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TMI BlogChapter IV - The Companies (Share Capital and Debentures) Rules, 2014X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2013 (18 of 2013) and in supersession of the Companies (Central Government s) General Rules and Forms, 1956 or any other relevant rules prescribed under the Companies Act, 1956 (1 of 1956) on matters covered under these rules, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely: - 1. Short title and commencement.- (1) These rules may be called the Companies ( Share Capital and Debentures ) Rules, 2014. (2) They shall come into force on the 1 st day of April, 2014. 2. Definitions.- (1) In these rules, unless the context otherwise requires,- (a) Act means the Companies Act, 2013 (18 of 2013); (b) Annexure means the Annexure to these rules; (c) Fees means the fees as specified in the Companies (Registration offices and fees) Rules, 2014 ; (d) Form or e-form means a form set forth in Annexure to these rules which shall be used for the matter to which it relates; (e) Regional Director means the person appointed by the Central Government in the Ministry of Corporate Affairs as a Regional Director; (f) section means the section of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estor Education and Protection Fund to the Central Government; (h) the company has not been penalized by Court or Tribunal during the last three years of any offence under the Reserve Bank of India Act, 1934 , the Securities and Exchange Board of India Act, 1992, the Securities Contracts Regulation Act, 1956, the Foreign Exchange Management Act, 1999 or any other special Act, under which such companies being regulated by sectoral regulators. (2) The explanatory statement to be annexed to the notice of the general meeting in pursuance of section 102 or of a postal ballot in pursuance of section 110 shall contain the following particulars, namely:- (a) the total number of shares to be issued with differential rights; (b) the details of the differential rights ; (c) the percentage of the shares with differential rights to the total post issue paid up equity share capital including equity shares with differential rights issued at any point of time; (d) the reasons or justification for the issue; (e) the price at which such shares are proposed to be issued either at par or at premium; (f) the basis on which the price has been arrived at; (g) (i) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares with differential voting rights; (g) the diluted Earning Per Share pursuant to the issue of each class of shares, calculated in accordance with the applicable accounting standards; (h) the pre and post issue shareholding pattern along with voting rights in the format specified under sub-rule (2) of rule 4. (5) The holders of the equity shares with differential rights shall enjoy all other rights such as bonus shares, rights shares etc., which the holders of equity shares are entitled to, subject to the differential rights with which such shares have been issued. (6) Where a company issues equity shares with differential rights, the Register of Members maintained under section 88 shall contain all the relevant particulars of the shares so issued along with details of the shareholders. Explanation.- For the purposes of this rule, it is hereby clarified that differential rights attached to such shares issued by any company under the provisions of Companies Act, 1956, shall continue till such rights are converted with the differential rights in accordance with the provisions of the Companies Act, 2013. 5. Certificate of shares (where shares are not in demat f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be personally responsible for permitting the affixation of his signature thus and the safe custody of any machine, equipment or other material used for the purpose. (4) The particulars of every share certificate issued in accordance with sub-rule (1) shall be entered in the Register of Members maintained in accordance with the provisions of section 88 along with the name(s) of person(s) to whom it has been issued, indicating the date of issue. 6. Issue of renewed or duplicate share certificate.- (1) the certificate of any share or shares shall not be issued either in exchange for those which are sub-divided or consolidated or in replacement of those which are defaced, mutilated, torn or old, decrepit, worn out, or where the pages on the reverse for recording transfers have been duly utilised, unless the certificate in lieu of which it is issued is surrendered to the company: Provided that the company may charge such fee as the Board thinks fit, not exceeding fifty rupees per certificate issued on splitting or consolidation of share certificate(s) or in replacement of share certificate(s) that are defaced, mutilated, torn or old, decrepit or worn out: (b) Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the company or at such other place where the Register of Members is kept and it shall be preserved permanently and shall be kept in the custody of the company secretary of the company or any other person authorized by the Board for the purpose. (c) All entries made in the Register of Renewed and Duplicate Share Certificates shall be authenticated by the company secretary or such other person as may be authorised by the Board for the purposes of sealing and signing the share certificate under the provisions of sub-rule (3) of rule 5. 7. Maintenance of share certificate forms and related books and documents.