Chapter II
ALTERATIONS, CHANGES
AND MODIFICATIONS
A. MEMORANDUM AND ARTICLES OF ASSOCIATION-ALTERATIONS
[Topic 26 to 29]
B. NAME-CHANGES [Topic 30 to 33]
C. SHARE CAPITAL-MODIFICATIONS [Topic 34 to 47]
D. BUY-BACK OF SHARES OR OTHER SECURITIES [Topic 48]
E. GENERAL [Topic 49 to 51]
A. Memorandum and Articles of
Association-Alterations
(Topic 26 to
Topic 29)
Topic 26
DO
YOU WISH TO ALTER THE ARTICLES OF ASSOCIATION OF YOUR COMPANY?
1. Take the necessary decision by convening a Board
Meeting as per Topic 131 to change all or any of the existing Articles of
Association and fix up the day, time, place and agenda for a general meeting
for passing special resolutionj to effect the change. [Section 31(1)].
2. See that any such change in the Articles of the
company conforms to the provisions of the Companies Act, 1956 and the
conditions contained in the Memorandum of Association of the company. [Section
31(1)].
3. See that any such change does not increase the
liability of any member who has become so before the alteration to contribute
to the share capital of or otherwise to pay money to, the company. [Section
38].
4. See that any such change does not have
the effect of converting a public company into a private company.
5. Keep in mind that if a public company is converted
into a private company that private company will still be treated as a public
company even after conversion if it is a subsidiary of a public company.
[Section 3(i)(iv)(c)].
6. In the aforesaid case, make an application to the
Registrar of Companies (power of the Central Government delegated) for such
alteration vide Topic 9. [Section 31(1), Proviso].
7. See that
any such change does not provide for expulsion of a member by the company1.
8. Issue notices for the General Meeting by giving
not less than twenty-one days notice in writing proposing the Special
Resolution and explaining inter alia, in the Explanatory Statement the
implication and reasons of the changes being proposed. [Section 171(1) read
with section 173(2)].
9. If the shares of the company are enlisted with any
Recognised Stock Exchange, then forward copies of all notices sent to the
shareholders with respect to change in the Articles of Association to the Stock
Exchange. [Clause 33 of the Standard Listing Agreement2].
10. Please keep in mind that the Special Resolution for
change of Articles of Association made in relation to insertion of provisions
defining a private company should be passed only through postal ballot if your
company is a listed company. 3 [Section 192A read with Rule 4(b) of
the Companies (Passing of the Resolution by Postal Ballot) Rules, 2001. 4]
11. Hold the General Meeting and pass the
Special Resolution by three fourth majority. [Section 189(2)].
12. File with the Stock Exchange with which your
company is enlisted six copies of such amendments as soon as the company adopts
it in General Meeting. Out of the six copies, one copy must be a certified true
copy.
[Clause 33 of the Standard Listing Agreement2].
13. Forward promptly to the Stock Exchange
with which your company is enlisted three copies of the notice and a copy of
the proceedings of the General Meeting. [Clause 31(c) & (d) of Standard
Listing Agreement2].
14. File the Special Resolution with the concerned
Registrar of Companiess with explanatory statement in Form No. 23 within
thirty days of its passing [Section 192(4)(a)] after payment of the requisite
filing fee6 in cash as per Schedule X.
15. Please keep in mind that if default is
made in complying with the aforesaid requirement of filing, the company and
every officer of the company who is in default will be punishable with fine of
Rs. 200/-7 for every day during which the default continues.
[Section 192(5)]
16. If the Articles of Association have been completely
or substantially changed, file a new printed copy of the Articles after paying
the requisite fee8 in cash prescribed under Schedule X to the
Companies Act, 1956.
17. Effect
the changes in all copies of the Articles of Association. [Section 40].
18. Please also keep in mind that if the aforesaid
requirement is not complied with and the Articles of Association of your
company is issued without carrying out the alterations made therein, the
company and every officer of the company who is in default will be punishable
with fine upto Rs. 1000 for each copy so issued. [Section 40(2)]
19. Any alteration so made be as valid as if originally
contained in the Articles of Association and be subject to alteration by
Special Resolution as above. [Section 31(2)].
20. If the Articles are altered pursuant to an order of
the Company Law Board made under Section 397 or 398 then see that such
alteration is not inconsistent with the said and if it is so then obtain first
leave of the Company Law Board to make such alteration. [Section 404(1)].
21. File a certified copy of the order of the Company
Law Board altering or giving leave to alter Articles of Association within 30
days after the making thereof with the concerned Registrar of Companies.
10 [Section 404(3)].
22. Note that if your company's paid-up share
capital is less than Rs. 50 lakhs but is equal to or more than Rs. 10 lakhs,
your company is required to obtain a Compliance Certificate from a secretary in
whole-time practice to be filed with the Registrar of Companies
mentioning therein inter alia that the company has altered its articles of association
after obtaining approval of the members in the general meeting held on a specific date and the
amendments to the articles of association have been duly registered with the
Registrar of Companies as per paragraph 30 of the Form of Compliance
Certificate appended to the Companies (Compliance Certificate) Rules, 2001. 11 [Section 383-A(1) proviso].
Topic 27
DO
YOU WISH TO HAVE YOUR COMPANY STRUCK OFF AS DEFUNCT COMPANY?
1. Note that the power to declare a company as a
defunct company and to strike it off as such is a matter of discretion of the Registrar
of Companies. He cannot, however, refuse to exercise this discretion if it can
be shown to him that the circumstances mentioned in Section 560 do exist in a
particular case.
2. Any Director or shareholder of the company can
bring to the notice of the Registrar of Companies1 the particular
circumstances from which the Registrar of Companies has reason to believe that
the company is not carrying on business or in operation. [Section 560(1)].
3. If a company is being wound up, the
Registrar of Companies1 can be informed so that he has reasonable
cause to believe either of the following:
(i) no
liquidator is acting;
(ii) the
affairs of the company have been completely wound
(iii) no returns which are required to be made have not been made
for a period of 6 consecutive months. [Section 560(4)]
4. Ensure that the letter to be addressed
to the concerned Registrar of Companies1, as mentioned in item 2
above contains the following information if it is desired to invoke the power
of the said Registrar of Companies to strike off the company:-.
(a) Date
of Incorporation of the company and the registration number of the company;
(b) Particulars of shareholders and Directors and the changes
therein as on the date of intimation and as in immediate past;
(c) Whether
any amount is due to the company from the Directors;
(d) Whether there is any liability of the Company to outsiders
and, if so, the extent of such liability;
(e) How the liability of the company to creditors etc. is
proposed to be met before the company is struck off;
(f) The position regarding filing of documents with the Registrar
of Companies indicating particularly, if any, prosecution is pending against
the company and its officers for default;
(g) Audited accounts of the company to show that no assets are
left in the company or very little assets are left to enable the company to
carry on business;
(h) Any other substantial grounds on which it can be shown that
it is impossible for the company to remain in operation, also indicating the
fact that it is indeed not in operation.
5. After receiving the first show cause
notice from the Registrar of Companies, as to why the company should not be
struck off, make appropriate representations to him to substantiate facts
leading to the company being liable to be struck off.
6. Note that the aforesaid representation
should be made within 1 month of the date of sending the letter by the
Registrar of Companies to the company.
7. Further note that if no answer is given by the
company within the aforesaid time, the Registrar of Companies will send another
letter by registered post to the company within 14 days after expiry of 1 month
mentioned above, which will refer to the first letter of the Registrar of
Companies. [Section 560(2)]
8. If the company has not sent any answer to the first
letter, then ensure that it is send within 1 month of the second letter sent to
it by registered post by the Registrar of Companies.
9. Keep in mind that the Registrar of Companies will
publish a notice in the Official Gazette for striking the name of the company
off the register if no answer is received from the company within 1 month of
the second letter.
10. Obtain an affidavit on a non-judicial stamp
paper of the requisite value2 from the managing director or whole-time
director and in case there is none in a company then from two directors of the
company to the effect that the company has no assets or liabilities as on date
and the company has not been carrying on any business during the last one year
or more.
11. The aforesaid should be evidenced by not only the
latest audited balancesheet and profit and loss account of the company, but all
the balance sheets and profit and loss accounts and submit them with the other
papers mentioned in item 4 above to the concerned Registrar of companies3.
12. Keep in mind that the aforesaid filing of all the
papers is necessary for the Registrar of Companies to ascertain whether
applicant, seeking sanction under section 560 has met his obligations to
depositors, bankes and financial institutions from whom it borrowed the money
and paid taxes and other Government and statutory dues.
13. Also prepare an Indemnity Bond, on a non-judicial
stamp paper of the requisite value2 prevalent in the State from one
of the aforesaid persons to the effect that the liabilities of the company, if
any, will be met by them even after the name of the company is struck of from
the Register.
14. After the
Registrar of Companies publishes a notice in the Official Gazette, any creditor
or any other person may make representation to him objecting to the company
being struck off and, in such an event, all efforts should be made to see that
the objections are met.
15. Note that the
striking off of the company under Section 560 does not mean dissolution of the
company and the Court's power to wind-up the company still remains.
16. Any
representation made to the Registrar of Companies should be made bona fide,
otherwise, the person making representation, if he is a Director of the
company, may be liable to prosecution and for other proceedings in the event of
the court interfering for the purpose of winding up a defunct company.
17. While
having your Company Struck off as defunct company adhere to the Circulars
issued by the Department of Company Affairs given below:
I. Fast track scheme under section 560 of the
Companies Act-Reg.
General Circular No. 10/2000, dated 25-9-2000
Easy Exit Route for Companies
1. It has come to
the notice of the Department Co. Affairs that while a large number of companies
have been registered but due to various reasons some of them have failed to
take off. The promoters of such companies have been requesting the Government
to strike off the name of the company by adopting an easy to follow method in a
time-bound manner.
2. A
number of representations from professional bodies/individuals have also been
received during the operation of CLSS, 2000.
3. Recognising
the urgent need, the Department has decided to launch "fast track section
560 scheme" with effect from 28th September, 2000. Three different
coloured forms have been prescribed:
(a) White coloured form for applicants of CLSS 2000 up to 31st
August, 2000; (Fast track I);
(b) Pink coloured form for applicants of CLSS 2000 from 1st
September to 30th September, 2000, (Fast track II);
(c) Blue coloured form for all other applicants who have filed
the documents with the Registrars in the past in respect of defunct companies
and have sought their names to be struck off.
4. The
blue form is for those applicants who file their applications after 30th
September, 2000, and who wish to avail of the benefit of section 560 Scheme.
They will however, be required to pay Jump sum fee as per the table given
below:
|
No. of documents |
Delay of less than three years in filing
documents |
Delay of three years or more in filing documents |
|
|
(Rs.) |
(Rs.) |
|
(1) |
(2) |
(3) |
|
up to 2 |
3,500 |
4,000 |
|
up to 5 |
6,500 |
8,000 |
|
up to 10 |
10,000 |
12,000 |
|
More than 10 |
13,000 |
20,000 |
5. The
cost of each form has been prescribed as Rs. 100. The pre-numbered forms,
will be supplied in the respective office of the ROC's and RD's through out
the country.
6. The companies
availing or this scheme will be enormously benefited as it would be a simple
"exit route" for them particularly those companies which have no
business and they have availed of Company Law Settlement Scheme, 2000. This
will also help the other companies who want to exit the corporate form of
business on the payment of specified lump sum amount. They will be saved from
the protracted process of voluntarily winding up of companies.
