Prefrential allotment

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 April 2012 Dear Members,

Taking a situation wherein in unlisted public Company I have to allot equity shares on preferential basis to 70 shareholders.

Any offering of securities to 50 persons or more is a public offering by virtue of Section 67(3) of the Companies Act, 1956.

Therefore I am showing two EGM for passing special resolution by the members authorizing the board of directors to make such issue.

However gap between two EGM is of 15 days. Supported by shorter consent of all shareholders.

My question is am I right to follow said procedure or there is any better way to do it.

Regards,

vignesh

vignesh (Expert)
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26 April 2012 Dear Sir,

No need to conduct two egms. Just conduct one egm and get the approval for the total amount for instance Rs.50 lacs. You can issue the shares on preferential allotment through board resolution itself and you can allot 40 members in the first and the balance in the another board meeting.

Querist : Anonymous

Querist : Anonymous (Querist)

26 April 2012 Thank you for your reply.

But, as per Unlisted Public Companies (Preferential Allotment) Amendment Rules, 2011 any proposed offer shall not be made to more than 49 allottees.

Also details like name, father's name, address and occupation of proposed allottees has to mentioned in special resolution.

Regards,

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Querist : Anonymous

Querist : Anonymous (Querist)

03 May 2012 Waiting for replies.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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10 August 2024 In the context of preferential allotment in unlisted public companies, there are specific regulations and procedures that must be followed. Let’s address your queries with a focus on compliance with the relevant provisions under the Companies Act, 1956, and subsequent amendments, including the Unlisted Public Companies (Preferential Allotment) Amendment Rules, 2011.

### **1. **Compliance with Preferential Allotment Rules:**

**a. **Companies Act, 1956:**

- **Section 67(3):** States that offering securities to 50 persons or more is considered a public offering. This would necessitate compliance with public offering regulations unless specific exemptions apply.

- **Special Resolution:** Under Section 81(1A) of the Companies Act, 1956, a special resolution must be passed to authorize the board of directors for a preferential allotment.

**b. **Unlisted Public Companies (Preferential Allotment) Amendment Rules, 2011:**

- **Rule 13:** Specifies that the preferential allotment shall not be made to more than 49 allottees. This rule is crucial because it restricts the number of allottees in an unlisted public company to avoid the situation being classified as a public offering.

- **Details of Allottees:** You must provide details such as name, father's name, address, and occupation of the proposed allottees in the special resolution, as per the rules.

### **2. **Procedure for Preferential Allotment:**

**a. **Passing Special Resolution:**

- **Requirement:** A special resolution is required to be passed by the shareholders to authorize the board to make the preferential allotment. The resolution must be passed in a general meeting (EGM).

- **Two EGMs:** While holding two EGMs with a 15-day gap could be a procedural option, it's important to ensure compliance with the legal requirements and avoid any potential procedural errors.

**b. **Alternate Procedure:**

- **Single EGM Option:** Since the Unlisted Public Companies (Preferential Allotment) Amendment Rules, 2011 restrict the number of allottees to 49, you should consider revising the allotment to comply with this rule. If you are required to allot shares to 70 shareholders, you may need to either:
- **Revise the Allotment Plan:** Ensure that the number of allottees is 49 or fewer.
- **Seek Shareholders' Consent:** If revising is not feasible, you must ensure proper documentation and approval from all shareholders for an exemption or different compliance strategy.

**c. **Documentation and Filing:**

- **Special Resolution:** The special resolution must detail the allotment terms and the list of proposed allottees.

- **Compliance:** Ensure compliance with all regulatory requirements, including filing with the Registrar of Companies (ROC) and obtaining any necessary approvals or consents.

### **3. **Key Points to Consider:**

- **Legal Compliance:** Ensure that the total number of allottees does not exceed 49 unless exempted or approved otherwise.

- **Documentation:** Ensure that all documents, including the special resolution and details of the allottees, are correctly filed and comply with the regulatory requirements.

- **Review Rules and Regulations:** Always review the latest rules and regulations to ensure compliance, as laws and amendments may change.

### **Conclusion:**

In your scenario, holding two EGMs with a 15-day gap might not be necessary if the total number of allottees exceeds 49. Instead, focus on revising the allotment plan to comply with the rules. If necessary, consult with a legal expert or company secretary to ensure all regulatory requirements are met, and consider any exemptions or alternative compliance strategies if needed.