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Furthr issu of share capital sec. 62 (1) (a)

RACHANA DAGA (CS) (555 Points)

02 February 2015

Dear Experts,

There in one Private Limited Company , in which two memers. Company is subsidiary of Foregin Company. Now Company wants to increse its paid up capital in the raito of 80 : 20 as decided earlier.

Kindly sugesst in this case , as we have decided to take help of 62 (1 ) (a) and there is no same thing in Section 42 and 62 (1) (a) .

Kindly help and do us needful.

Thanks & Regards.

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Discussion > Corporate Law > Co Act 2013 >

Sec 42 and sec 62(1)(c) of companies act 2013

Pages : 1 2

Hemant Kejriwal Associate [ Scorecard : 34]	Posted On 04 June 2014 at 18:34
	Hello Everyone, Can anyone clarify the diiference between Sec 42 (Offer or invitation for subscriptttion of Securities on Private Placement) and Sec 62(1)(c) (Further Issue of Share Capital on preferential basis). Also, If Company X Pvt Ltd want to opt for further issue of share capital, what is the procedure to be followed?
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Ashish Gupta [ Scorecard : 45]	Posted On 04 June 2014 at 22:55
	Both are same under the Companies Act, 2013 insofar as the Company going for preferential allotment under Section 62(1)(c) also needs to comply with the conditions laid down in Section 42. Pls refer Rule 13 (1) of the Companies (Share Capital and Debentures) Rules, 2014. Regards Ashish


Shilpa Company Secretary [ Scorecard : 171]	Posted On 05 June 2014 at 11:36
	Hi Hemant, Please open the attached file. I hope this will help you in understanding the concept. With regards Attached File : 1002262 1323777 further issue of shares through private placement and preferential allotment.pdf downloaded 3913 times Message Thanked by (Total thanks : 1)

Shilpa Company Secretary [ Scorecard : 171]	Posted On 05 June 2014 at 11:40
	Procedure for Private Placement / Preferential Allotment 1.Send Notice of Board Meeting as per section 173 of the Companies Act, 2013. 2.Convene a Board Meeting and pass following resolution: a) Decide the names of the subscribers to the issue. b) Prepare and Approve the Offer Letter in PAS-4. c) Prepare Share Application Form. d) Fix the Date, time, place of General Meeting and approve the notice and explanatory statement. 3.Send notice (along with explanatory statement) of the General Meeting to members, Directors as per section 101 and 102 of the Companies Act, 2013. 4.Send Offer Letter (Form PAS-4) alongwith Share Application Form to subscribers to issue within 30 days from the date of recording the name of the Persons in PAS-5 5.Hold EGM on the convened date and pass special resolution under section 62. 6.File Form MGT-14 within 30 days of passing Special Resolution along with Explanatory statement. 7.File Return of Allotment in PAS-3 within 30 days. Attachment to Form a) List of Allottees (LOA) b) LOA shall be certified by the signatory (Director/ CS) of Form. c) Valuation Report 8. Maintain the record of the Allotment of securities issued. 9. File PAS-4 and PAS-5 with ROC within 30days of circulation of relevant private placement Offer Letter in GNL-2. Message Thanked by (Total thanks : 2)

Vaiyapuri kannan V.P.FINANCE & COMPANY SECRETARY [ Scorecard : 159]	Posted On 05 June 2014 at 12:25
	Both private placement under section 42 and preferential allotment u/s 62(1)(c) are not same . The first one is an alternative machanism in the hands of public companies ( listed & unlisted public companies) and that is to approach public for raising further funding by avioding the routine procedures of issuing prospectus and complying with all others sebi 's compliance .wheraas the second one was specifically designed for the company which decides to issue shares to outsiders whenever it could not get further funding from the existing shareholders . Simplying saying that the conditions stated under section 42 should be complied with once the company has preferred the route stated under section 62(1)(c) for raising further funding was not right if we could not understand the intended purposes that to be separately served by these two sections

Ashish Gupta [ Scorecard : 45]	Posted On 05 June 2014 at 14:34
	Pls refer to Q25 of the discussion paper between ICSI and ROC Karnataka (attached herewith for reference). Hope this clarifies. Regards Ashish Gupta Attached File : 1293226 1323865 conclusions drawn from roc 39 s session blr chapter of icsi 01 05 14.pdf downloaded 1849 times Message Thanked by (Total thanks : 1)

Uday Prasad CS [ Scorecard : 36]	Posted On 05 June 2014 at 15:38
	What will be the procedure if company want to convert its loan into equity shares. Kindly note: At the time of sanction of loan in 2010 company entered into agreement with bank that if company fails to repay the loan amount the unpaid loan amount will be converted into equity shares at par value.

Vaiyapuri kannan V.P.FINANCE & COMPANY SECRETARY [ Scorecard : 159]	Posted On 05 June 2014 at 15:53
	ROC replied that there is no difference between private placement & preferential allotment under the companies act 2013. It is ROC opinion or comments on the question of similarity between the private placement & preferential allotment . Once we get into practice side we would understand that if a company , which could not able to raise further capital from the existing sharesholders under section 62 (1)(a) , could raise the required fund from the outsiders under section 62 (1)(c) by passing a special resolution in general body meeting ,but in this circumtance the company can not approach any unknown public becuase it is against the basic provisions of private limited or against the provisions stated in part I of chapter III of new companies Act 2013 if it is public company . The main underlying point emphasised in section 42 is that the pvt ltd company should be restricted from approaching unknown common public by issuing any kind of invitation for subscribing in shares and the public company should be prevented from escaping compliance of provisions stated in part I of chapter III of new company act because the sebi wants to protect interest of common investors And hence it may be inferred that irrespective of fact that whether a company has complied with section 42 while going thru 62(1)(c) or not , the company would not go beyond the provisions stated in clause 2 ( 68 ) if it is pvt limited company or the provisions contained in part I of chapter III of new act if it is public ltd company . So additional compliance with sec 42 while going thru sec 62(1)(c) route would not be necessciated if the company concerned takes care of compliances of relevant applicable provisions stated in the nature of restriction as explained above Message Thanked by (Total thanks : 1)

Hemant Kejriwal Associate [ Scorecard : 34]	Posted On 06 June 2014 at 20:15
	Thanks all for your valuable comments.

Raja. company secretary [ Scorecard : 71]	Posted On 11 July 2014 at 11:30
	Hello.. Can any one provide me the Draft Board Resolutions and Special resolution (Passed in EGM) for issue of shares under section u/s 62(1)(c) of the companies act, 2013. and what are the sequence of filling Forrm MGT 14. GNL 2 with ROC? Do we need to attach Valuers report for price justification attached to GNL 2 or MGT 14? Plz Reply as early as possible . I will be very thankful for your early responce.