7. The
scheme will be in operation from 28th September, till 26th November, 2000 (60
days).
8. A copy of this
press note dated 25th September, 2000, has been placed at the web-page of
the Department of Company Affairs at the internet address
http://www.nic.in/dca.
II. Fast Track Scheme under section 560 of the
Companies Act, 1956,
waiving of the requirement of obtaining certificate
from various authorities
[General Circular No. 14/2000, Dated 16-11-2000]
With regard to the Department of Company Affairs,
General Circular number 10/2000, dated 25-9-2000 regarding Fast
Track Scheme under section 560 of the Companies Act, two common problems have
been highlighted by the professionals/professional bodies in following the
procedure prescribed in the aforesaid Scheme.
First problem relates to getting the two affidavits
prescribed by the Department signed on a stamp paper by a Judicial Magistrate.
It has been represented before the Department that going before the Magistrate
is not easy for various reasons, and the Department has, therefore, considered
this matter in detail and a decision has been taken that the affidavit could be
signed by Magistrate or by Notary Public with Seal.
Second problem is that there were, inter alia, the
following conditions (mentioned in clause (e) and (f) of General Circular
10/2000, dated 20-9-2000) to be fulfilled by a company which wishes
to avail of the Scheme for striking off its name:
• A
certificate from the auditor that the company is not doing any business and
does not owe any amount to Tax Authorities/Banks and Financial Institutions has
been submitted.
• A
clearance certificate of Tax dues (from income-tax, sales tax, excise,
etc.) has been attached.
Various suggestions/representations have been received
by the Department informed that the Income-tax Act, Sales Tax Act and
Central Excise do not apply to those companies which have not done any business
since their incorporation or for a fairly long period and problems involved in
getting these certificates by such companies. The Department of Company Affairs
has therefore, decided that in case of companies which have not done any
business since their incorporation as well as for a fairly longer period can
give an Affidavit along with an Indemnity Bond in prescribed form on a stamped
paper.
The Scheme is also extended by one month on the
basis of various representations received from Companies, Professionals,
Institutes, Chamber of Commerce, etc.
We, the following Directors of ______________
Limited, (hereinafter called "the Company"), incorporated on
____/____/_______ under the Companies Act, 1956 and having its Registered
Office at _____________
1. Shri _________________ S/o. Shri ___________ residing at ___________
2. Shri _________________ S/o. Shri ___________ residing at ___________
do solemnly affirm as under:
1. We are the only directors of
____________ Limited.
2. The Company was incorporated on ________ with an object to
carry on ______
3. The Company has been inoperative right from the date of its
incorporation/the past ___________ years due to diverse reasons.
4. The Company has assets worth Rs. ________ in the form of
cash balance/or no assets (strike out the one not applicable) and has
liabilities to the extent of Rs._________ but the creditors have waived the
payment of their dues, and the waiver letters have been enclosed/no
liabilities. (strike out the one not applicable).
5. As on date the Company is not having any dues towards Income
Tax/ Sales Tax/Central Excise or any other Central or State Government
Departments/Authorities or any local authorities.
6. The Company has/had no workers (strike out the one not
applicable) as on date and no amount is due any worker who was in the
employment of the company.
7. In view of the foregoing, we the Directors of the company
have decided to make an application to The Registrar of Companies ___________
to strike off the name of the Company from the Registrar of Companies
maintained by the said Registrar of Companies, under section 560 of the
Companies Act, 1956.
8. In case of any loss(es) to any person or any valid claim
from any person, if any, arising out of the striking off the name of the
Company from the Register of Companies, by the Registrar of Companies,
___________, we the Directors of the Company jointly and severally, undertake
to indemnity any person for any such losses and indemnity bond to this effect
is enclosed.
We solemnly affirm that this declaration is true to
the best of our knowledge and belief and that it conceals nothing and that no
part of it is false.
Place: Signature:
1 Shri
Dated: 1 Shri.
To
The Registrar of Companies,
_______________________
1. We Shri _______________, S/o. Shri
_________________, residing at _______________ and Shri
____________________________________________, S/o.
Struck off as defunct company § Topic 27 129
Shri _______________, residing at
______________________, do hereby jointly and severally declare that:
(a) We are the only Directors of ___________________ Limited, a
Company incorporated on ________________ under the Companies Act, 1956 whose
Registered Office is situated at __________________
(b) That we have made an affidavit dated __________________ the
_________ duly sworn before notary public affirming that the Company _________
Limited, has assets worth Rs. ___________ in the form of _______________ The
Company has no liabilities.
(c) Further the Company is not doing/carrying on any business
right from the date of its incorporation and the Company is also not intending
to do any business or commercial activity as laid down in the main objects of
its Memorandum of Association in future.
(d) Thus the Company is defunct and is requesting the Registrar
of Companies,_____________ to strike off the name of the Company from the
Register of Companies in terms of section 560 of the Companies Act, 1956.
2. In
view of the above, we do hereby undertake in writing:
(a) to pay and settle all lawful claims arising out of the
striking off the name of the Company.
(b) to indemnify any person for any such losses that may arise
pursuant to striking off the name of the Company.
(c) to settle all lawful claims and liabilities which have not
come to our notice at this stage, even after the name of the Company has been
struck off in terms of section 560 of the Companies Act, 1956.
Place: Signature:
1 Shri
Dated: 2 Shri.
1. Signature
(Name, Father's name, Address & Occupation)
2. Signature
(Name, Father's name, Address & Occupation)
Extension till 31-1-2001
[General Circular No. 3/2001, dated 2-1-2001]
Attention is drawn to the Department of Company
Affairs General Circulars numbers 10/2000 dated 20-9-2000 and
14/2000, dated 16-11-2000 regarding Fast Track Scheme under
Section 560 of the Companies Act. On the basis of various representations
received from Companies, Professionals, Institutes, Chamber of Commerce, etc.,
the Scheme has been extended till 31-1-2001. Other terms and
conditions of the Scheme remain unchanged.
IV. Fast Track Scheme under Section 560 of the
Companies Act, 1956 - extended for the State of Gujarat till 31-3-2001
vide Press Release No. 1/2001 dt. 6-2-2001.
Topic 28
DO YOU WISH TO CHANGE THE REGISTERED
OFFICE OF YOUR COMPANY?
(A) In case the registered offlce is proposed to be
changed within the local limits, postal limits or wider of the two :-
1. Hold
a Board Meeting after giving notice to all the directors of the company as
per Section 286 and decide about the change.
2. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of upto Rs. 1000/-.1 [Section 286(2)]
3. File the
notice of change with the concerned Registrar of Companies2 in Form
No. 18@ along with a certified copy of the Board Resolution
approving the change and also a certified true copy of the confirmation of the
Regional Director within thirty days from the date when the change becomes
effective [Section 146 (2)] after paying the requisite fee3
prescribed under Schedule X to the Companies Act, 1956, either in cash, demand
draft or treasury challan. [Rule 22].
(B) In case the registered oMce is proposed to be
changed outside the local limits, postal limits or wider of the two but within
the State:-
1. Hold a Board
Meeting after giving notice to all the directors of the company as per
Section 286 to decide about the change and to fix up the date, time, place and
agenda for the General Meeting to pass a Special Resolution for the same
subject to the confirmation of the Regional director. [Section 146(2)(a),
Proviso].
2. If your
company is a listed company, then ensure that the Special Resolution as
aforesaid is passed only through postal ballot. 4 [Section 192A
read with Rule 4(e) of the Companies (Passing of the Resolution by Postal
Ballot) Rules, 2001.5
3. Keep in mind
that such a change of registered office within a State will require
confirmation of the Regional Director only, where such change amounts to
changing the registered office from the jurisdiction of one Registrar of
Companies to the jurisdiction of another Registrar of Companies within the same
State.6 [Section 17A(3) Explanation]
4. Issue notices
for the General Meeting by giving not less than twenty-one days notice in
writing proposing the Special Resolution with suitable Explanatory Statement.
[Section 171(1) read with section 173(2)].
5. Hold
the General Meeting and pass the Special Resolution. [Section 189(2)] by
three-fourths majority.
6. Forward
promptly to the Stock Exchange with which your company is enlisted three copies
of the notice and a copy of the proceedings of the General Meeting. [Clause
31(c) and (d) of Standard Listing Agreement7].
7. File the
Special Resolution with the concerned Registrar of Companies8 within
thirty days of its passing in Form No. 23@ with Explanatory
Statement [Section 192(4)(a)], after paying the requisite fee9
prescribed under Schedule X to the Companies Act, 1956, either in cash, demand
draft or treasury challan. [Rule 22].
8. Please keep in
mind that if default is made in complying with the aforesaid requirement of
filing the company and every officer of the company who is in default will be
punishable with fine of Rs. 200/-10 for every day during which
the default continues. [Section 192(5)]
119. (a) Make
an application in Form 1-AD to the Regional Director along with a fee of
Rs. 500/-9 by Bank Draft drawn in favour of Pay and Accounts Officer,
Department of Company Affairs.
(b) Enclose
the following documents to the application :-
(i) Certified
true copy of the Memorandum and Articles of Association;
(ii) Certified true copy of the Notice of the general meeting and
the Special Resolution with the relevant Explanatory Statement; as passed;
(iii) Certified true copy of the latest audited balance-sheet
and profit and loss account;
(iv) A copy of the minutes of the general meeting (to indicate the
number and shareholding of members who voted against the shifting and grounds
put forth by them).
(v) Paper
clipping of the advertisement in Newspaper(s);
(vi) Any other information that may be pertinent to be given in
connection with the change;
(vii) A
crossed demand draft evidencing payment of the application fee.
(c) File the application form with the Registrar of Companies
from where the company proposes to shift its Registered Office and a copy
thereof for information to the Registrar of Companies under whose jurisdiction
the Registered Office is proposed to be shifted.
10. Keep in mind
that the confirmation applied for as above to the Regional Director should be
communicated to your company within four weeks from the date of receipt of application
for such change. 12 [Section 17A(3)]
11. File the
notice of change with the concerned Registrar of Companies13 in Form
No. 18 within thirty days after the date of change [Section 146(2)] after
paying the requisite fee14 as above. [Rule 22].
12. Please also
keep in mind that if default is made in complying with the aforesaid
requirement the company and every officer of the company who is in default will
be punishable with fine of Rs. 500/-15 for every day during
which the default continues. [Section 146(4)]
13. File with the
Registrar of Companies13 a certified copy of the confirmation given
by the Regional Director within two months from the date of confirmation
together with a printed copy of the memorandum as altered and the Registrar of Companies
should register the same and certify the registration under his hand within one
month from the date of filing of such document. 12 [Section 17A(4)]
14. Keep in mind
that the aforesaid certificate given by the Registrar of Companies will be conclusive
evidence that all the requirements of this Act with respect to the alteration
and confirmation have been complied with henceforth the memorandum as altered
will be the memorandum of the company. 12 [Section 17A(5)]
(C) In case the registered ofrice is proposed to be
changed outside the State:
1. Hold a Board
Meeting after giving notices to all the directors of the company as per
Section 286 to decide about the change and to fix up the date, time, place and
agenda for a General Meeting to pass a Special Resolutiont for altering the
Memorandum of Association in this regard subject to confirmation of the Company
Law Board. [Section 17(1)].
2. Issue notice
for the General Meeting by giving not less than twenty-one days notice in
writing proposing the Special Resolution with suitable Explanatory Statement.
