TRANSFER OF UNCLAIMED DIVIDEND AND UNCLAIMED SHARES- PROCEDURE

Unclaimed or Unpaid Dividend

The purpose of investing in shares is to get returns thereon. When a company earns profits, the same will be distributed to the shareholders by way of dividend. Section 123 of the Companies Act, 2013, deals with Declaration of Dividends. The Board of Directors of the company recommend dividend and the shareholders at the General Meeting approve the dividend. When the dividend is not claimed by the shareholders, it shall be transferred to Unpaid Dividend Account in accordance with Section 124 of the Companies Act, 2013.

Meaning of Unclaimed Dividend;

The dividend that has been declared by the company and has not been paid or claimed by the members is named as unclaimed or unpaid dividend.

Applicable Section of the Companies Act 2013 and the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016

As per Section 124(5) of the Companies Act, 2013; the unclaimed or unpaid dividend for a period more than 7years has to be transferred to Investor Education and Protection Fund established under the Section 125 of the Companies Act, 2013, by the Central Government. The procedure for transferring the amount unpaid or unclaimed to the IEPF is stated in the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016.

Forms to be Filed

The following forms are prescribed by the Government relating to Unclaimed Dividend;

·         Form No. IEPF-1- Statement of amounts to be credited to IEPF

·         Form No. IEPF-2- Statement of unclaimed or unpaid amounts

·         Form No. IEPF-3- Statement of shares and unclaimed or unpaid dividend not transferred to the IEPF

·         Form No. IEPF-4- Statement of shares to be transferred to IEPF

·         Form No. IEPF-5- Application to the Authority(constituted under Section 125(5) of the Companies Act, 2013) for claiming unpaid amounts and shares from the IEPF

·         Form No. IEPF-6- Statement of unclaimed and unpaid amounts to be transferred to IEPF

Amounts to be credited to the IEPF

As per Section 125 of the Companies Act, 2013, the following shall be credited to Investor Education and Protection Fund;

a.        the amount given by the Central Government by way of grants after due appropriation made by Parliament by law in this behalf for being utilised for the purposes of the Fund;

b.       donations given to the Fund by the Central Government, State Governments, companies or any other institution for the purposes of the Fund;

c.        the amount in the Unpaid Dividend Account of companies transferred to the Fund under sub-section (5) of section 124;

d.       the amount in the general revenue account of the Central Government which had been transferred to that account under sub-section (5) of section 205A of the Companies Act, 1956, as it stood immediately before the commencement of the Companies (Amendment) Act, 1999, and remaining unpaid or unclaimed on the commencement of this Act;

e.       the amount lying in the Investor Education and Protection Fund under section 205C of the Companies Act, 1956;

f.         the interest or other income received out of investments made from the Fund;

g.        the amount received under sub-section (4) of section 38;

h.       the application money received by companies for allotment of any securities and due for refund;

i.         matured deposits with companies other than banking companies which has remained unclaimed and unpaid for a period of seven years from the date of it becoming due for payment;

j.         matured debentures with companies which has remained unclaimed and unpaid for a period of seven years from the date of it becoming due;

k.        interest accrued on the amounts referred to in clauses (h) to (j);

l.         sale proceeds of fractional shares arising out of issuance of bonus shares, merger and amalgamation for seven or more years;

m.      redemption amount of preference shares remaining unpaid or unclaimed for seven or more years; and

n.       such other amount as may be prescribed

Further, through notification to the IEPF Rules, 2016, the following additional amounts shall be credited in the Fund:

a.        All shares in respect of which dividend has not been paid or claimed for 7 consecutive years or more.

b.       All resultant benefits arising out of shares held by IEPF under section 124(6) like dividend, bonus shares, etc.

c.        All grants, fees and charges received by the Authority under these rules;

d.       All sums received by the IEPF Authority from such other sources as may be decided upon by the Central Government

e.       All income earned by the IEPF Authority in any year;

f.         All amounts payable as mentioned in Section 108(3) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and Section 10B of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980; and

g.        All other sums of money collected by the IEPF Authority as envisaged in the Act

h.       Due, unpaid or unclaimed interest on matured deposits transferred to the Fund;

i.         Due, unpaid or unclaimed interest on matured debentures transferred to the Fund;

Procedure for transfer of Dividend

·         According to Section 123(4) of the Companies Act, 2013, the amount of dividend declared, out of profits or out of money provided by the Government, shall be deposited in a Schedule Bank Account within 5days of declaration.

