New Delhi. Lalit Kumar Partner. August 29, J. Sagar Associates advocates & solicitors. Bengaluru Chennai Gurgaon Hyderabad Mumbai New Delhi

Transcription

1 Cmpanies Act, 2013 Presentatin ti t ICSI Chapter, New Delhi Lalit Kumar Partner August 29, 2014 J. Sagar Assciates advcates & slicitrs Bengaluru Chennai Gurgan Hyderabad Mumbai New Delhi

2 Public Offer & Private Placement By Public Cmpany (Sectin 23 (1)) Public ffer thrugh prspectus (Part I Chapter III) Private Placement (Sectin 42 - Part II Chapter III, Sectin 62(1)(c), Rule 14 f Cmpanies (Prspectus and Alltment f Securities) Rules, 2014 and Rule 13 f Cmpanies (Share Capital and Debentures) Rules, 2014) Rights Issue (Sectin 62(1)(a)) Bnus Issue (Sectin 63 & Rule 14 f Cmpanies (Share Capital and Debentures) Rules, 2014)

3 Public Offer & Private Placement By Private Cmpany (Sectin 23 (2)) Private Placement (Sectin 42 - Part II Chapter III, Sectin 62(1)(c), Rule 14 f Cmpanies (Prspectus and Alltment f Securities) Rules, 2014 and Rule 13 f Cmpanies (Share Capital and Debentures) Rules, 2014) Rights Issue (Sectin 62(1)(a)) Bnus Issue (Sectin 63 & Rule 14 f Cmpanies (Share Capital and Debentures) Rules, 2014)

4 Share Capital & Debentures Kinds f Securities Equity Share Capital (Sectin 43) With vting rights With differential rights as t dividend, vting r therwise (Rule 4 f the Cmpanies (Share Capital and Debentures) Rules, 2014 Preference Share Capital (Sectin 43) Redeemable Preference Shares can exceed 20 years and up t 30 years fr specified infrastructure prjects (Refer Schedule VI) (Sectin 55 and Rule 9 f Cmpanies (Share Capital and Debentures) Rules, 2014) Cnvertible Preference Shares Optinally r Cmpulsrily Cnvertible Debentures Nn-Cnvertible Unsecured Debentures Nn-Cnvertible Secured Debentures Cnvertible Debentures Optinally Cnvertible r Cmpulsrily Cnvertible

5 Shares with Differential Rights Private and public cmpanies have t cmply with DVR rules (Sectin 43) New DVR rules are mre stringent than existing DVR rules: Track recrd f distributable prfits in last 3 FYs means cmpanies with less than 3 years f existence cannt issue DVRs N default in filing financial statements fr the last 5 FYs N default in (i) redemptin f preference shares, matured depsits r debentures, (ii) repayment f term lans f scheduled banks and PFIs, (iii) payment f interest r declared dividend, and (iv) emplyee statutry payments DVR shares cannt exceed 26% f the ttal equity share capital including DVRs CmpanyntbeenpenalisedbyacurtrTribunalinlast3 years f any ffence under the RBI Act, SEBI Act, SCRA, FEMA Act r any special act What happens t the existing DVRs befre April 1, 2014?

6 Preference Shares Can be fr upt 30 years fr infrastructure prjects prvided prescribed % f shares are annually redeemed at the preference sharehlders ptin (Sectin 55(2) First prvis) Premium n RPS nly payable ut f prfits (and nt securities premium a/c) fr sme cmpanies (Sectin 55(2) (d)) Prvisin fr issue f new RPS t redeem earlier RPS in case f failure t redeem r pay dividend - cnsent f NCLT & 75% (by value) f preference sharehlders needed (Sectin 55(3)) Rules suggest: special reslutin needed in a general meeting fr issue n subsisting default in dividend payment r redemptin AOA t set ut prvisins n (i) () pririty, (ii) participatin p in surplus dividend r assets, (iii) cumulative r nt, (iv) cnversin rights, (v) vting rights, (vi) redemptin Distinctin between cumulative and nn-cumulative preference shares w.r.t vting rights remved all kinds f preference shares entitled t vte n all matters if dividend remains unpaid fr 2 years