[Section 17](1) read with section 173(2)].
3. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of Rs. 1000/-16 [Section 286(2)]
4. Hold the
General Meeting and pass the Special Resolution by three-fourths
majority [Section 189(2)] subject to the confirmation of the Company Law Board.
5. Do
the following if the shares of your company are listed with any of the
recognised Stock Exchange:-
(a) File with the Stock Exchange concerned six copies of such
amendments made in the Memorandum as soon as the company adopts it in the
General Meeting. One of the copies must be a certified copy;
(b) Forward promptly to the Stock Exchange three copies of the
notice and a copy of the proceedings of the General Meeting;
(c) Forward to the Stock Exchange copies of all notices sent to
the shareholders with respect to the amendment made in the Memorandum of
Association. [Clauses 31(c), (d) and 33 of the Standard Listing Agreenient17].
6. File
the Special Resolution,with Explanatory Statement with the concerned Registrar
of Companies18 within thirty days in Form No. 23@ [Section
192(4)(a)], after paying the requisite fee19 prescribed under
Schedule X to the Companies Act, 1956, either in cash, demand draft or treasury
challan. [Rule 22]
7. Please keep in
mind that if default is made in complying with the aforesaid requirement of
filing, the company and every officer of the company who is in default will be
punishable with fine of Rs. 200/-20 for everyday during which
the default continues. [Section 192(5)]
8. Not less than
one month before filing the petition publish a general notice at least once in
the daily newspaper published in the principal language of the district in
which the registered office is situate and at least once in English in a daily
newspaper, in the English language and circulating in that district.
[Regulation 36(1)(i) of the Company Law Board Regulations, 1991].
9. See that the
aforesaid notice to be published clearly indicates the substance of the
petition and state therein that any person whose interest is likely to be
affected may intimate to the Bench Officer within twenty-one days of the
date of the publication of the notice, the nature of interest and grounds of
opposition.
10. Forward
promptly to the Stock Exchange with which your company is enlisted, three
copies of the general notice published in the newspapers. [Clause 31(c) of the
Standard Listing Agreemen21].
11. Serve by
certificate of posting individual noticef on each debenture holder and creditor
of the company, unless otherwise required by the Bench to be sent by registered
post [Regulation 36(1)(ii) of the Company Law Board Regulations, 1991].
12. Forward to the
Stock Exchange with which the shares of your Company are listed, three copies
of the above individual notice served to the debenture holders and creditors.
[Clause 31(c) of the Standard Listing Agreemen21].
13. Serve a notice
together with a copy of the petition with all the annexures on the Chief
Secretary to the Government of the State in which the registered office of the
company is situate or to the Administrator or Lt. Governor of the Union
Territory where the registered office is situated in a Union Territory.
[Regulation 36(2) of the Company Law Board Regulations, 1991].
14. Prepare a List
of Creditorst as on a certain date which should be serially numbered and in
alphabetical order giving therein the amount and nature of credit. [Regulation
36(6) of the Company Law Board Regulations, 1991].
15. Make a
petition to the concerned Regional Bench22 of the Company Law Board
in Form No. 1$ given in Annexure II for confirming the change [Section
17(2)] which must be verified by an affidavitŁ as prescribed by
Regulation 14(1) and (5) of the Company Law Board Regulations, 1991.
[Regulations 14(1) & (5)], and affix court fee stamps of the requisite
value23 on the petition.
16. See that the following
papers are attached to the petition:-
(i) Certified
true copy of the Memorandum and Articles of Association;
(ii) Certified true copy of the notice calling for the meeting
along with Explanatory Statement and certified true copy of the Special Resolution
sanctioning the alteration;
(iii) Certified true copy of the minutes of the meeting at which the
Special Resolution was passed;
(iv) Demand draft24 drawn in favour of "Pay and
Accounts Officer, Department of Company Affairs, New Delhi", or
"Mumbai" or "Kolkata" or "Chennai" as the case
may be, showing payment of a fee of Rs. 1000/-25 ;
(v) An affidavitŁ verifying the petition on non-judicial
stamp paper of requisite value26. After obtaining the signature of
the Deponent such affidavit should be either sworn in before any Oath
Commissioner or Notarised by the Notary Public with notorial stamps affixed on
it.
(vi) An affidavitŁ on non-judicial stamp paper of
requisite value26 giving proof of the publication and service of
notices with certified true copies of the newspaper cuttings. After, obtaining
the signature of the Deponent such affidavit should be either sworn in before
any Oath Commissioner or notarised by the Notary Public with notorial stamps
affixed on it.
(vii) A list of creditors which shall be made up to the latest
practicable date not preceding the date of filing of the petition by more than
two months signed by two directors, and the secretary if any. One of the two
directors should be the managing director if there is any.
(viii) An affidavitŁ on non-judicial stamp paper of
requisite value26 verifying list of creditors as per Regulation
36(7) of the Company Law Board Regulations 1991 by two directors and the
Secretary, if any.
(ix) One
of the two directors should be a managing director if there is any.
(x) Memorandum of appearance in Form No. 5 with copy of the
Board Resolution or the executed Vakalatnama, as the case may be, after
affixing court fee stamps of requisite value.27
(xi) Certified true copy of the latest audited balance-sheet
with the profit and loss Account of the company with auditors' report and
directors' report.
(xii) Original Postal receipt evidencing service of the special
notice along with a copy of the special resolution on the Chief Secretary of
the Government of State, or to Administrator or Lt. Governor of the Union
Territory in which the registered office of the company is situated, by
registered post with acknowledgment due, mentioned in item 13.
(xiii) Original acknowledgment of the concerned Registrar of Companies21
evidencing service of a complete set of the petition on the said Registrar of
Companies, mentioned in item 17.
(xiv) Original postal receipts evidencing -service of the
special notice along with a copy of the special resolution on all the creditors
of the company as on a particular date, by certificate of posting. [Regulation
18 read with Annexure III of the Company Law Board Regulations, 19911.
17. See that a
copy of the petition is also served on the concerned Registrar of Companies23
along with copies of all the enclosures, as mentioned above. [Regulation 14(3)
of the Company Law Board Regulations, 1991].
18. File the
petition along with all the enclosures after the expiry of one month from the
date of publication of newspaper notice and despatch of notice to creditors and
debentureholders and within two months of the date of preparation of the List
of Creditors. [Regulation 18 read with Regulation 36(1) and (6) of the Company
Law Board Regulations, 1991 read with Annexure III].
19. If the
petition is in order in all respects then the Bench Officer will issue a notice
of hearing and the petition will be heard by a Single Member of the concerned
Regional Bench and if found valid the Special Resolution will be ordered to be
confirmed.
20. On receipt of
the Company Law Board's order give notice of the receipt of the order to the
concerned Registrar of Companies28 in Form No. 21 and file a
certified copy of the same together with a printed copy of the Memorandum of
Association, as altered, within three months from the date of the order with
the Registrars of Companies28 of each of the States after paying the
requisite fee29 as prescribed under Schedule X to the Companies Act,
1956, either in'cash, demand draft or treasury challan. [Rule 22].
21. The time taken
in supplying a certified copy of the order by the Company Law Board shall be
excluded in computing the period of three months. [Section 640A read with
Regulation 29(4) of the Company Law Board Regulations, 1991].
22. The Registrars
of Companies28 of both the States will register the same and certify
under their respective hands the registration thereof within one month.
[Section 18(1) and (3)].
23. The Company
Law Board may, however, extend any of the periods, mentioned in items 16 and 18
above. [Section 18(4)]. The alteration will be effective only on such
registration. [Section 19(1)]. For late filing, the consequences as stated in
Section 19(2) will follow.
24. The Company
Law Board may, on sufficient cause being shown, revive the order not registered
with the Registrar of Companies within due time on application made to it
within a further period of one month. [Section 19(2), Proviso].
25. File the
notice of change with the Registrar of Companies of the new State in Form No.
18 within thirty days from the date when the change becomes effective [Section
146(2)], after paying the requisite fee as prescribed under Schedule X to the
Companies Act, 1956, either in cash, demand draft or treasury challan. [Rule
22].
26. Please keep in
mind that if default is made in complying with the aforesaid requirement, the
company and every officer of the company who is in default will be punishable
with fine of Rs. 500/- for every day during which the default continues.
[Section 146(4)]
27. Make necessary
changes in every copy of Memorandum of Association, letter heads, vouchers,
registers, office papers, records, books, documents, signboards, common seal
etc.
28. Please keep in
mind that if at any time the company issues any copies of Memorandum of
Association without making the necessary changes therein, the company and every
officer of the company who is in default will be punishable with fine upto Rs.
100/- for each copy so issued. [Section 40(2)]
29. Further keep
in mind that if your company does not make necessary changes in its letter
heads, vouchers etc. as mentioned above, your company will be punishable with
fine of Rs. 5000/-. [Section 147(3)]
30. Note that if
your company's paid-up share capital is less than Rs. 50 lakhs but is
equal to or more than Rs. 10 lakhs, your company is required to obtain a
Compliance Certificate from a secretary in whole-time practice to be
filed, with the Registrar of Companies mentioning therein inter alia that the
company has altered the provisions of the memorandum with respect to situation
of the company's registered office from one State to another during the year
under scrutiny after complying with the provisions of the Act as per paragraph
26 of the Form of Compliance Certificate appended to the Companies (Compliance
Certificate) Rules, 2001. [Section -383-A(1) proviso].
Topic 29
DO YOU WISH TO ALTER THE OBJECTS OF YOUR
COWANY?
1. Hold a Board
Meeting after giving noticest to all the directors of the company as per
Section 286 to decide about the change and to fix up the date, time, place and
agenda for a General Meeting to pass a special resolution for suitably altering
the Memorandum of Association in this regard.
2. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of Rs. 1000/-. [Section .286(2)]
3. Note
that the aforesaid alteration can be made only on the grounds as mentioned in
Section 17(1)(a) to (g).
4. If
your company is a listed company, then ensure that the Special Resolution as
aforesaid is passed only through postal ballot. [Section 192A read with Rule
4(a) of the Companies (Passing of the Resolution by Postal Ballot) Rules,
2001].
5. Issue notices
for the General Meeting by giving not less than twenty-one days notice in
writing proposing the Special Resolution with suitable Explanatory Statement.
[Section 17](1) read with section 173(2)].
6. Hold
the General Meeting and pass the Special Resolution by three fourths majority.
[Section 189(2)].
7. Do
the following if the shares of your company are listed with any recognised Stock Exchange:
(a) Forward copies of all notices sent to the shareholders with
respect to the amendment in the Memorandum of Association to the Stock
Exchange.
(b) File with the Stock Exchange six copies of the amendments
made in the object clause of the Memorandum as soon as the company adopts it in
the General Meeting. One of the copies must be a certified copy.
(c) Forward promptly to the Stock Exchange three copies of the
notice and a copy of the proceedings of the General Meeting. [Clause 31(c), (d)
and 33 of the Standard Listing Agreemenel
8. File
the Special Resolution with Explanatory Statement with the concerned Registrar
of Companies within thirty days in Form No. 23 [Section 192], after paying the
requisite fee as prescribed under Schedule X to the Companies Act, 1956,
either in cash, demand draft or treasury challan. [Rule 22].
9. Please also
keep in mind that if default is made in complying with the aforesaid
requirement of filing the company and every officer of the company who is in
default will be punishable with fine of Rs. 200/- for everyday during
which the default continues. [Section 192(5)]
10. Make necessary
changes in every copy of the Memorandum of Association, letter heads, vouchers,
registers, office papers, records, books, documents, signboards, common seal
etc.