·         If the declared dividend remains unpaid or unclaimed in the dividend account for more than 30days from the date of declaration, the said amount shall be transferred to Unpaid Dividend Account within 7days from the expiry of 30days as per Section 124 of the Companies Act, 2013.

·         As per Section 124(5), any money remaining unclaimed in the Unpaid Dividend Account for a period more than 7years from the date of transfer of dividend to the said account along with the interest accrued (if any), be transferred to the Investor Education and Protection Fund (IEPF) established by the Central Government within a period of 30days of such shares becoming due.

·         According to provision to rule 6(3)(a) of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, the company shall issue notice to the shareholders concerned regarding transfer of shares three months before the due date of the shares to be transferred to the fund and also publish the notice in one leading English newspaper and a regional language newspaper.

·         The company shall also publish on their website the details of such shareholders and shares due to be transferred.

Depositing/ Crediting to IEPF and Forms to be filed

·         The deposit can be made online or offline for transfer of such amount from the Unpaid Dividend Account to the IEPF.

·         In case of Offline payment, three copies of challan are to be generated and the same shall be submitted to the concerned authority (constituted under Section 125(5) of the Companies Act, 2013).

·         Thereafter, the company shall file Form No. IEPF-1 with the statements of amounts credited to IEPF as per provision of rule 5(4) of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016.

·         The company shall within a period of 90days after the AGM and every year thereafter till the completion of 7 years identify the unclaimed dividend amount and the statement of the unclaimed or unpaid dividend shall be filed in Form No. IEPF-2 as per provision of rule 5(8) of the IEPF Rules, 2016.

·         In case, specific order of the Court or Tribunal or Statutory Authority restrains the transfer of shares or dividend, the company shall not transfer the same to the Fund. The company shall furnish to the authority Form No. IEPF-3 within 30days from the end of financial year containing statement of shares and unclaimed or unpaid dividend not transferred to the IEPF.

·         Within 30days from the end of financial year, the company shall furnish a statement to the authority in Form No. IEPF-6 statement of unclaimed or unpaid dividend due to be transferred to the Fund in the next financial year.

Manner for Transfer of Shares to IEPF as per Rule 6 of Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016

·         Where the shares are dealt with depository, the company shall inform the depository who shall effect the transfer of shares. Under the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, the shares shall be credited to IEPF Suspense Account with one Depository Participant as may be identified by the Authority.

·         In case of shares held in physical form, after passing necessary Board/ Committee resolution for transfer, application shall be made by the Company Secretary or the person authorised by the Board on behalf of the concerned shareholders for issue of duplicate certificates.

·         The duplicate certificate issued on receipt of the application shall on the face of it contain that the duplicate certificate is “Issued in lieu of share certificate No. ___ for the purpose of transfer to IEPF”.

·         Particulars of such share certificate issued shall be entered in the register maintained in Form SH-2.

·         After the issue of duplicate certificates, the Company Secretary or the persona authorised by the Board, shall sign the Form No. SH-4 for transferring the shares in favour of the Fund.

·         The company or depository shall preserve copies of the depository instruction slips, transfer deeds and duplicate certificates for its record.

·         The company shall inform the depository to convert the duplicate share certificates issued into DEMAT form and transfer them to the authority concerned.

·         While effecting the transfer, the company shall file the Form No. IEPF-4 containing the statement of shares to be transferred to IEPF. The voting rights on shares transferred to the Fund shall remain frozen until the rightful owner claims the shares.