7 Debentures Issue f Secured Debentures (Sectin 71 and Rule 18 f the Cmpanies (Share Capital and Debentures) Rules, 2014) The perid f redemptin cannt exceed 10 years except in a cmpany engaged in the setting up f infrastructure prjects fr which the maximum perid if 30 years Security by creatin f charge ntheprperties p r assets f the cmpany, having a value which is sufficient fr the due repayment f the amunt f debentures and interest theren Appintment f debenture trustee Creatin f Debenture Redemptin Reserve Created ut f prfits f the cmpany available fr distributin f dividend DRR equivalent t at least 50% f the amunt raised thrugh debenture Each year n r befre April 30, invest r depsit, nt less than 15% f the amunt f debentures maturing during the year ending n March 31 f the next year in certain prescribed methds The remaining invested r depsited shall nt at any time fall belw 15% f the amunt f the debentures maturing during the year ending n March 31 f that year

8 Share Capital & Debentures Vting rights in respect f preference shares n distinctin between cumulative and nn-cumulative preference shares (Sectin 47) Bnus issuance specifically prvided certain cnditins impsed cannt be issued frm revaluatin reserve and in lieu f dividend (Sectin 63) Offerncemadecannt bewithdrawn Rule 14 f Cmpanies (Share Capital and Debentures) Rules, 2014) Prhibitin f issue f shares at discunt - issue at discunt t be vid (Sectin 53) Issue f sweat equity shares permitted (Sectin 54 & Rule 8 f Cmpanies (Share Capital and Debentures) Rules, 2014) Preferential issue value t be determined by registered valuer (Sectin 62 and Rule 13 f Cmpanies (Share Capital and Debentures) Rules, 2014) Specific mentin f issue f cnvertible debentures subject t sharehlders reslutin (Sectin 71)

9 Share Capital & Debentures In Private Placement mnies payable shall be paid thrugh cheque r demand draft f ther banking channels but nt by cash (Sectin 42 (5)) Alltment f Securities within 60 days frm the date f receipt fapplicatin mney (Sectin 42 (6)) Mney received n applicatin shall be kept in a separate bank accunt and shall nt be utilised fr any purpse except (Sectin 42 (6)) Fr adjustment against alltment f securities Fr repayment f mnies where the cmpany is unable t allt securities Certificate fr the alltted securities t be issued Within 2 mnths frm the date f alltment f shares Within 6 mnths frm the date f alltment f debentures

10 Prcess f Private Placement New issuances by private cmpanies t be either (i) rights r bnus issues, r (ii) private placement (Sectin 23(2)) Private placement defined (Sectin 42(2) Explanatin II) any ffer f securities/ invitatin t subscribe t securities t a select grup f persns thrugh issue f a private placement ffer letter ffer/ invitatin t persns nt exceeding 200 in a financial year + prescribed cnditins Issue f equity instruments nw have t cmply py with private placement nrms and preferential alltment nrms! Rules define Preferential Offer t mean: Issue f equity shares r cnvertible securities T any select persn r grup n a preferential basis Excludes public issue, rights issue, ESOP, ESPS, sweat equity, bnus, DRs issued utside India r freign securities

11 Prcess f Private Placement Private placement limit des nt include QIBs and ESOPs (Sectin 42(2)) Rules prescribe: 200 persn limit The value f the ffer r invitatin per persn must be with an investment size f nt less than INR 20,000 f the face value f the securities Very Tricky Issue! Abve 2 cnditins nt applicable t NBFCs and HFCs if RBI / NHB have prescribed regulatins and they are cmpliant with them Special reslutin t issue all securities required fr each ffer