11. Please keep in
mind that if at any time the company issues any copies of the Memorandum of
Association without making the necessary changes therein, the company and every
officer of the company who is in default will be punishable with fine upto Rs.
100/- for each copy so issued. [Section 40(2)]
12. Further keep
in mind that if your company -does not make necessary changes in its
letter heads, vouchers etc. as mentioned above, your company will be punishable
with fine of Rs. 5000/-. [Section 147(3)]
13. Note that if
your company's paid-up share capital is less than Rs. 50 lakhs but is
equal to or more than Rs. 10 lakhs, your company is required to obtain a
Compliance Certificate from a secretary in whole-time practice to be
filed with the Registrar of Companies mentioning therein inter alia that the
company has altered the provisions of the memorandum with respect to the
objects of the company during the year under scrutiny with the provisions of
the Act as per paragraph 27 of the Form of Compliance Certificate appended to
the Companies (Compliance Certificate) Rules, 2001. [Section 383-A(1)
proviso].
(Topic 30 to Topic 33)
Topic 30,
DO YOU WISH TO CHANGE THE NAME OF YOUR
COMPANY?
1. Select,
in order of preference, a few suitable names, not less than four, each of which
should indicate as far as possible the main object of the company.
2. Out
of the aforesaid four names, one name will be main and other three to be
mentioned in order of preference.
3. Hold
a Board Meeting after giving notices+ to all the directors of the Company as
per Section 286 and adopt in it these new names selected.
4. Please keep in
mind that every officer of the company whose duty is to give notice as
aforesaid and who fails to do so will be punishable with fine upto Rs. 1000/-.
[Section 286(2)]
5. Avoid
names which resemble too closely or are the same as the names of any other
company already registered. [Section 20].
6. Names starting
with small alphabets can be used but before using such names it should be
ensured that such names do not have phonetic or visual resemblance to the name
of a company already in existence. [Circular No. 6/99, dated 13-5-1999].
7. Follow
the guidelines issued by the Central Government for availability or otherwise
of certain names.
8. See
that the name chosen does not violate the provisions of Emblems and Names
(Prevention of Improper Use) Act, 1950. Also see that the changed name does not
have the words, 'Stock Exchange' as part of its name without obtaining in
principle approval/no objection from the Securities and Exchange Board of India
9. Further
see that the name chosen does not contain any mark which is identical with or
deceptively similar to a trade mark under the Trade Marks Act, 1999.
10. Apply to the
concerned Registrar of Companies to ascertain which of the new names selected
by you is available in Form No. lA. A fee of Rs. 500/- is charged for the same.
[Rule 4A].
11. Pay the
fee for the application for availability of name in cash to the concerned
Registrar of Companies.
12. The concerned
Registrar of Companies will ordinarily inform within seven days from the date
of submission of your application whether any of the names applied for is
available or not.
13. Note that
application for approval of name should be given by the Registrar of Companies
within 3 working days as per the Citizen's Charter of the Department of Company
Affairs, Schedule III Serial No. 1, issued by the said Department vide No.
5/25/99-CL-V, Press Note No. 9/99, dated 9-8-1999.
14. If none
of the proposed four names is available, apply again to the concerned Registrar
of Companies selecting fresh names with required application fee.
15. Where computer
facility is available in the Registrar of Companies office, name availability
applications are disposed of within three working days after their receipt.
[Circular No. 14/6/ 94 CL-V, dated 16-2-1995].
16. On
confirmation from the concerned Registrar of Companies that the new name is
available for adoption, hold a Board Meeting after giving notices to all the
directors of the company as per Section 286 and fix up the date, time, place
and agenda in the Board Meeting for convening a General Meeting for passing a
special resolution to change the name, subject to the approval of the Central
Government, by delegation, Registrar of Companies. [Section 21].
17. Please keep in
mind that every officer of the company whose duty is to give notice as
aforesaid and who (fails to do so will be punished with fine upto Rs. 1,000/-
[Section 286(2)].
18. Issue notices
not less than twenty-one days from the date of the meeting [Section
171(1)] proposing the Special Resolution with suitable Explanatory Statement.
[Section 173(1)(b) & (2)].
19. Hold the
General Meeting and pass the Special Resolution, by three fourths majority
[Section 189(2)] for chanie of present name to the new name availed of from the
Registrar of Companies.
20. File the
Special Resolution with Explanatory Statement in Form No. 23, with the
concerned Registrar of Companies within thirty days of its passin, [Section
192(4)(a)], after paying the requisite fee prescribed under Schedule X to the
Companies Act, 1956, either in cash, demand draft or treasury challar [Rule
22].
21. Please keep in
mind that if default is made in complying with the aforesail requirement of
filing, the company and every officer of the company who is ii default will be
punishable with fine of Rs. 200/- for every day during which the default
continues. [Section 192(5)]
22. Do the
following if the shares of your company are listed on a recognised Stock
Exchange:-
(a) Send copies of notices issued to the shareholders to the Stock
Exchange with respect to the amendment of your company's Memorandum of
Association;
(b) File with the Stock Exchange six copies of the amendments
made in th Memorandum of Association as soon as they are adopted by the Company
in the General Meeting. One of the copies must be a certified copy;
(c) Forward to the Stock Exchange promptly three copies of the
notice and a copy of the proceedings of the General Meeting. [Clauses 31(c),(d)
and 33 of the Standard Listing Agreement].
23. Even if the
change of name consists of any abbreviated name then such narr can be allowed
to be changed by the Registrar of Companies in the light of existin guidelines
and no prior approval of the concerned Regional Director is necessary.
24. Apply
to the concerned Registrar of Companies' for approving the chang in name under
Section 21.
25. There is no
prescribed form of application, but the following details an papers should be
given in and/or enclosed with the application made on a plain paper giving full
details:
(a) detailed
reasons for the change of name;
(b) an up-to-date certified true copy of the
Memorandum and Articles of Association;
(c) a certified true copy each of the balance-sheet and the
profit & loss account for the last two financial years;
(d) a certified true copy of the confirmation received from the
concerned Registrar of Companies regarding the availability of the new name;
(e) a certified true copy of the communication received from the
concerned Registrar of Companies in token of his having recorded the Special
Resolution. [Section 192]. In case the said acknowledgment had not yet been
received, send the copy of the receipt, granted by him at the time of filing
the Special Resolution;
(f) a
certified true copy of the Special Resolution;
(g) total
number of members:
(i) on
the register as on the date of passing of the resolution;
(ii) who voted against the resolution with
the grounds of their objection;
(iii) who
voted in favour of the resolution;
(iv) who
expressed no opinion;
(h) whether absentee members communicated any objection to the
passing of the resolution;
(i) date
of incorporation of the company with the Registration number;
(j) certified copies of the Director's Reports, on the Annual
Accounts of Company, for two financial years;
(k) the
treasury challan evidencing payment of requisite fee :-
(i) challan Form No. TR-6 available with the specified
branches of the Punjab National Bank ;
(ii) The description of the Head of account of the treasury
challan should be as prescribed under Rule 22(1) of the Companies (Central
Government's) General Rules and Forms, 1956 and as amended vide GSR 25](E),
dated 21-6-1996 (w.e.f. 21-6-1996). For account head
and code please see Rule 22(1) in Appendix 1;
(iii) the amount of fees to be paid will be determined on the basis
of the authorised share capital provided in the Companies (Fees on Application)
Rules, 1999.
26. The requisite
fee may also be paid by demand draft drawn in favour of the Pay and Accounts
Officer, Department of Company Affairs, New Delhi or Mumbai or Calcutta or
Chennai and payable at any bank located in New Delhi or Mumbai or Calcutta or
Chennai depending on the place where the registered office of the company is
situated and the jurisdiction of the Registrar of Companies.
27. Note that the
application for approving the change in name should be given by the Registrar
of Companies within 15 working days as per the citizen's charter of the
Department of Company Affairs, Schedule III Serial No. 3, issued by the said
Department vide no. 5.25/99-CL-V, Press Note No. 9/99, dated 9-8-1999.
28. On receiving
the approval, apply to the concerned Registrar of Companies for a fresh
Certificate of Incorporation in the new name. On the issue of such Certificate
by the Registrar of Companies, the change in name will be effective. [Section
23].
29. Make necessary
changes in every copy of the Memorandum and Articles of Association, letter
heads, vouchers, registers, office papers, records, books, documents,
signboards, common seal etc.
30. If the change
in name amounts to either addition thereto or deletion therefrom of the word
"private" as a result of conversion of a public company into a
private company or vice versa then Central Government's (by delegation,
Registrar of Companies) approval is not required under proviso to Section 21
but for converting a public company into a private company, Central
Government's (by delegation, Registrar of Companies) approval under proviso to
Section 31 (1) is necessary.
31. Please keep in
mind that if at any time the company issues any copies of the Memorandum and
Article of Association without making the necessary changes therein, the
company and every officer of the company who is in default will be punishable
with fine upto Rs. 100/- for each copy so issued. [Section 40(2)]
32. Further keep
in mind that if your company does not make necessary changes in its letter
heads, vouchers etc. as mentioned above, your company will be punishable with
fine of Rs. 5000/-. [Section 147(3)]
33. Note that if
your company's paid-up share capital is less than Rs. 50 lakhs but is
equal to or more than Rs. 10 lakhs, your company is required to obtain a
Compliance Certificate from a secretary in whole-time practice to be
filed with the Registrar of Companies mentioning therein inter alia that the
company has altered the provisions of the memorandum with respect to name of
the company during the year under scrutiny and complied with the provisions of
the Act as per paragraph 26 of the Form of Compliance Certificate appended to
the Companies (Compliance Certificate) Rules, 2001.[Section 383-A(1)
proviso].
Topic 31
1. Please note
that when you seek registration of your existing business as a company under
section 565 by complying with the requirements of Section 567 (where your
existing business is a joint stock company) or Section 568 (where it is not a
joint stock company), in the existing name, and such name appears to be
undesirable [Section 20] in the opinion of the Central Government, the existing
name has to be changed with the approval of the Central Government.
2. See that such
changed name is not in the abbreviated form and in case it is so then no prior
approval of the concerned Regional Director is necessary now and Registrar of
Compamesi may take a final decision on such applications in the light of
existing guidelines.
3. Also see, that
the existing name or the changed name does not have the words, 'Stock Exchange',
as part of its name without obtaining in F rinciple approval/no objection from
the Securities and Exchange Board of India .
4. You can use
names starting with small alphabets but before using such names ensure that
such names do not have phonetic or visual resemblance to the name of a company
already in existence. [Circular No. 6/99, dated 13-5-1999].
5. Further
see that the name chosen does not contain any mark which is identical with or
deceptively similar to a trade mark under the Trade Mark Act, 1999.
6. Apply to the
concerned Registrar of Companies to ascertain which of the new names selected
by you is available in Form No. 1A. A fee of Rs. 500/- is charged for the same.
[Rule 4A]
7. Pay the fee
for the application for availability of name in cash to the concerned
Registrar of Companies.
8. The concerned
Registrar of Companies will ordinarily inform within seven days from the date
of submission of your application whether any of the names applied for is
available or not.