(The above provisions excepting the provision for transfer of shares to IEPF are applicable. The provision relating to transfer of shares is yet to be notified).

Claiming the Unpaid amounts and shares from IEPF as per Rule 7 of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016

·         The claimant, whose shares unclaimed dividend or interests thereon has been transferred to IEPF, shall make an online application in Form No. IEPF-5. The claimant shall file only one consolidated claim in respect of a company in a financial year.

·         The claimant shall send the form duly signed by him, with the other documents necessary, to the concerned company at the registered office for verification of the claim.

·         Documents required are;

                                 i.            Copy of Acknowledgement

                                ii.            Indemnity Bond with claimant signature

                              iii.            Advance Stamped Receipt

                              iv.            Copy of Aadhar Card

                                v.            Proof of entitlement (certificate of shares, etc.)

                              vi.            In case of refund of matured deposit or debentures, original certificate thereto

                             vii.            Cancelled cheque leaf

                           viii.            Copy of Passport, OCI and PIO card in case of foreigners and NRI

                              ix.            Other optional document, (if any)

·         The company shall send a verification report to the Authority within 15days from the date of receipt of claim from the claimant.

·         Application received for refund of any claim duly verified by the company shall be disposed off by the Authority within 60days from the date of receipt of verification report from the company. Any further delay beyond 60days shall be recorded in writing specifying the reasons for delay and the same shall be communicated to the claimant.

·         After verification of the report, the authority shall take following actions;

                                 i.            To the amount claimed, the authority and then Drawing and Disbursement officer of the Authority shall present a bill to the Pay and Accounts Office for e-payment.

                                ii.            In case of shares claimed, the authority shall issue a refund sanction order with the approval of competent Authority and shall credit the shares lying with the Depository Participant in IEPF suspense account to the DEMAT account of the claimant and in case of physical shares, cancel the duplicate certificate and transfer the shares to the claimant.

In case of Delisting or Winding up of the Company

·         If the company is getting delisted, Authority shall surrender such shares with SEBI and the proceeds realized shall be credited to the Fund.

·         In case of company whose shares are held by the authority is being wound up, the Authority may surrender the shares and credit the realised amount to the Fund. Any further dividend declared shall be credited to the Fund and a separate ledger account shall be maintained for such proceeds.

Format of Notice to be issued to the Shareholders and in the newspaper

COMPANY NAME AND REGISTERED OFFICE ADDRESS

CIN: ____

NOTICE TO THE SHAREHOLDERS

TRANSFER OF UNPAID/ UNCLAIMED DIVIDEND FOR THE FINANCIAL YEAR 2009-10 TO THE INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Notice is hereby given to the shareholders of the company pursuant to Rule 6 of Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, as under;

In pursuance of the provisions of Section 125(1) of the Companies Act, 2013, the Central Government has established “Investor Education and Protection Fund”. In terms of Section 124(5), every company has to credit the amount of dividend which remains unpaid or unclaimed for a period of seven years from the date of its transfers to Unclaimed Dividend Account, to the IEPF. Accordingly, Dividend for the year 2009-10, which remains unclaimed for a period of 7 years, will be credited to IEPF in the month of September, 2017.

Recently the Government of India vide. Notification dated September 05, 2016 came out with Rules constituting the Investor Education and Protection Fund Authority to administer the said IEPF. In terms of the said Rules made thereunder, all shares in respect of which the dividends are not claimed/ paid for the last 7 years in respect of any shareholder have to be transferred to IEPF Suspense Account with one Depository Participant to be identified by the Investor Education and Protection Fund Authority.

To claim the dividend amount before its credit to IEPF, shareholders may forward to us a written application to claim the unclaimed dividend at the registered office of the company____, Chennai, on or before 30^th September, 2017. In case of no valid claim has been made, the shares in respect of which the dividends are lying unclaimed/ unpaid will be transferred to IEPF Suspense Account on completion of three months from the date of this notice, individually served on the members along with the details of unclaimed dividend.