12 Prcess f Private Placement Preferential issue price t be determined by registered valuer (Sectin 62(1)(c)) Rules state that valuer can chse amngst multiple valuatin methds, depending n the purpse f valuatin, such as NAV methd, market price methd, PECV methd, DCF methd, weighted average methdetc. Rules state that cnversin price als has t be determined befrehand n the basis f the registered valuer reprt Is the flexibility n cnversin frmula gne? What is the crrect prcess nw specially fr PE investrs? Psing implementatin challenges

13 Cnfusing Private Placement Prcess! Cmplete recrd f all fferees t be maintained (Sectin 42(7)) Name f fferee t be recrded prir t invitatin t subscribe Rules letter f ffer and applicatin frm t be sent within 30 days f such recrding Private placement details t be filed with ROC (Sectin 42(7)) Alltment within 60 days failing which mney t be refunded with 15 days; y; interest n delay in refund (Sectin 42(6)) Des nt tie in with FDI plicy? N fresh ffer unless earlier ffer cmpleted/ withdrawn (Sectin 42(3)) Nn-cmpliance with private placement nrms - deemed t be a public ffer (Sectin 42(4)) Penalty Cmpany, prmters and directrs liable, penalty is amunt invlved in ffer r Rs. 2 crres, whichever is higher. Cmpany has t refund all mnies t subscribers within 30 days f rder (Sectin 42(10))

14 Are yu my subsidiary? Test f subsidiary is exercise r cntrl f > 50% f the ttal share capital instead f > 50% equity share capital (s. 2(87)) S an investr hlding CCPs f a greater amunt than equity sharehlders may becme the hlding cmpany f its prtfli entity? PE investrs nt registered it as cmpanies under 2013 Act als cvered? 50% test can be satisfied directly r tgether with ther subsidiaries (s. 2(87)) Hlding f CCDs des nt trigger the prvisin Whether freign hlding cmpanies included? Sectin 4(7) gne!

15 Prspectus Dcument cntaining ffer f securities fr sale t the public t be deemed prspectus (Sectin 25) nly public cmpany can issue prspectus Matters t be stated in prspectus (Sectin 26) Variatin in the terms f cntract t r bjects in prspectus (Sectin 27) Pssible nly with the apprval f sharehlders by way f a special reslutin, the dissenting sharehlders t be given exit by the prmter r cntrlling sharehlder h at exit price Offer f sale t the public thrugh prspectus (Sectin 28) Public ffer f securities t be in dematerialise frm (Sectin 29) Shelf Prspectus (Sectin 31) Red Herring Prspectus (Sectin 32)

16 Prspectus Issue f applicatin frms fr securities accmpanied by an abridged prspectus (Sectin 33) Criminal liability fr mis-statements in prspectus (Sectin 34) Same punishment as fr fraud under Sectin 447 Civil liability fr mis-statements in prspectus (Sectin 35) Liable t pay cmpensatin t every persn wh has sustained lss r damage acting n any statement incuded r mitted in the prspectus Where prspectus is issued with intent t defraud the applicants fr the securities r any ther persn r fr any fraudulent purpse, persns referred t in Sectin 35(1) will be persnally respnsible withut any limitatin f liability fr all r any f the lsses r damages that may have been incurred by any persn wh subscribed t the securities n the basis f such prspectus (Sectin 35(3)) 3 Punishment fr fraudulently inducing persns t invest mney (Sectin 36) punishment under Sectin 447

17 Prspectus N alltment f securities if the amunt stated in the prspectus as theminimum i subscriptin and the sums payable n applicatin have been paid t and received by the cmpany (Sectin 39 (1)) If the minimum subscriptin r the amunt payable n applicatin is nt received within 30 daysfrmthedateftheissuefprspectus, the entire amunt received has t be refunded (Sectin 39 (2)) Securities t be dealt in stck exchanges (Sectin 40)

18 Questins?

19 Thank Yu