9. One
confirmation from the concerned Registrar of Companies that the new name is
available decide on the change of name in the following manner:-
(i) If your existing business is a joint stock company within
the meaning of section 566 and is sought to be registered as a company limited
by shares then, obtain the assent of three-fourths of the members of your
company present in person or, where proxies are allowed, by proxy, at a General
Meeting summoned for the purpose. [Section 565(1), Proviso (vi), read with
section 572, Proviso];
(ii) If your existing business is not a joint stock company within
the meaning of Section 566 and is sought to be registered as an unlimited
company, then, obtain the assent of a majority of such of the members as are
present in person or, where proxies are allowed, by proxy, at a General Meeting
summoned for the purpose. [Section 565(1), Proviso (v), read with Section 572,
Proviso];
(iii) If your existing business, whether a joint stock company or
not, is sought to be registered as a company limited by guarantee, then, obtain
the assent as per (i) or (ii), above, as the case may be, and also pass a
resolutionj declaring that each member undertakes to contribute to the assets
of the company in the event of its being wound up while he is a member, or
within one year he ceases to be a member, for payments of debts and liabilities
of the company or of such debts and liabilities as may have been contracted
before he ceases to be a member, and of the costs, charges and expenses of
winding-up, and for the adjustment of the rights of the contributories
among themselves, such amount as may be required not exceeding a specified
amount. [Section 565(1), Proviso (vii) read with Section 572, Proviso].
10. After
deciding the change of name as above, apply to the Central Government
(delegated to the Registrars of Companies) for approving the change in name.
11. Make an
applicationf to the concerned Registrar of Companies (delegated by the Central
Government) in the form of a letter on a plain paper giving all the relevant
details. There is no prescribed form for this.
12. Address the
application to the concerned Registrar of Companies and attach the following
documents to it:
(i) A declaration that proper assent of the members has been
taken as mentioned under item 9(ii) above;
(ii) A certified true copy of the resolution as mentioned under
item 9(i), (ii) and (iii), as the case may be;
(iii) A certified true copy each of the documents mentioned in
Section 567 or 568, as the case may be;
(iv) Original copy of the treasury challan evidencing the payment
of the requisite" application fee , or the demand draft for the required
amount of the fee.
13. Pay the
requisite application fee of the minimum of Rs. 500/- or the maximum of
Rs. 2000/-, as the case may be, as prescribed by the Companies (Fees on
Application) Rules, 1999 either by way of treasury challan or by way of demand
draft.
14. If paid by way
of treasury challan, then obtain three copies of treasury challan from the
specified branches' of the Punjab National Bank and file the details and
deposit along with the fee in cash to the said Branch, of the Bank.
15. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(2) of the Companies (Central Government's) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21-6-1996
(w.ef 21-6-1996). For account head and code please see Rule 22(2)
in Appendix 1.
16. Two copies of
the challan will be given to the depositor, the original copy should be sent to
the Central Government along with the documents mentioned in item 12 above.
17. If the
application fee is to be paid by way of a demand draft, then, draw the demand
draft in favour of "Pay and Accounts Officer, Department of Company
Affairs, New Delhi or Mumbai or Calcutta or Chennai" and payable at any
bank located in New Delhi or Mumbai or Calcutta or Chennai depending on the
region in which the office of the Registrar of Companies is located.
18. Do not pay the
fee in cash because the application is to be made to the Central Government
although delegated to the Registrar of Companieslo and cash is-not
accepted at the office of the Central Government.
19. Note that the
application for approving the change in name should be given by the Registrar of
Companies., within 15 working days as per the Citizen's Charter of the
Department of Company Affairs, Schedule III Serial No. 3, issued by the said
Department vide No. 5/25/99-CL-V; Press Note No. 9/99, dated 9-8-1999.
20. On receipt of
the approval from the concerned Registrar of Companies carry on the
registration requirements of your company under Section 567 or 568.
21. Note that if
your company's paid-up share capital is less than Rs. 50 lakhs but is
equal to or more than Rs. 10 lakhs, your company is required to obtain a
Compliance Certificate from a secretary in whole-time practice to be
filed with the Registrar of Companies mentioning therein inter alia that the
company has altered the provisions of the memorandum with respect to name of
the company during the year under scrutiny and complied with the provisions of
the Act as per paragraph 28 of the Form of Compliance Certificate appended to
the Companies (Compliance Certificate) Rules, 2001. [Section 383-A(1)
proviso].
Topic 32
DO YOU HAVE TO CHANGE THE NAME OF YOUR
COMPANY ON CENTRAL GOVERNMENT'S DIRECTION? [SECTION 22(1)(b)]
1. Please note that:-
(a) if the name of your company is, in the opinion of the Central
Government, identical with or too nearly resembles the name of previously
registered company, then a direction may be issued to your company to change
the name [Section 22(1)];
(b) such a direction can be issued only within twelve months of
incorporation with the original name or on re-registration, by a new name
[Section 22(1)(b)];
(c) power of the Central Government under Section 22(1)(b) now
stands delegated to the Regional Director.
2. On
receipt of the direction from the Central Government under Section 22(1)(b),
change the name of your company, within three months from the date of the
direction. [Section 22(1)(b)].
3. Please keep in
mind that if your company, makes any default in complying with any direction
given as aforesaid by the Central Government, the company and every officer who
is in default would be punishable with fine upto Rs. 1000/- for every day
during which the default continues. [Section 22(2)]
4. Select in
order of preference, a few suitable names, not less than four, each of which
should indicate as far as possible the main objects of the company. Out of the four
names, one name will be mentioned as the main name and the other three names
should be mentioned in order of preference.
5. Hold
a Board Meeting after giving notice to all the directors of the Company as per
Section 286 and adopt in it these new names selected.
6. Please keep in
mind that every officer of the company whose duty is to give notice as
aforesaid and who fails to do so will be punishable with fine upto Rs. 1000/-.
for every day during which the default continues. [Section 22(2)]
7. Avoid names
which resemble too closely or are the same as the names of any other company
already registered. [Section 20].
8. Names starting
with small alphabets can be used but before using such names it should be
ensured that such names do not have phonetic or visual resemblance to the name
of a company already in existence. [Circular No. 6/99, dated 13-5-1999].
9. Follow
the guidelines issued by the Central Government for availability or otherwise
of certain names.
10. See
that the name chosen does not violate the provisions of Emblems and Names
(Prevention of Improper Use) Act, 1950.
11. Also see that
the name chosen does not have the words, 'Stock Exchange' as part of its name
without obtaining in principle approval/no objection from Securities and Exchange
Board of India.
12. Apply to the
concerned Registrar of Companies to ascertain which of the new names selected
by you is available in Form No. 1A. A fee of Rs. 500/- is charged for the same.
[Rule 4A].
13. Attach the following documents along with the above
application:
(i) A certified true copy of the direction received from the
Central Government for changing the existing name;
(ii) A certified true copy of the Board Resolution adopting the
new names in order of preference;
14. Pay the fee of
Rs. 500/- in cash for the above application for availability of name to the
concerned Registrar of Companies.
15. The Registrar
of Companies will ordinarily inform within seven days from the date of
submission of your application whether any of the new names applied for is
avoidable or not.
16. If none of the
proposed four names is available, you will have to apply again to the concerned
Registrar of Companies, selecting fresh names with required application fee.
17. Where computer
facility is available in Registrar of Companies office, ilame availability
applications are disposed of within three working days after their receipt.
[Circular No. 14/6/94 CL-V, dated 16-2-1995].
18. Note that
application for approval of name should be given by the Registrar of Companies
within 3 working days as per the Citizen's Charter of the Department of Company
Affairs, Schedule III, Serial No. 1, issued by the said Department vide No.
5/25/99-CL-V, Press Note No. 9/99, dated 9-8-1999.
19. On
confirmation from the concerned Registrar of Companies that the new name is
available for adoption, hold a Board Meeting after giving notices to all the
directors of the company as per Section 286 and fix up the day, time, place and
agenda for convening a General Meeting for passing an Ordinary Resolution to
change the name, subject to the approval of the Central Government, by
delegation, Regional Director. [Section 22(1)(b)].
20. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
upto Rs. 1000/-. [Section 286(2)]
21. Issue notices
before twenty-one days from the date of the meeting [Section 171(1)]
proposing the Ordinary Resolution with suitable Explanatory Statement. [Section
173(1)(b) and (2)].
22. Hold
the General Meeting and pass the Ordinary Resolutionf by simple majority for
change of name. [Section 189(1)].
23. Apply to the
Regional Director (delegated by the Central Government) Kanpur/Kolkata/Chennai
or Murnbai as the case may be, on plain paper for approving the change in name
under Section 22(1)(b).
24. There is no
prescribed form of application but ensure that the following details and papers
should be enclosed to the application'~ made on a plain paper giving full
details :
(i) A
certified true copy of the direction of the Central Government;
(ii) The original name approval letter received from the Registrar
of Companies regarding the availability of new name;
(iii) A
certified true copy of the Ordinary Resolution passed;
(iv) A
certified true copy of the certificate of incorporation of the company;
(v) Original copy of the treasury challan evidencing the payment
of the requisite fee or if the requisite fee" is paid by way of a demand
draft, the demand draft.
25. Pay the
requisite application fee of the minimum of Rs. 500/- or the maximum of
Rs. 2000/-, as the case may be, as prescribed by the Companies (Fees on
Application) Rules, 1999, either by way of treasury challan or by way of demand
draft.
26. If paid by way
of treasury challan, then obtain three copies of treasury challan from
specified branches of the Punjab National Bank and fill the details and deposit
along with the fee in cash to the branch of the Bank.
27. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(2) of the Companies (Central Government's) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21-6-1996
(w.ef 21-6-1996). For account head and code please see Rule 22(2)
in Appendix 1.
28. Two copies of
the challan will be given to the depositor, the original copy should be sent to
the concerned Regional Director along with the documents mentioned in item 24.
29. If the
requisite application feel is to be paid by way of demand draft, then draw the
demand draft in favour of Pay and Accounts Officer, Department of Company
Affairs, Kolkata/Chennai/Mumbai as the case may be, depending on the
jurisdiction of the Regional Director over the place of the registered office of
the company and payable at any bank located at the same city or town as the
office of the Regional Director. For payment of application fee by way of
demand draft to the Regional Director, Northern Region, Kanpur, draw the demand
draft in favour of "Regional Director, N.R., Department of Company
Affairs, Kanpur" and payable at Kanpur.
30. Note that the
application for approval of rectification of name under section 22 should be
given by the Regional Director within 30 days as per the Citizenos Charter of
the Department of Company Affairs, Schedule II, Serial No. 1 issued by the said
Department vide No. 5/25/99-CL-V; Press Note No. 9/99, dated 9-8-1999.
31. On receiving
the approval from the Regional Director, apply to the concemed Registrar of
Companies" for a fresh certificate of incorporation in the new name.
32. On the issue
of the aforesaid certificate by the Registrar of Companies, the change in name
will be effective. [Section 23].
33. Make necessary
changes in every copy of the Memorandum and Articles of Association, letter
heads, vouchers, registers, office papers, records, books, documents,
signboards, common seal, etc.
34. Please keep in
mind that if at any time the company issues any copies of the Memorandum and
Articles of Association without making the necessary changes therein, the
company and every officer of the company who is in default will be punishable
with fine upto Rs. 100/- for each copy so issued. [Section 40(2)]
35. Further keep
in mind that if your company does not make necessary changes in its letter
heads, vouchers, etc. as mentioned above, your company will be punishable with
fine of Rs. 5000/-.