The company has sent individual notices through registered post to the latest available addresses of the shareholders whose dividends are lying unclaimed since September, 2010 for the last 7 consecutive years, advising them to claim the dividends expeditiously.

Further, in terms of Rule 6(3) of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, the statement containing the details of name, address, folio number, demat account number and number of shares due to transfer is made available in our website www.websiteofthecompany.com for information and necessary action by the shareholders.

In case the concerned shareholders wish to claim the shares after transfer to IEPF, a separate application has to be made to the IEPF Authority in Form IEPF-5, as may be prescribed under the Rules and the same is made available at IEPF website i.e., www.iepf.gov.in.

For ___Company

Company Secretary/ Director

Place: Chennai

Date: 01-09-2017

PROCEDURE FOR FORFEITING THE SHARES

When should the shares be forfeited?

If a member fails to pay any call money for the shares on the day appointed for payment thereof, the shares shall be forfeited by the company.

Prerequisites for forfeiture

·         Power in Articles of Association (AOA)-

The authority to forfeit the shares, in case of member failing to pay call money, should be expressly provided in the Articles of Association of the company under the head ‘Forfeiture of Shares’. If there is no such power mentioned in the Articles of Association, shares cannot be forfeited.

·         Board Resolution

·         Intimation to the Stock Exchange about the Forfeiture of Shares

The Board shall pass the resolution, for forfeiture and for the issue of notice to the defaulting member, without which forfeiture will not come into effect.

·         Issue of Notice-

The defaulting members should be issued a notice calling for money due, failing which their shares will be liable for forfeiture.

Six copies of the notice shall be forwarded to the Stock Exchange.

Course of Action

·         The list of defaulting members (who had not paid the call money due) shall be prepared.

·         The Stock Exchange should be informed about the Board Meeting regarding forfeiture of shares.

·         At the meeting of the Board, the Board may, upon passing a resolution for forfeiture and for issue of notice, serve a notice on the shareholder with acknowledgement due requiring him to pay such amount remaining unpaid.

·         Six copies of the notice should be sent to the Stock Exchange.

·         Notice shall state the amount due (with interest at a specified rate and the dividend- if the AOA provides) and a date at which the payment shall be made by the shareholder which shall not be earlier than 14 days from the date of issue of notice.

·         The Notice shall also state that in the event of non-payment of the money due on or before the date specified, the respective shares shall be liable to forfeiture.

·         If money is not paid at that date, the company may forfeiture the shares at anytime by passing a Board Resolution.

·         The person whose shares have been forfeited shall cease to be a member but shall be held liable to pay to the company all monies which are payable by him before forfeiture. However, liability shall cease if and when the company receives all the monies that were due.

·         The entry of forfeiture should be made in the Register of Members and the name of the concerned shareholder will be removed from the Register and the information regarding the forfeiture should be intimated to Stock Exchange.

·         The company may publish the notice of forfeiture in the newspaper.

·         The concerned shareholder should be informed about the forfeiture of his shares through registered post with acknowledgement due or by any means provided in the AOA.

·         Duly verified declaration in writing signed by the director or manager or company secretary of the company should be obtained, stating the shares forfeited and the date, which shall act as the conclusive evidence.

·         Subsequently, with the power mentioned in AOA, the forfeited shares may be sold or disposed off in such manner as the Board may think fit.

