory.
They also have to file return of deposits.

CS Kalidas Vanjpe
Practising Company Secretary

DEPOSITS (Contd.)
In case of deposits held by existing
companies, they have to be repaid within
the due date or one year.
National
Company Law Tribunal can
extend time for repayment.
Rules however have given respite to cos.
They can repay the deposit and interest as
per the terms on which they are accepted.
That will be sufficient compliance. But if
they fail, then penal provisions will apply.

CS Kalidas Vanjpe
Practising Company Secretary

DEPOSITS (Contd.)
A statement of deposits to be filed with
ROC within 3 months of commencement of
Act or from the date on which such
payment is due.
Practical problem for Pvt cos.
Statement to be certified by auditor
May lead to cash flow problems or
disputes among shareholders

CS Kalidas Vanjpe
Practising Company Secretary

DEPOSITS EXEMPTION CRITERIA

Some Exemptions:
Advance for supply of goods/services should be
appropriated within 365 days
Advance for sale of property should be adjusted
against property
Supply of capital goods exempted but if any of
the above all cases, if the company has to refund
money as the Co did not have necessary
permissions/approvals to deal in the goods etc,
then the amount will be treated as deposit.
Security deposit for performance of contract.
CS Kalidas Vanjpe
Practising Company Secretary

EXEMPTION (Contd.)
Unsecured loan from promoters/relatives
in the form of quasi equity.
Security deposit from employee not
exceeding his annual salary and it should
be non-interest bearing.
Govt loans or govt guaranteed loans
Inter corporate deposits, bank loans etc
Bonds or debentures either secured or
compulsorily convertible into eq shares

CS Kalidas Vanjpe
Practising Company Secretary

EXTREMELY IMPORTANT
PENAL PROVISION:

If existing deposit is not repaid within due date or

one year or extended time, minimum penalty Rs.
1 cr., may go to Rs. 10 cr.

Officer in default liable to imprisonment upto 7

years or fine (min Rs. 25 lakhs, Maximum Rs. 2
cr) or both.

If fraud in acceptance is proved, every officer

accepting deposit, is personally responsible for
losses, damages.
CS Kalidas Vanjpe
Practising Company Secretary

OTHER POINTS

Enhancement
in
penalty,
appointment
of
prosecutors for courts and adjudicating officers
for trying offences. This means enforcement of
the provisions would be done seriously.
Hence, a change in mindset necessary. Chalta
Hai attitude needs to be abandoned.
Likely effects:
a) cost of compliance
b) increase in business of insurance co.
c) increase in litigation, cash flow problems for
private cos.
CS Kalidas Vanjpe
Practising Company Secretary

THANK YOU.

CS Kalidas Vanjpe
Practising Company Secretary