36. Note that if
your company's paid-up share capital is less than Rs. 50 lakhs but is
equal to or more than Rs. 10 lakhs, your company is required to obtain a
Compliance Certificate from a secretary in whole-time practice to be
filed with the Registrar of Companies mentioning therein inter alia that the
company has altered the provisions of the memorandum with respect to name of
the company during the year under scrutiny and complied with the provisions of
the Act as per paragraph 28 of the Form of Compliance Certificate appended to
the Companies (Compliance Certificate) Rules, 2001. [Section 383-A(1)
proviso].
Topic 33
DO YOU WISH TO REVALIDATE THE NAME
AVAILED OF ONCE AFTER THE EXPIRY OF INITIAL VALIDITY PERIOD?
1. Whether for
incorporating a new company or for change of name of your existing company if
you have once applied and availed of a particular name, such a name is valid for
six months'.
2. If within six
months the company is not incorporated in the name availed of or if the
existing name of the company is not changed to the new name availed of then the
validity period of that name expires.
3. To
revalidate the name again for a further period of six months you have to take
the following steps:
(i) Make an application to the same Registrar of Companies from
whom you have obtained the name on plain paper, explaining therein the reasons
for which you were unable to avail the name within the validity period.
(ii) Attach a certified copy of the original name availability
letter from the Registrar of Companies.
(iii) Cash
of Rs. 500/-as application fee for revalidation.
(iv) Deposit the aforesaid papers and cash at the office of the
concerned Registrar of Companies.
4. See
that the said applicationf- for revalidation is made before the last date
on which the validity period of the name expires.
5. On receipt of
the approval from the concerned Registrar of Companies, you are free to use the
name within six months from the date of the approval given.
6. Please keep in
mind that revalidation of name can be done only once and not perpetually.
7. Note that if
your company's paid-up share capital is less than Rs. 50 lakhs but is equal
to or more than Rs. 10 lakhs, your company is required to obtain a Compliance
Certificate from a secretary in whole-time practice to be filed with the
Registrar of Companies mentioning therein inter alia that the company has
altered the provisions of the memorandum with respect to name of the company
during the year under scrutiny and complied with the provisions of the Act as
per paragraph 28 of the Form of Compliance Certificate appended to the
Companies (Compliance Certificate) Rules, 2001. [Section 383-A(1)
proviso].
(Topic 34 to Topic 47)
Topic 34
DO YOU WISH TO INCREASE THE AUTHORISED
SHARE CAPITAL OF YOUR COMPANY?
1. Consult the
Articles of Association of your company to see whether they authorise the
company to increase the share capital. [Section 94]. If it does not authorise,
complete proceedings to alter them accordingly, vide Topic 26.
2. Note that if
your company is not a company limited by shares and your company wishes to
increase the number of its members beyond the registered number the same
procedure given below should be followed. [Section 97(1)]
3. Convene a
Board Meeting after issuing noticest to the directors of the company as per
Section 286 to decide about the increase and to fix up the date, time, place
and agenda for convening a General Meeting and to pass an Ordinary Resolutiont
(or Special Resolution, if so required by the Articles) for the same. [Section
94(2)].
4. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
upto Rs. 1000/-. [Section 286(2)]
5. If the shares
of your company are listed with any of the recognised StockExchange, then
immediately after the Board Meeting intimate to the concerned Stock Exchange by
letter or by telegram short particulars of the increase of capital. [Clause
22(c) of the Standard Listing Agreement].
6. Issue notices
in writing at least twenty-one days before the date of the meeting
[Section 171(1)] for the General Meeting with suitable Explanatory Statement.
[Section 173(2)].
7. Hold the
general meeting and pass the Ordinary Resolution by simple majority or Special
Resolution, by three fourths majority [Section 189] as required under item 3
above.
8. If the shares
of your company are listed with any of the recognised Stock Exchange, then
forward three copies of the notice and a copy of the proceedings of the General
Meeting to the Stock Exchange. [Clause 31(c) and (d) of the Standard Listing
Agreement] .
9. If the
resolution passed is a Special Resolution, file the same with Explanatory
Statement with the concerned Registrar of Companies in Form No. 23 within
thirty days, [Section 192(4) (a)], after paying the requisite fee prescribed
under Schedule X to the Companies Act, 1956, either by cash, demand draft or
treasury challan. [Rule 22].
10. Please keep in
mind that if default is made in complying with the aforesaid requirement of
filing, the company and every officer of the company who is in default will be
punishable with fine of upto Rs. 200/- for every day during which the
default continues. [Section 192(5)]
11. File the
notice of increase with the concerned Registrar of Companiee in Form No. 5
within thirty days on which the Registrar of Companies will make necessary
changes in the company's Memorandum and Articles of Association. [Section 97].
12. Ensure that
the said notice includes particulars of the classes of shares affected and the
conditions if any subject to which the new shares created in the increased
authorised share capital are to be issued. [Section 97(2)]
13. Please keep in
mind that if default is made in complying with the aforesaid requirements, your
company and every officer of your company who is in default will be punishable
with fine upto Rs. 500/- for every day during which the default continues.
[Section 97(3)]
14. While filing
the above notice, the registration feess for the increased authorised share
capital shall have to be paid either by way of treasury challan paid into any
of the specified branches of the Punjab National Bank or by demand draft drawn
in favour of the concerned Registrar of Companies.
15. The aforesaid
amountl payable will be the difference between the fees payable at the existing
rate on the authorised capital before and after the increment, as calculated on
the basis of Schedule X to the Companies Act, 1956.
16. If paid by way
of treasury challan then obtain three copies of the treasury challan from any
of the specified branches of the Punjab National Bank, and fill the details and
deposit all the three copies along with the registration fee in cash to the
said branch of the bank.
17. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(1) of the Companies (Central Government's) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21-6-1996
(w.ef 21-6-1996). For account head and code please see Rule 22(1)
in Appendix 1.
18. Two copies of
the challan will be given back to the depositor, the original copy should be
sent to the concerned Registrar of Companies along with Form No. 5 mentioned in
item 11.
19. Make necessary
changes in every copy of the Memorandum and Articles of Association and in all
other papers and documents.
20. Please keep in
mind that if at any time the company issues any copies of the Memorandum and
Articles of Association without making the necessary changes therein, the
company and every officer of the company who is in default will be punishable
with fine upto Rs. 100/- for each copy so issued. [Section 40(2)].
21. Note that if
your company's paid-up share capital is less than Rs. 50 lakhs but is
equal to or more than Rs. 10 lakhs, your company is required to obtain a
Compliance Certificate from a secretary in whole-time practice to be
filed with the Registrar of Companies mentioning therein inter alia that the
company has altered the provisions of the memorandum with respect to share
capital of the company during the year under scrutiny and complied with the
provisions of the Act as per paragraph 29 of the Form of Compliance Certificate
appended to the Companies (Compliance Certificate) Rules, 2001. [Section 383-A(1)
proviso].
Topic 35
DO YOU WISH TO INCREASE THE PAID-UP
SHARE CAPITAL OF A COMPANY?
1. Check whether
the Articles of Association of your company authorise the company to increase
the paid-up share capital of your company and if it does not then
complete proceedings to alter them accordingly, vide Topic 26
2. Also check
whether the paid up share capital proposed to be increased will be within the
total authorised share capital of your company and if not then complete
proceedings to first increase the authorised share capital of your company vide
Topic 34.
3. Decide as to
which of the following ways your company wishes to increase the paid-up
share capital of your company:
(a) making
a preferential allotment under section 81(1A) of the Act;
(b) issuing initial or further equity shares to the public;
(c) issuing rights shares to your existing shareholders;
(d) issuing bonus shares to your existing shareholders;
(e) securitisation of loans and advances;
(f) issuing
preference shares to a selected group;
(g) issuing
preference shares to your existing shareholders as bonus;
(h) conversion of existing debentures or bonds already issued by
your company into shares.
4. Convene
a Board Meeting after issuing notices to the directors of the company as per
Section 286 to decide about the increase of paid-up share capital and to
fix up the date, time, place and agenda for convening a General Meeting and to
pass an Ordinary or Special Resolution as the case may be for the same.
5. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
upto Rs.1000/-. [Section 286(2)].
6. If the shares
of your company are listed with any of the recognised Stock Exchange, then
immediately after the aforesaid Board Meeting intimate to the concerned Stock
Exchange by letter or telegram short particulars of the proposed increase of
paid-up share capital of your company. [Clause 22(c) of the Standard
Listing Agreement]
7. Issue notices
in writing at least twenty-one days before the date of the General
Meeting [Section 171(1)] with suitable Explanatory Statement. [Section 173(2)].
8. Hold the
General Meeting and pass the Ordinary Resolution by simple majority or the
Special Resolution by three fourths majority [Section 189] as the case may be
as required under item 3 above.
9. If the shares
of your company are listed with any of the recognised Stock Exchange, then
forward three copies of the notice and a copy of the proceedings of the General
Meeting to the Stock Exchange. [Clause 31(c) and (d) of the Standard Listing
Agreement].
10. If the
resolution passed is a Special Resolution, file the same with the relative
Explanatory Statement with the concerned Registrar of Companies in Form No.23
within thirty days,[Section 192(4) (a)], after paying the requisite fee prescribed
under Schedule X of the Companies Act,1956, either by cash, demand draft or
treasury challan. [Rule 22].
11. If paid by way
of treasury challan then obtain three copies of the treasury challan from any
of the specified branches of the Pun ab National Bank, and fill the details and
deposit all the three copies along with the filing fee in cash to the said
branch of the bank.
12. The
description of the head of account of the treasury challan should be as -ibed
under Rule 22(1) of the Companies (Central Government's) General and Forms,
1956 and as amended vide GSR 251(E), dated 21-6-1996 (w.e.f 1996).
For account head and code please see Rule 22(1) in Appendix 1.
13. Two
copies of the challan will be given back to the depositor, the original should be
sent to the concerned Registrar of Companies along with Form No. 23 mentioned
in item 10.
14. Make necessary
changes in every copy of the Memorandum and Articles of Association and in all
other papers and documents immediately after the paidLre capital is increased.
15. Please keep in
mind that if at any time the company issues any copies of lemorandum and
Articles of Association without making the necessary es therein, the company
and every officer of the company who is in default will be punishable with fine
upto Rs. 1000/- for each copy so issued.[Section 40(2)].
16. If your
company proposes to increase its paid-up share capital by making a -ntial
allotment under section 81(1A) mentioned in clause (a) of item 3 then complete
proceedings vide Topics 317 and 318 as the case may be.
17. If your
company proposes to increase its paid-up share capital by issuing or
further equity shares to the public mentioned in clause (b) of item 3 then
complete proceedings vide Topics 306, 307 and 308 or 309 as the case may be.
18. If your
company proposes to increase its paid-up share capital by issuing shares
to your existing shareholders mentioned in clause (c) of item 3 then complete
proceedings vide Topics 312, 313 and 314 as the case may be.
19. If your
company proposes to increase its paid-up share capital by issuing shares
to your existing shareholders mentioned in clause (d) of item 3 then complete
proceedings vide Topic 315.
20. If your
company proposes to increase its paid-up share capital by securitisation
of loans and advances mentioned in clause (e) of item 3 above, then complete
proceedings vide Topic 343.
21. If your
company proposes to increase its paid-up share capital by issuing
preference shares to a selected group mentioned in clause (f) of item 3 above,
then complete proceedings vide Topics 321, 322, 323, 324, 325, as the case may
be.