PROCEDURE OF LLP (LIMITED LIABILITY PARTNERSHIP) FORMATION under LLP ACT 2008

PROCEDURE OF LLP (LIMITED LIABILITY PARTNERSHIP) FORMATION

STEP BY STEP PROCEDURE OF LLP (LIMITED LIABILITY PARTNERSHIP) FORMATION, IN INDIA

STEP – 1 APPLY FOR DIN -1

Apply for obtaining DIN (Director Identification Number) of proposed Designated Partners

Need to attach following documents (self attested) by an applicant with along with DIN 1 form

a)      1 passport size photograph in physical or a soft copy (in.JPEG format)

b)      Address Proof: Passport / Driving License having pin code /Election card. Or Electricity Bill/Telephone Bill/ Bank Statement certified by Bank Manager which should not be older than 2 months.

c)       Identity proof : PAN card (Mandatory Field of DIN form)

d)      Email address  of the applicant (Mandatory Field of DIN form)

e)      Mobile Number(Mandatory Field on DIN form)

f)       Annexure DIN 1(verification of an applicant) to be signed by an applicant

In case of Foreign Partner / NRI, the passport copy is mandatory requirement as a proof of identity.  The address proof should not be older than 1 year from the date of filing of the e-form.  The passport copy and address proof should be notarized by the consulate of the Indian Embassy, Foreign public notary or Company secretary in full time employment / CEO / Managing Director of the Indian company in which he/ she proposed to be a director.

STEP – 2 APPLY FOR DIGITIAL SIGNATURE CERTIFICATE:

Need to apply for Digital Signature Certificate of 2 Designated Partners. Need to attach documents (Identity Proof and Address Proof) with DSC application form same as mentioned for DIN 1  . An applicant is required to affix photo and sign across the photo on DSC application form and on 2^nd stage.

In case of a Foreign Partner / NRI , the Passport copy and address proof should be notarised by the consulate of the Indian Embassy , Foreign public notary or  company secretary in full time employment /CEO/ Managing Director of the Indian company in which he / she proposed to be a director .

STEP – 3 APPLICATIONS TO GOVERNEMENT FOR NAME AVAILABILITY OF THE PROPOSED LLP

Need to file e-form 1 with www.llp..gov.in for name availability.  The applicant also needs to give 5/6 proposed names in preference along with their meaning and significance of each word.

Refer Name Availability Guidelines issued by MCA

STEP – 4 VERIFICATION OF DOCUMENTS AND FORMS BY GOVERNMENT

After this, Form – 1 shall be checked by the Government (Registrar of Companies) in detail and may suggest some changes to be made in the attachments or form itself. Need to make necessary changes if any.

STEP 5 : FILLING OF INCORPORATION DOCUMENT  &  SUBSCRIPTION  STATEMENT  (E-FORM 2)

After Form –1 is approved by the Government (Registrar of Companies), the next step is to file Incorporation Document & Subscription Statement in E – form 2.

Attachments: -

1.       Address proof (Electricity/Telephone/Property Tax Bill)of not older  than 2 months self attested by one of the partners

2.       Incorporation Document  & Subscription  Statement  (Signed by each  Designated  Partner and witnessed by Professional )

STEP 6 : CERTIFICATE OF INCORPORATION

After verification by Government (ROC) and satisfied by it , it shall send soft copy of certificate   of Incorporation via email in Form 16 and physical  certificate of Incorporation by post.

STEP 7: DRAFTING OF LLP AGREEMENT

Need to draft LLP agreement duly printed on stamp paper and signed by each Designated Partner with the signature of two witnesses.  Note: The stamp duty applicable for agreement will vary from state to state depending upon the total contribution of LLP.

STEP 8 : FILING OF LLP AGREEMENT (E-FORM – 3)

Need to file following e – forms with the Government simultaneously within 30 days from the date of receipt of certificate of Incorporation.

a)      Form- 3 – LLP Agreement

As per updated ROC Procedure, no need to file form 4 for appointment of the same partners mentioned in form – 2.  Refer the note at the end for more details.

STEP – 9 : APPROVAL OF FORM -3

After verification by the Government and satisfied by it, it approves LLP Agreement.  This is the last step of LLP Incorporation.  The Company can start its business now onward.

