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Share issue by unlisted company

Pratibha (Service) (94 Points)

04 October 2010

Please help me to resolve following issue :

X Ltd. an unlisted (public) company with paid up capital of Rs.5 lacs (par value Rs. 10) having two prmoters A Ltd. and B Ltd. with equal shareholding.

Now X Ltd. wants to increase its share capital in the any one of the following manner:

1) can X Ltd. issue further shares to A Ltd. and B Ltd. proportionately @ Rs. 10 and at the same time to C Ltd. @ premium of Rs.40 per share for 20% holding. or

2) can X Ltd. issue further shares to A Ltd. and B Ltd. proportionately @ Rs. 10 per share and later on say one month after to C Ltd. @ premium of Rs.40 per share for 20% holding. or vice versa.

can a compnay do so, if yes under which section of the Companies Act, 1956 or if not then under which section of the Companies Act, 1956.

Please reply................

Thanks & regards,

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5 Replies

Ajay Mishra (Company Secretary) (74337 Points)
Replied 04 October 2010

In case of public company, they can issue further shares as per section 81(1A) read with Unlisted Public Companies (Preferential Allotment) Rules, 2003.

You can do so as per your above proportionate pattern.

Regards

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HARDIK (COMPANY SECRETARY NCFM (Corporate Governance )) (664 Points)
Replied 04 October 2010

Kindly see the attached file.

Attached File : 56 unlisted company pre allotment rules.pdf downloaded: 709 times

Pratibha (Service) (94 Points)
Replied 05 October 2010

Thanks for prompt reply but kindly note that Section 81 and Unlisted Public Companies (Preferential Allotment) Rules, 2003 does not talk about differential pricing of shares. The above mentioned provisions specifies only the proecedures to be followed.

My specific question is about differential pricing for further issue to promoter companies (in the above case A Ltd. and B Ltd.) and new investor (C Ltd.) by unlisted company (X Ltd.).

I searched the issue into corporate law book but could not find anything relevant. Companies Act, silent about the issue.

Could you please provide some case laws/studies where any company has done this for clarification.

Thanks & regards,

Pratibha (Service) (94 Points)
Replied 05 October 2010

I would like to add up further that while searching net (https://www.yourcompanysecretary.com/PROCEDURES/XIII-6.htm) I found that differential pricing is not permitted for composite issue of an existing unlisted company which makes the public issue for the first time.

I want to make sure whether the above provision is correct if yes then what is the relevant section.

Thanks & regards,

Preeti Jain (Chartered Accountant) (23 Points)
Replied 22 December 2010

Hello,

Can anyone please provide the checklist stating the procedure to be followed by the Public Limited Company (Unlisted) to Issue shares and the relevant forms which have to be uploaded with ROC..