22. If your
company proposes to increase its paid-up share capital by issuing
preference shares to a selected group mentioned in clause (g) of item 3 above,
then complete proceedings vide Topic 326.
23. If your
company proposes to increase its paid-up share capital by issuing
preference shares to a selected group mentioned in clause (h) of item 3 above,
then complete proceedings accordingly.
Topic 36
DO YOU WISH TO ISSUE SHARE CAPITAL WITH
DIFFERENTIAL RIGHTS AS TO DIVIDEND, VOTING OR OTHERWISE?
[Companies (Issue of Share Capital with
Differential Voting Rights) Rules, 2001; GSR 167(E) dated 9-3-2001
amended by GSR 27(E) dated 12-1-2002]
1. Before issuing
share capital with differential rights as to dividend, voting or otherwise
check the following :
(1) your
company must be a company limited by shares;
(2) your company must have distributable profits in terms of
section 205 for the three, financial years preceding the year in which it
decides to issue such shares;
(3) your company has not defaulted in filing annual accounts and
annual returns for the three financial years immediately preceding the
financial year in which it decides to issue such shares;
(4) your company has not failed to repay its deposits or interest
thereon . on due date or redeem its debentures on due date or pay dividend;
(5) the articles of association of your company authorise the
issue of such shares;
(6) your company has not been convicted of any offence arising
under the SEBI Act,1992, the Securities Contracts (Regulation) Act, 1956, the
Foreign Exchange Management Act, 1999;
(7) your company has not defaulted in meeting investors'
grievances. [Rule 3(1) to (6)].
(8) shares
to be issued with such differential rights must be equity shares only.
2. In case the
Articles of Association of your company does not authorise the issue of such
shares then complete proceedings to alter them accordingly, vide Topic 26.
3. Convene a
Board Meeting after issuing notices to the directors of the company as per
Section 286 to decide about the issue of share capital with differential rights
as to voting, dividend or otherewise and to fix up the date, time, place and
agenda for convening a General Meeting and to pass an Ordinary or Special
Resolution as the case may be for the same. [Section 94(1)(a) &(2) ].
4. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meetin i as aforesaid and who fails to do so will be punishable with fine
upto Rs.1000/-. [Section 286(2)].
5. If the shares
of your company are listed with any of the recognised Stock Exchange, then
immediately after the aforesaid Board Meeting intimate to the concerned Stock
Exchange by letter or telegram short particulars of the proposed increase of
paid-up share capital of your company. [Clause 22(c) of the Standard
Listing Agreement].
6. Issue noticesf
in writing at least twenty-one days before the date of the General
Meeting [Section 171(1)] with suitable Explanatory Statement. [Section 173(2)]
.
7. If your
company is a listed public company then ensure that it obtains the approval of
its shareholders through postal ballot. [Rule 3(7)].
8. Ensure that
the aforesaid notice of the General Meeting at which the resolution is proposed
to be passed is accompanied by an Explanatory Statement stating in particular
the following:
(a) the rate of voting which the equity share capital with
differential voting right shall carry;
(b) the scale in proportion to which the voting rights of such
class or type of shares will vary;
(c) the company shall not convert its equity share capital with
voting rights into equity share capital with differential voting rights and the
shares with differential voting rights into equity share capital with voting
rights;
(d) the shares with differential voting rights shall not exceed
25% of the total share capital issued;
(e) that a member of the company holding any equity share with
differential voting rights shall be entitled to bonus shares, rights shares of
the same class;
(f) the holders of the equity shares with differential voting
rights shall enjoy all other rights to which the holder is entitled to
excepting right to vote as indicated in (a) above. [Rule 3(9)]
9. Hold the
General Meeting and pass the Ordinary Resolution by simple majority or the
Special Resolution by three fourths majority [Section 189] as the case may be
as required under item 3 above.
10. If the shares
of your company are listed with any of the recognised Stock Exchange, then
forward three copies of the notice and a copy of the proceedings of the General
Meeting to the Stock Exchange. [Clause 31(c) and (d) of the Standard Listing
Agreement].
11. If the
resolution passed is a Special Resolution, file the same with the relative
Explanatory Statement with the concerned Registrar of Cornpanies in Form No.23
within thirty days, [Section 192(4) (a)], after paying the requisite fee
prescribed under Schedule X of the Companies Act,1956, either by cash, demand
draft or treasury challan. [Rule 22].
12. Please keep in
mind that if default is made in complying with the aforesaid requirement of
filing, the company and every officer of the company who is in default will be
punishable with fine of Rs.200/- for every day during which the default
continues. [Section 192(5)]
13. If paid by way
of treasury challan then obtain three copies of the treasury challan from any
of the specified branches of the Punjab National Bank, and fill the details and
deposit all the three copies along with the filing fee in cash to the said
branch of the bank.
14. The
description of the head of account of the treasury challan should be as
prescribed under Rule 22(1) of the Companies (Central Government's) General
Rules and Forms,1956 and as amended vide GSR 251(E), dated 21-6-1996
(w.ef 21-6-1996). For account head and code please see Rule 22(1)
in Appendix 1.
15. Two copies of
the challan will be given back to the depositor, the original copy should be
sent to the concerned Registrar of Companies along with Form No. 23 mentioned
in item 11.
16. Make necessary
changes in every copy of the Memorandum and Articles of Association and in all
other papers and documents immediately after the paidup share capital is
increased.
17. Please keep in
mind that if at any time the company issues any copies of the Memorandum and
Articles of Association without making the necessary changes therein, the
company and every officer of the company who is in default will be punishable
with fine up to Rs. 1000/ for each copy so issued. [Section 40(2)].
18. Maintain a
register as required under section 150 containing the particulars of
differential rights to which the holder is entitled. [Rule 4].
19. Note that if
your company's paid-up share capital is less than Rs.50 lakhs but is
equal to or more than Rs.10 lakhs, your company is required to obtain a
Compliance Certificate from a secretary in whole-time practice to be
filed with the Registrar of Companies mentioning therein inter alia that the
company has issued shares with differential voting rights during the financial
year and complied with the provisions of the Act as per paragraph 19 of the
Form of Compliance Certificate appended to the Companies (Compliance
Certificate) Rules, 2001. [Section 383-A(1) proviso].
Topic 37
DO YOU WISH TO REDUCE THE SHARE CAPITAL
OF YOUR COMPANY?
1. Consult the
Articles of Association of your company to see whether they authorise reduction
of share capital [Section 100(1)], if not, complete proceedings to alter them
accordingly, vide Topic 26.
2. Convene a
Board Meeting after issuing notices to the directors of the company as per
Section 286 and approve the scheme of reduction, and fix up the date, time,
place and agenda for the General Meeting to pass a Special Resolution for
effecting reduction and consequently to change the Memorandum of Association
subject to confirmation of the concerned High Court.
3. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
upto Rs. 1000/-. [Section 286(2)]
4. The reduction
may be effected in any way as specified in Section 100 of the Companies Act,
1956 and they are:-
(a) by extinguishing or reducing the liability on any of its
shares in respect of share capital not paid-up; [Section 100(1)(a)]
(b) either with or without extinguishing or reducing liability on
any of its shares, by cancelling any paid-up share capital which is lost,
or is unrepresented by available assets; [Section 100(1)(b)] or.
(c) either with or without extinguishing or reducing liability on
any of its shares, by paying off any paid-up share capital which is in
excess of the wants of the company. [Section 100(1)(c)]
5. Issue noticest
in writing at least twenty-one days before the date of the General
Meeting proposing the Special Resolution with suitable Explanatory Statement.
[Section 171(1) read with section 173(2)].
6. Hold the
General Meeting and pass the Special Resolutiont by three fourths majority.
[Section 189(2)].
7. If the shares
of your company are listed with any of the recognised Stock Exchange, then
forward to the Stock Exchange concerned:
(a) Three copies of the notice and a copy of the proceedings of
the General Meeting effecting the reduction of capital;
(b) Copies of all notices sent to your shareholders with respect
to amendments to be made in the memorandum and articles. [Clauses 31(c), (d)
and 33 of the Standard Listing Agreement].
8. File the
Special Resolution with Explanatory Statement with the concerned Registrar of
Companies in Form No. 23 within thirty days. [Section 192] after paying the
requisite fees prescribed under Schedule X to the Companies Act, 1956, either
in cash, demand draft or treasury challan. [Rule 22(1)].
9. Please keep in
mind that if default is made in complying with the aforesaid requirement of
filing, the company and every officer of the company will be punishable with
fine of upto Rs. 200/- for every day during which the default continues.
[Section 192(5)]
10. Apply to the
concerned High Court for confirmation of the reduction by way of a petition in
Form No. 18 of the Companies (Court) Rules, 1959, and such petition must be
accompanied by summons for directions in Form No. 19 of the said Rules.
11. The aforesaid
petition must be verified by an affidavit in Form No. 3 of the said Rules which
should either be notarised by the Notary public or sworn before the Oath
Commissioner. [Rule 21 of the Companies Court Rules, 1959].
12. The petition should be accompanied by the following
documents:-
(i) A certified true copy of the Memorandum and Articles of
Association of your company;
(ii) A
certified true copy of the notice calling the meeting;
(iii) A certified true copy of the Special Resolution with Explanatory
Statement authorising the reduction of capital;
(iv) A
certified true copy of the latest balance-sheet and profit and loss
account;
(v) A certified true copy of the minutes of the meeting at which
the Special Resolution was passed. The original minute book of the company, if
required to be produced should also be produced along with the certified true
copy which will be returned by the Court after the copy has been checked with
the original. [Note: Rule 22 of the Companies (Court) Rules, 1959].
(vi) Requisite
Court fee as prescribed by the rules of the concerned High Court.
13. Make an
advertisement of the petition not less than fourteen days before the date fixed
for hearing in one issue of the Official Gazette of the State or the Union Territory
concerned and in one issue each of a daily newspaper in English language and a
daily newspaper in the regional language circulating in the concerned State or
thq Union Territory if the Judge so directs on receiving the petition.
14. This is
usually the case when the Judge is satisfied that the reduction does not
involve either diminution of liability in respect of unpaid share capital or
payment to any shareholder of any paid-up share capital. [Rules 24 and 47
of the Companies (Court) Rules, 1959].
15. If, according
to the Judge, the reduction involves either diminution of liability in respect
of unpaid share capital or payment to any shareholder of any paid-up
share capital, then do the following things:
(i) File a list of creditors in Form No. 21 prescribed under
Rule 49 of the Companies (Court) Rules, 1959, with the concerned High Court,
within the time allowed by the Judge;
(ii) See that the said list is verified by an affidavit in Form
No. 22 pre-scribed under Rule 50 of the Companies (Court) Rules, 1959,
which is to be made by a director or secretary or any other principal officer
of the concerned company;
(iii) Keep copies of the list of creditors in the registered office
of the company and also at the office of the advocate of the company and allow
any person to inspect and take extracts from it at any time during the ordinary
hours of business on payment of the sum of one rupee. [Rule 51 of the Companies
(Court) Rules, 1959];
(iv) Give notice to every creditor named in the list in Form No. 23
prescribed under Rule 52 of the Companies (Court) Rules, 1959, within seven
days after the filing of the list of creditors. Send such notices by pre-paid
registered post for acknowledgment to the last known address of each creditor;
(v) Advertise the noticet of the presentation of the petition and
of the list of creditors in Form No. 24 prescribed under Rule 53 of the
Companies (Court) Rules, 1959, within seven days after the filing of the said
list;
(vi) File an affidavit proving the despatch and publication of the
notices mentioned in (iv) and (v) above in Form No. 25 prescribed under Rule 54
of the Companies (Court) Rules, 1959; The said affidavit before filing should
be either notarised by the Notary Public or sworn before the Oath Commissioner;
(vii) File a statement signed and verified by the advocate of the
company stating the result of the notices mentioned in (iv) and (v) above,
accompanied by an affidavit in Form No. 26 prescribed under Rule 55 of the
Companies (Court) Rules, 1959, within the time fixed by the Judge;
(viii) If the Company contends that a person is not entitled to be
entered in the list of creditors or if the company is unwilling to set apart
and appropriate the full amount of any debt or claim of any creditor, then give
a notice to that or those creditor or creditors in Form No. 27 prescribed under
Rule 56 of the Companies (Court) Rules, 1959, not less than four clear days
before the date fixed by the Judge;
(ix) Get a certificate prepared by the advocate of the company
stating the result of the settlement of the list of creditors and file it.