**Note** : Any existing limited Liability Partnership (LLP) will need to file the particulars of designated partners/ partners with the  registrar at the time of their appointment along with any subsequent changes in the particulars  there after .  E- Form – 4 is required to be filed for appointment of new partners and / or cessation / change in designation of existing partner / designated partner.  No need to file form – 4 for appointment of same partners mentioned in Form – 2.  The change in the particulars of designated partner or partner having DIN shall be updated in the system through e - form DIN 4 and LLP shall file intimation thereof in this form.

Procedure of Issuing Shares under Companies Act 2013 (For Private Limited)

Procedure of Issuing Share Capital under Companies Act 2013 (For Private Limited)

Under the Companies Act 2013, A Company can raise funds to increase its Share Capital in the following ways:

1.      Private Placement / Preferential  Allotment

2.      Right Issue

3.      Public Issue

APPLICABILITY
From 1st April 2014

A. PRIVATE PLACEMENT

1.      As per Section. 42, of the Companies Act 2013 and Rule 14 under Companies (Prospectus and Allotment of Securities) Rules 2014), A private company has to follow the procedures for private placement of securities.

2.      A Private Placement is issuing shares to a selected group of people, including or not the existing shareholders, like friends, family members, Angel investors, Venture Capitalists etc.

3.      Securities means - equity shares, preference shares and debentures, convertible instruments, and also redeemable instruments.

4.      “Private Placement” means any offer of securities or invitation to subscribe securities (equity or securities that convert to equity) to a select group of persons by a company, other than by way of public offer, through issue of a private placement offer letter. 

B. RIGHTS’ ISSUE

A rights issue is directly offered to all existing shareholders of the Company in proportion to their current holding. The company also set a time limit for the shareholder to buy the shares. Companies pursue Rights Issue as an avenue to raise funds for various reasons, ranging from expansion or acquisitions to paying down debts.

Section 62 of Companies Act, 2013 contains provisions on “further issue of capital”, and enacts the principle of pre-emptive rights of shareholders of a company to subscribe to new shares of the company.

Provisions of Section 62 of Companies Act, 2013 are mandatory for all Private companies, public companies, and listed as well as unlisted companies.

PREFERENTIAL ALLOTMENT :

Sec 62 (1) Where at any time, a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares shall be offered:

(a) to persons who, at the date of the offer, are holders of equity shares of the company in proportion, as nearly as circumstances admit, to the paid-up share capital on those shares by sending a letter of offer subject to the following conditions, namely:—

(i)         the offer shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days and not exceeding thirty days from the date of the offer within which the offer, if not accepted, shall be deemed to have been declined;

(ii)        unless the articles of the company otherwise provide, the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person; and the notice referred to in clause (i) shall contain a statement of this right;

(iii)       after the expiry of the time specified in the notice aforesaid, or on receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the Board of Directors may dispose of them in such manner which is not dis-advantageous to the shareholders and the company;

PROCEDURE FOR ALLOTMENT OF SHARES ON RIGHT ISSUE BASIS:

Issue notice in writing to every Director at least seven days’ before convening the Board meeting. [Sec 173 (3)]

Convene a Board Meeting

Pass a Board resolution for approving “Letter of offer”. The offer letter shall include right of renunciation also.

Dispatch Letter of offer to all existing shareholders through registered post or speed post or through electronic mode at least three days before the opening of the issue.

Receive acceptance, renunciations, rejection of rights from shareholders.

Issue notice in writing to every Director at least seven days’ before convening the Board meeting. [Sec 173 (3)]

Convene a Board Meeting

Pass Board resolution for approving allotment and issue of shares.

File with Registrar a return of allotment in E-Form PAS-3 within 30 days of allotment of shares.

File E-form MGT 14 within 30 days of Issue of securities.

OTHER INFORMATION:

There is no prescribed format for “Letter of offer” to be issued, in case of right issue of securities. Format of “Letter of offer” prescribed in Companies Act, 2013 is Pursuant to section 42 and rule 14(1) of Companies (Prospectus and Allotment of Securities) Rules, 2014 and not for Section 62.

