Unlisted Companies (Issue of Sweat Equity Shares) Rules, 2003

Transcription

1 Unlisted Companies (Issue Swe Equity Shares) Rules, 2003 [Notificion No. GSR 923(E), ded ] In exercise the powers conferred by proviso to sub-section (1) section 79 A the Companies Act, 1956 (1 1956) read with sub-section (1) section 642 the said Act, the Central Government hereby makes the following rules, namely: 1. Short title and commencement (1) These rules may be called the Unlisted Companies (Issue Swe Equity Shares) Rules, (2) They shall come into force on the de their publicion in the Official Gazette. 2. Definitions In these rules, unless otherwise defined, (i) "Asset" means a resource controlled by the company and from which future economic benefits are expected to flow to the company; (ii) "employee" means (a) a permanent employee the company working in India or out India; or (b) a director the company, employed as a whole-time director or executive director a company; (iii) "intangible asset" means an identifiable non-monetary asset, without physical substance, held for use in the production or supply goods or services, for rental to others, or for administrive purposes; (iv) "share price" means price a share on a given de arrived on the net worth basis; (v) "value addition" means anticiped economic benefits derived by the enterprise from expert and/or pressional for providing know-how or making available rights in the nure intellectual property rights, by such person to whom swe equity is issued for which the considerion is not paid or included in: (a) the normal remunerion payable under the contract employment, in the case an employee and/or (b) monetary considerion payable under any other contract, in the case nonemployee. 3. Applicability

2 These rules shall be applicable to issue swe equity shares by all unlisted companies. 4. Special resolution (1) For the purpose passing a special resolution under clause (a) sub-section (1) section 79A the Companies Act, 1956 (1 1956), the explanory stement to be annexed to the notice for the general meeting pursuant to section 173 the said Act shall contain particulars as specified below: (i) the de the meeting which the proposal for issue swe equity shares was approved by the Board directors the company; (ii) e reasons/justificion for the issue; (iii) the number shares/considerion for such shares and the class or classes persons to whom such equity shares are to be issued; (iv) the value the swe equity shares alongwith valuion report/basis valuion and the price which the swe equity shares will be issued; (v) the names persons to whom the equity will be issued and the person's relionship with the company; (vi) ceiling on managerial remunerion, if any, which will be affected by issuance such equity; (vii) a stement to the effect th the company shall conform to the accounting policies specified by the Central Government; and (viii) diluted earning per share pursuant to the issue securities to be calculed in accordance with the Accounting Standards specified by the Institute Chartered Accountants India. (2) Approval shareholders by way separe resolution in the general meeting shall be obtained by the company in case grant shares to identified employees and promoters, during any one year, equal to or exceeding 1% the issued capital (excluding outstanding warrants and conversion) the Company the time grant the swe equity shares. 5. Register shares The company shall maintain a Register Swe Equity Shares issued under section 79A in the Form specified in Schedule annexed to these rules..

3 6. Restriction on issue swe equity shares The company shall not issue swe equity shares for more than 15% total paid up equity share capital in a year or shares the value 5 crores rupees, whichever is higher except with the prior approval the Central Government. 7. Disclosure in the Directors' Report The Board directors shall, inter alia, disclose either in the Directors' Report or in the annexure to the Directors' Report, the following details issue swe equity shares: (a) number shares to be issued to the employees or the directors; (b) conditions for issue swe equity shares; (c) the pricing formula; (d) the total number shares arising as a result issue swe equity shares; (e) money realised or benefit accrued to the company from the issue swe equity shares; (f) diluted Earnings Per Share (EPS) pursuant to issuance swe equity shares. 8. Pricing swe equity shares The price swe equity shares to be issued to employees and directors shall be a fair price calculed by an independent valuer. 9. Issue swe equity shares for considerion other than cash Where a company proposes to issue swe equity shares for considerion other than cash, it shall comply with following: (a) the valuion the intellectual property or the know-how provided or other value addition to considerion which swe equity capital is issued, shall be carried out by a valuer; (b) the valuer shall consult such experts, as he may deem fit, having regard to the nure the industry and the nure the property or the value addition; (c) the valuer shall submit a valuion report to the company giving justificion for the valuion; (d) a copy the valuion report the valuer shall be sent to the shareholders with the notice the general meeting; (e) the company shall give Justificion for issue swe equity shares for considerion other than cash, which shall form part the notice sent for the general meeting; and

4 (f) the amount swe equity shares issued shall be treed as part managerial remunerion for the purposes sections 198, 309, 310, 311 and 387 the Companies Act, 1956 if the following conditions are fulfilled: (i) the swe equity shares are issued to any director or manager; and (ii) they are issued for non-cash considerion, which does not take the form an asset which can be carried to the balance sheet the company in accordance with the relevant accounting standards. 10. Lock-in swe equity shares Swe equity shares issued to employees or directors shall be locked-in for a period three years from the de allotment. 11. Certifice from auditors In the case every company th has allotted shares under these rules, the Board directors, shall each annual general meeting place before the shareholders a certifice from the auditors the company/ practising company secretary th swe equity shares have been allotted in accordance with the resolution the company in the general meeting and these rules. 12. Accounting policies (1) Where the swe equity shares are issued for a non-cash considerion, such non-cash considerion shall be treed in the following manner in the books account the company: (a) where the non-cash considerion takes the form a depreciable or amortizable asset, it shall be carried to the balance sheet the company in accordance with the relevant accounting standards; or (b) where clause (a) is not applicable, it shall be expensed as provided in the relevant accounting standards; or (2) In respect swe equity shares issued during accounting period, the accounting value swe equity shares shall be treed as another form compension to the employee or the director in the financial stement the company. Register Swe Equity Shares (Pursuant to rule 5) The register swe equity shares issued by the company to be kept in the following form:

5 Sl. N o. Folio No./Certifi ce No. De passing resoluti on De issue swe equi ty shar es Nam e the allott ee Stus the allotte e- wheth er directo r or emplo yee Refere nce to entry in register membe rs No. swe equi ty shar es issue d Face value the shares Price which shares issued Total considerion paid by employee/director Lock in period till which de