- (1) All blank forms to be used for issue of share certificates shall be printed and the printing shall be done only on the authority of a resolution of the Board and the blank form shall be consecutively machine-numbered and the forms and the blocks, engravings, facsimiles and hues relating to the printing of such forms shall be kept in the custody of the secretary or such other person as the Board may authorise for the purpose; and the company secretary or other person aforesaid shall be responsible for rendering an account of these forms to the Board. (2) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; or (c) an employee or a director as defined in sub-clauses (a) or (b) above of a subsidiary, in India or outside India, or of a holding company of the company; (ii) the expression Value additions means actual or anticipated economic benefits derived or to be derived by the company from an expert or a professional for providing know-how or making available rights in the nature of intellectual property rights, by such person to whom sweat equity is being issued for which the consideration is not paid or included in the normal remuneration payable under the contract of employment, in the case of an employee. (2) The explanatory statement to be annexed to the notice of the general meeting pursuant to section 102 shall contain the following particulars, namely:- (a) the date of the Board meeting at which the proposal for issue of sweat equity shares was approved; (b) the reasons or justification for the issue; (c) the class of shares under which sweat equity shares are intended to be issued; (d) the total number of shares to be issued as sweat equity; (e) the class or classes of directors or employees to whom such equity shares are to be issued; (f) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under clause (6) and clause (7) shall be sent to the shareholders with the notice of the general meeting. (9) Where sweat equity shares are issued for a non-cash consideration on the basis of a valuation report in respect thereof obtained from the registered valuer, such non-cash consideration shall be treated in the following manner in the books of account of the company- (a) where the non-cash consideration takes the form of a depreciable or amortizable asset, it shall be carried to the balance sheet of the company in accordance with the accounting standards; or (b) where clause (a) is not applicable, it shall be expensed as provided in the accounting standards. (10) The amount of sweat equity shares issued shall be treated as part of managerial remuneration for the purposes of sections 197 and 198 of the Act, if the following conditions are fulfilled, namely.- (a) the sweat equity shares are issued to any director or manager; and (b) they are issued for consideration other than cash, which does not take the form of an asset which can be carried to the balance sheet of the company in accordance with the applicable accounting standards. (11) In respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) The Register of Sweat Equity Shares shall be maintained at the registered office of the company or such other place as the Board may decide. (c) The entries in the register shall be authenticated by the Company Secretary of the company or by any other person authorized by the Board for the purpose. 9. Issue and redemption of preference shares.- (1) A company having a share capital may, if so authorised by its articles, issue preference shares subject to the following conditions, namely:- (a) the issue of such shares has been authorized by passing a special resolution in the general meeting of the company (b) the company, at the time of such issue of preference shares, has no subsisting default in the redemption of preference shares issued either before or after the commencement of this Act or in payment of dividend due on any preference shares. (2) A company issuing preference shares shall set out in the resolution, particulars in respect of the following matters relating to such shares, namely:- (a) the priority with respect to payment of dividend or repayment of capital vis-a-vis equity shares; (b) the participation in surplus fund; (c) the partici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence shares for a period exceeding twenty years but not exceeding thirty years, subject to the redemption of a minimum ten percent of such preference shares per year from the twenty first year onwards or earlier, on proportionate basis, at the option of the preference shareholders. 11. Instrument of transfer.- (1) An instrument of transfer of securities held in physical form shall be in Form No.SH.4 and every instrument of transfer with the date of its execution specified thereon shall be delivered to the company within sixty days from the date of such execution. (2) In the case of a company not having share capital, provisions of sub-rule (1) shall apply as if the references therein to securities were references instead to the interest of the member in the company. (3) A company shall not register a transfer of partly paid shares, unless the company has given a notice in Form No. SH.5 to the transferee and the transferee has given no objection to the transfer within two weeks from the date of receipt of notice. 12. Issue of employee stock options.- A company, other than a listed company, which is not required to comply with Securities and Exchange Board o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable accounting standards . (3) The companies granting option to its employees pursuant to Employees Stock Option Scheme will have the freedom to determine the exercise price in conformity with the applicable accounting policies, if any. (4) The approval of shareholders by way of separate resolution shall be obtained by the company in case of- (a) grant of option to employees of subsidiary or holding company; or (b) grant of option to identified employees, during any one year, equal to or exceeding one percent of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant of option. (5) (a) The company may by special resolution, vary the terms of Employees Stock Option Scheme not yet exercised by the employees provided such variation is not prejudicial to the interests of the option holders. (b) The notice for passing special