Letter of offer shall specify the number of shares offered and other information and limiting a time not being less than fifteen days and not exceeding thirty days from the date of the offer within which the offer, if not accepted, shall be deemed to have been declined;

Attach with E-Form PAS-3 (i) Board Resolution for allotment and issue of share. (ii) Letter of offer (iii) List of Allottees

List of Allottees attached with E-Form PAS-3 shall state the names, address, occupation, if any, of the shareholder and number of securities allotted to each of the allottees and the list shall be certified by the signatory of the Form PAS-3 as being complete and correct as per the records of the company.

OFFER LETTER

1.       An offer can be made under a Private Placement Offer Letter to not more than 200 people

2.      Notice of issue should be dispatched at least 3 days before opening of offer.

3.      Offer should remain open at least for 15 days and not more than 30 days.

4.      Addressed to specific person in writing or in electronic mode.

5.       Special Resolution – basis or justification of pricing (including premium) to be made in the explanatory statement. Purpose and object of offer Time schedule for which offer is valid. Price of offer and its justification the securities allotted has to be fully paid-up (i.e. it cannot be partly-paid).

6.      .In case the existing shareholders do not accept the offer; the directors should dispose such shares in a manner “non-disadvantageous” to the company.

7.      The 200 people limit excludes Qualified Institutional Buyers and Employees.

8.      The value of the Offer per person shall not be less than Rs 20,000 of the ‘face value’ of securities.  

9.      The payment for subscription should be through the bank account of the person subscribing to the securities and the company should keep a record of the bank account from where such payments have been received.

10.   No cash transaction is permitted.

11.   The money so received shall be kept in a separate bank account of the company and utilised only for allotment, prior to the allotment of shares, the share application money cannot be used for any other purposes.

12.  The Company should maintain record of such Bank A/C

13.   Maintain complete record in PAS-5 and PAS-4 to be filed with ROC

PENALTY

1.      Non-compliance can lead to a penalty of Rs 2 crores or the amount involved in the offer, whichever is higher.

2.      Refunding the share application money

3.      It means, Make Allotment of shares within 60 days of receipt of Money from the persons to whom right was given.  Else from the 75th day, the share application monies have to be repaid. In the event of failure to repay, interest at 12% pa has to be paid.

PROCEDURES TO BE FOLLOWED BY THE COMPANY GOING IN FOR PRIVATE PLACEMENT

1.      Check Provision in Article regarding Private Placement. If not there, amend the Articles.

2.      The Articles of Association should provide for and shareholders of the company through special resolution approve the Offer and this resolution should be acted upon within 12 months. At any given point in time, there should be only one active offer for each kind of security.

3.      Call Board Meeting to consider the following :        

a)      To Prepare Offer Letter

b)      Make Proposal for Private Placement

c)      Prepare list of persons to whom option will be given

d)     Call Extra Ordinary General Meeting (EGM)

Call Extra Ordinary Meeting to consider the following:

1.      Pass Special Resolution, which will be valid for 12 months

2.      If Private Placement is not completed in 12 Month, pass another Special Resolution

3.      Approve Draft Offer Letter by Special Resolution

4.      File MGT-14 with ROC with Attachments, viz. Notice of EGM – CTC of SR – Minutes

5.      Issue offer letter in PAS-4 within 30 days of record of name of persons:

6.      Application form serially numbered

7.      Address to the persons to whom the offer is made

8.      Prepare complete record of Private Placement in PAS-5

9.      File PAS-4 + PAS-5 with ROC within 30 days of issue of offer letter in GNL-2

10.  Called Board Meeting for allotment of shares

11.  File PAS-3 with Roc within 30 days if Allotment is made, along with prescribed attachments

12.  The price of the security has to be justified through a    valuation report by a Registered Valuer who can be a company secretary, chartered accountant or a cost accountant.

13.  File Form MGT-14 along with Resolution pass in Board meeting for allotment of shares.

Issue Share Certificates within 60 days of the allotmen