The MCA has vide gazette notification dated 14th December 2011 amended the Unlisted Public Companies (Preferential Allotment) Rules 2003 vide the 2011 Amendment Rules. Salient features of the amendment are:
1) The definition of "preferential allotment" has been expanded to include instruments convertible into shares including hybrid instruments convertible into shares on a preferential basis but has excluded private placement made by a company under section 81(1A) and issue of shares to promoters and their relatives either in public issue or otherwise;
2) A proviso has been added in the above definition to state that the name, father's name, address & occupation needs to be mentioned in the resolution to be passed by the members u/s 81(1A) for the preferential issue;
3) Another proviso has been added that such preferential offer cannot be made to more than 49 persons;
4) A new rule 8 has been added which states that no fresh offer shall be made unless the earlier offer has been completed and the allotment in respect thereof. Any offer not in compliance with sec 81(1A) read with sec 67(3) shall be treated as a public offer and SEBI regulations on the subject shall apply. Monies shall be received under the offer only through cheque or demand draft or other banking channels (presumably NEFT, internet banking), not by cash. Allotment should be completed within 60 days of the date of receipt of application money and in case the company is not able to do that, then application monies have to be repaid within 15 days thereof with an interest of 12% p.a. Monies received on application have to be kept in a separate bank account and can be utilised only for adjustment against allotment of securities or repayment of moneys where allotment could not be done within the stipulated time. Companies are not allowed to release any advertisement or use any media, marketing or distribution channels or agents in such issue.
Copy of the MCA notification can be found here
1) The definition of "preferential allotment" has been expanded to include instruments convertible into shares including hybrid instruments convertible into shares on a preferential basis but has excluded private placement made by a company under section 81(1A) and issue of shares to promoters and their relatives either in public issue or otherwise;
2) A proviso has been added in the above definition to state that the name, father's name, address & occupation needs to be mentioned in the resolution to be passed by the members u/s 81(1A) for the preferential issue;
3) Another proviso has been added that such preferential offer cannot be made to more than 49 persons;
4) A new rule 8 has been added which states that no fresh offer shall be made unless the earlier offer has been completed and the allotment in respect thereof. Any offer not in compliance with sec 81(1A) read with sec 67(3) shall be treated as a public offer and SEBI regulations on the subject shall apply. Monies shall be received under the offer only through cheque or demand draft or other banking channels (presumably NEFT, internet banking), not by cash. Allotment should be completed within 60 days of the date of receipt of application money and in case the company is not able to do that, then application monies have to be repaid within 15 days thereof with an interest of 12% p.a. Monies received on application have to be kept in a separate bank account and can be utilised only for adjustment against allotment of securities or repayment of moneys where allotment could not be done within the stipulated time. Companies are not allowed to release any advertisement or use any media, marketing or distribution channels or agents in such issue.
Copy of the MCA notification can be found here
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