resolution for variation of terms of Employees Stock Option Scheme shall disclose full of the variation, the rationale therefor, and the details of the employees who are beneficiaries of such variation. (6) (a) There shall be a minimum period of one year between the grant of option ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the year, the following details of the Employees Stock Option Scheme: (a) options granted; (b) options vested; (c) options exercised; (d) the total number of shares arising as a result of exercise of option; (e) options lapsed; (f) the exercise price; (g) variation of terms of options; (h) money realized by exercise of options; (i) total number of options in force; (j) employee wise details of options granted to;- (i) key managerial personnel; (ii) any other employee who receives a grant of options in any one year of option amounting to five percent or more of options granted during that year. (iii) identified employees who were granted option, during any one year, equal to or exceeding one percent of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant; (10) (a) The company shall maintain a Register of Employee Stock Options in Form No. SH.6 and shall forthwith enter therein the particulars of option granted under clause (b) of sub-section (1) of section 62. (b) The Register of Employee Stock Options shall be maintained at the registered office of the company or such other pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) the issue is authorized by its articles of association; (b) the issue has been authorized by a special resolution of the members; (c) the securities allotted by way of preferential offer shall be made fully paid up at the time of their allotment. (d) The company shall make the following disclosures in the explanatory statement to be annexed to the notice of the general meeting pursuant to section 102 of the Act: (i) the objects of the issue; (ii) the total number of shares or other securities to be issued; (iii) the price or price band at/within which the allotment is proposed; (iv) basis on which the price has been arrived at along with report of the registered valuer; (v) relevant date with reference to which the price has been arrived at; (vi) the class or classes of persons to whom the allotment is proposed to be made; (vii) intention of promoters, directors or key managerial personnel to subscribe to the offer; (viii) the proposed time within which the allotment shall be completed; (ix) the names of the proposed allottees and the percentage of post preferential offer capital that may be held by them; (x) the change in control, if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Others (Including NRIs) Sub Total(B) GRAND TOTAL (e) the allotment of securities on a preferential basis made pursuant to the special resolution passed pursuant to sub-rule (2)(b) shall be completed within a period of twelve months from the date of passing of the special resolution. (f) if the allotment of securities is not completed within twelve months from the date of passing of the special resolution, another special resolution shall be passed for the company to complete such allotment thereafter. (g) the price of the shares or other securities to be issued on a preferential basis, either for cash or for consideration other than cash, shall be determined on the basis of v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproved by the members by passing special resolution in a general meeting; (b) such purchase of shares shall be made only through a recognized stock exchange in case the shares of the company are listed and not by way of private offers or arrangements; (c) where shares of a company are not listed on a recognized stock exchange, the valuation at which shares are to be purchased shall be made by a registered valuer; (d) the value of shares to be purchased or subscribed in the aggregate together with the money provided by the company shall not exceed five per cent. of the aggregate of paid up capital and free reserves of the company; (2) The explanatory statement to be annexed to the notice of the general meeting to be convened pursuant to section 102 shall, in addition to the particulars mentioned in sub-rule (1) of rule 18, contain the following particulars, namely:- (a) the class of employees for whose benefit the scheme is being implemented and money is being provided for purchase of or subscription to shares; (b) the particulars of the trustee or employees in whose favor such shares are to be registered; (c) the particulars of trust and name, address, occup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or other securities intended to be purchased under the buy-back; (d) the number of securities that the company proposes to buy-back; (e) the method to be adopted for the buy-back; (f) the price at which the buy-back of shares or other securities shall be made; (g) the basis of arriving at the buy-back price; (h) the maximum amount to be paid for the buy-back and the sources of funds from which the buy-back would be financed; (i) the time-limit for the completion of buy-back; (j) (i) the aggregate shareholding of the promoters and of the directors of the promoter, where the promoter is a company and of the directors and key managerial personnel as on the date of the notice convening the general meeting; (ii) the aggregate number of equity shares purchased or sold by persons mentioned in sub-clause (i) during a period of twelve months preceding the date of the board meeting at which the buy-back was approved and from that date till the date of notice convening the general meeting; (iii) the maximum and minimum price at which purchases and sales referred to in sub-clause (ii) were made along with the relevant date; (k) if the persons mentioned in sub-cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within a period of one year from that date. (2) The company which has been authorized by a special resolution shall, before the buy-back of shares, file with the Registrar of Companies a letter of offer in Form No. SH.8 , along with the fee: Provided that such letter of offer shall be dated and signed on behalf of the Board of directors of the company by not less than two directors of the company, one of whom shall be the managing director, where there is one. (3) The company shall file with the Registrar, along with the letter of offer, and in case of a listed company with the Registrar and the Securities and Exchange Board, a declaration of solvency in Form No. SH.9 along with the fee and signed by at least two directors of the company, one of whom shall be the managing director, if any, and verified by an affidavit as specified in the said Form. (4) The letter of offer shall be dispatched to the shareholders or security holders immediately after filing the same with the Registrar of Companies but not later than twenty days from its filing with the Registrar of Companies. (5) The offer for buy-back shall remain open for a period of not less than fifteen days an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of an earlier issue of the same kind of shares or same kind of other specified securities for the buy-back. (12) (a) The company, shall maintain a register of shares or other securities which have been bought-back in Form No. SH.10. (b) The register of shares or securities bought-back shall be maintained at the registered office of the company and shall be kept in the custody of the secretary of the company or any other person authorized by the board in this behalf. (c) The entries in the register shall be authenticated by the secretary of the company or by any other person authorized by the Board for the purpose. (13) The company, after the completion of the buy-back under these rules, shall file with the Registrar, and in case of a listed company with the Registrar and the Securities and Exchange Board of India, a return in the Form No. SH.11 along with the fee . (14) There shall be annexed to the return filed with the Registrar in Form No. SH.11, a certificate in Form No. SH.15 signed by two directors of the company including the managing director, if any, certifying that the buy-back of securities has been made in compliance with the provisions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the company, or its subsidiary or its holding or associate company or a subsidiary of such holding company; (v) has furnished any guarantee in respect of the principal debts secured by the debentures or interest thereon; (vi) has any pecuniary relationship with the company amounting to two per cent. or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year; (vii) is relative of any promoter or any person who is in the employment of the company as a director or key managerial personnel (d) the Board may fill any casual vacancy in the office of the trustee but while any such vacancy continues, the remaining trustee or trustees, if any, may act: Provided that where such vacancy is caused by the resignation of the debenture trustee, the vacancy shall only be filled with the written consent of the majority of the debenture holders. (e) any debenture trustee may be removed from office before the expiry of his term only if it is approved by the holders of not less than three fourth in value of the debentur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in writing signed by debenture holders holding at least one-tenth in value of the debentures for the time being outstanding; (b) the happening of any event, which constitutes a breach, default or which in the opinion of the debenture trustees affects the interest of the debenture holders. (5) For the purposes of sub-section (13) of section 71 and sub-rule (1) a trust deed in Form No.SH.12 or as near thereto as possible shall be executed by the company issuing debentures in favour of the debenture trustees within sixty days of allotment of debentures. (6) The provisions of sub-rules (2) to (5) of rule 18 shall not be applicable to the public offer of debentures. (7) The company shall create a Debenture Redemption Reserve for the purpose of redemption of debentures, in accordance with the conditions given below- (a) the Debenture Redemption Reserve shall be created out of the profits of the company available for payment of dividend; (b) the company shall create Debenture Redemption Reserve equivalent to at least fifty percent of the amount raised through the debenture issue before debenture redemption commences. (i) No DRR is required for debentures issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be created in respect of non-convertible portion of debenture issue in accordance with this sub-rule. (e) the amount credited to the Debenture Redemption Reserve shall not be utilised by the company except for the purpose of redemption of debentures. (8) (a) A trust deed for securing any issue of debentures shall be open for inspection to any member or debenture holder of the company, in the same manner, to the same extent and on the payment of the same fees, as if it were the register of members of the company; and (b) A copy of the trust deed shall be forwarded to any member or debenture holder of the company, at his request, within seven days of the making thereof, on payment of fee. 19. Nomination by securities holders.- (1) Any holder of securities of a company may, at any time, nominate, in Form No. SH.13, any person as his nominee in whom the securities shall vest in the event of his death. (2) On the receipt of the nomination form, a corresponding entry shall forthwith be made in the relevant register of securities holders, maintained under section 88. (3) Where the nomination is made in respect of the securities held by more than one person ..... X X X X Extracts X X X X X X X X Extracts X X X X
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