[Rule 58 of the Companies (Court) Rules, 1959];
(x) Advertise notice of the date fixed for the hearing of the
petition in Form No. 29 prescribed under Rule 59 of the Companies (Court) Rules,
1959 within such time and in such newspaper or newspapers as the Judge may
direct;
16. The concerned
High Court, being satisfied on all respects, will pass an order confirming the
reduction and may direct the company to use the words "and reduced"
in its name and/or to publish in newspapers the reasons etc., for reduction in
terms of Section 102. Comply with these requirements of the said Court
accordingly.
17. Give notice of
the said Court's order to the concerned Registrar of Companies in Form No. 21,
within thirty days of the receipt of the said Court's order after paying the
requisite fee as prescribed under Schedule X to the Companies Act, 1956, either
in cash, demand draft or treasury challan. [Rule 22].
18. Deliver a
certified copy of the concerned Hiih Court's order and the minutes approved by
the said Court in Form No. 31 of the Companies (Court) Rules, 1959, to the
concerned Registrar of Companies and produce before him the original copy of
the order on which he will register the copy of the order and the minutes and
will certify the same under his own hand. The reduction will be effective on
such registration. [Section 103(1), (2) & (4)].
19. Publish the
notice of registration in such manner as the concerned High Court directs in
Form No. 32 of the Companies (Court) Rules, 1959. [Section 103(3)].
20. Alter accordingly the Memorandum and Articles of
Association and other papers and
documents.
21. Please keep in
mind that if at any time the company issues any copies of the Memorandum and
Articles of Association without making the alteration therein, the company and
every officer of the company who is in'default will be punishable with fine
upto Rs. 100/- for each copy so issued. [Section 40(2)]
22. Take
other steps such as making endorsement on the share certificates or refunding
of the capital or any other thing as per the scheme of reduction.
23. Send to the
Stock Exchange with which the shares of your company are listed, three copies
of all notices, circulars etc., issued or advertised by the company in
connection with the reduction. [Clause 31(e) of the Standard Listing
Agreement].
24. If your
company is a Government company, then follow the provisions of Sections 100 to
103 regarding reduction of capital, substituting "Central Govemment"
in place of "Court" wherever it appears.
25. Note that
under Explanation to section 87(2)(a) any resolution of your company for
reduction of its share capital should be deemed directly to affect the rights
attached to the preference shares if you have any and in such a case preference
shareholders will have a right to vote on such a resolution under section
87(2)(a).
26. Note that if
your company's paid-up share capital is less than Rs. 50 lakhs but is
equal to or more than Rs. 10 lakhs, your company is required to obtain a
Compliance Certificate from a secretary in whole-time practice to be
filed with the Registrar of Companies mentioning therein inter alia that the
company has altered the provisions of the memorandum with respect to share
capital of the company during the year under scrutiny and complied with the
provisions of the Act as per paragraph 29 of the Form of Compliance Certificate
appended to the Companies (Compliance Certificate) Rules, 2001. [Section 383-A(1)
proviso].
Topic 38
1. Consult the
Articles of Association of your company to see whether they authorise such
consolidation; if not, complete proceedings to alter them accordingly, vide
Topic 26 [Section 94(1)(b)].
2. Give twenty-one
days' prior notice to the recognised Stock Exchange with which the shares of
your company are listed of such proposed consolidation and division. [Clause 28
of the Standard Listing Agreement].
3. Make an
application to the same recognised Stock Exchange for listing of the securities
as changed if your company is a listed company. [Clause 28 of the Standard
Listing Agreement.
4. Convene a
Board Meeting after giving notice to all the directors of the company as per
Section 286 to decide about the consolidation and to fix up date, time, place
and agenda for calling a General Meeting to pass an Ordinary Resolution or
Special Resolution, if the Articles of Association of the company so require.
[Section 94].
5. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
upto Rs. 1000/-. [Section 286(2)]
6. If the shares
of your company are listed with any of the recognised Stock Exchange, then
immediately after the Board Meeting intimate to the concerned Stock Exchange by
letter or by telegram short particulars of the alteration of capital. [Clause
22(c) of the Standard Listing Agreement].
7. Issue notices
in writing at least twenty-one days before the date the General Meeting
proposing the Ordinary or Special Resolution with suitable Explanatory
Statement. [Section 171(1) read with section 173(2)].
8. Hold
the General Meeting and pass the Ordinary Resolution by ordinary majority or
Special Resolution by three fourths majority. [Section 189].
9. Forward three
copies of the notice and a copy of the proceedings of the General Meeting to
the Stock Exchange with which the shares of pur company are listed. [Clause
31(c) and (d) of the Standard Listing Agreement].
10. If the
resolution passed is a Special Resolution, file the same with the concerned
Registrar of Companies in Form No. 23 within thirty days of the passing
[Section 192] after paying the requisite filing fee prescribed under Schedule X
to the Companies Act, 1956, either in cash, demand draft or treasury challan.
[Rule 22].
11. Please also
keep in mind that if default is made in complying with the aforesaid
requirement of filing, the company and every officer of the company who is in
default will be punishable with fine of upto Rs. 200/- for everyday during
which the default continues. [Section 192(5)]
12. Give notice of
consolidation to the concerned Registrar of Companies in Form No. 5 within
thirty days on receipt of which he will record the notice and make any
alteration which may be necessary, in the company's Memorandum and Articles of
Association. [Section 95(1)].
13. Please keep in
mind that if default is made in giving the said notice within the said time,
your company and every officer of the company who is in default will be
punishable with fine upto Rs. 500/- for every day during which the default
continues. [Section 95(3)]
14. Pay the
required fee as prescribed under Schedule X to the Companies Act, 1956, for the
above notice by way of postal order if the amount does not exceed fifty rupees
or by cash or by the treasury challan to the concerned Registrar of Companies.
15. If paid by way
of treasury challan then obtain three copies or treasury challan from anyone of
the specified branches of the Punjab National Bank and fill the details and
deposit along with the fee in cash to the said branch of the bank.
16. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(1) of the Companies (Central Government's) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21-6-1996
(w.e.f 21-6-1996). For account head and code please see Rule 22(1)
in Appendix 1.
17. Two copies of
the challan will be given back to the depositor, the orginal copy of which
should be sent to the Registrar of Companies along with Form No. 5 mentioned in
item 12.
18. If your
ocmpany is a listed company then forward the following to the Stock Exchange
with which the shares of your company are listed:
(i) Copies of all notices sent to your company's shareholders
with respect to the alteration of conditions in the Memorandum of Association;
(ii) Six copies (one of which will be certified) of such
amendments made in the memorandum as soon as they are adopted by the company in
the General Meeting. [Clause 33 of the Standard Listing Agreement].
19. Make necessary
changes in all copies of the Memorandum of Association and also in share certificates,
records, documents and registers of the company.
20. Please keep in
mind that if at any time your company issues any copy of Memorandum of
Association without making the necessary changes therein, the company and every
officer of the company who is in default will be punishable with fine upto Rs.
100/- for each copy so issued. [Section 40(2)]
21. Consolidation
of the equity share capital and the redeemable preference share capital and the
division of the consolidated share capital into equity shares of lesser amount
is not covered under clause (b) of Sub-section (1) of Section 94, since
the consolidation and division of share capital into shares of small
denominations are not covered thereby. [Letter No. 40/3/71, CL-III, dated
21-7-1975].
22. Existing
listed companies who have issued shares with face value of Rs. 10/- and Rs.
100/- can avail the change proposed by SEBI to fix the amount of par
value of shares indicated by them in the Memorandum and Articles of Association
by splitting or consolidating the existing shares into any amount they think
fit but not below Re. 1. [Clause 3.7 of the SEBI (DIP) Guidelines 2000, dated
19-1-2000 issued by SEBI].
23. Note that if
your company's paid-up share capital is less than Rs. 50 lakhs but is
equal to or more than Rs. 10 lakhs, your company is required to obtain a
Compliance Certificate from a secretary in whole-time practice to be
filed with the Registrar of Companies mentioning therein inter alia that the
company has altered the provisions of the memorandum with respect to share
capital of the company during the year under scrutiny and complied with the
provisions of the Act as per paragraph 29 of the Form of Compliance Certificate
appended to the Companies (Compliance Certificate) Rules, 2001- [Section
383-A(1) proviso].
Topic 39
1. Consult the
Articles of Association of your company to see whether they authorise such sub-division;
if not, complete proceedings to alter them accordingly, vide Topic 26 [Section
94(1)(d)].
2. Give twenty-one
days' prior noticet to the recognised Stock Exchange with which the shares of
your company are listed, of such proposed sub-division of shares into
shares of smaller amount. [Clause 28 of the Standard Listing Agreement]
3. Make an
application to the same recognised Stock Exchange for listing of the securities
as changed if your company is a listed company. [Clause 28 of the Standard
Listing Agreement
4. Convene a
Board Meeting after giving noticet to all the directors of the company as per
Section 286 to decide about the sub-division and to fix up the date,
time, place and agenda for calling a General Meeting to pass an Ordinary
Resolution or Special Resolutionf, if the Articles of Association of the
company so require. [Section 94]
5. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
upto Rs. 1000/-. [Section 286(2)]
6. If the shares
of your company are listed with any of the recognised Stock Exchanges, then
immediately after the Board Meeting intimate to the concerned Stock Exchange by
letter or by telegram short particulars of such alteration of capital. [Clause
22(c) of the Standard Listing Agreement].
7. Issue notices
in writing at least twenty-one days before the date of the General
Meeting proposing the Ordinary or Special Resolution with suitable Explanatory
Statement. [Section 171(1) read with section 173(2)].
8. Hold
the General Meeting and pass the Ordinary Resolution by ordinary majority or
Special Resolution by three fourths majority. [Section 189].
9. Forward three
copies of notice and a copy of the proceedings of the General Meeting to the
Stock Exchange with which the shares of your Companies are listed. [Clause
31(c) and (d) of the Standard Listing Agreement].
10. If the
resolution passed is a Special Resolution file the same with the concerned
Registrar of Companies in Form No. 23 within thirty days of the passing
[Section 192] after paying the requisite fee prescribed under Schedule X to the
Companies Act, 1956, either in cash, demand draft or treasury challan. [Rule
22]
11. Please also
keep in mind that if default is made in complying with the aforesaid
requirement of filing the company and every officer of the company who is in
default will be punishable with fine of upto Rs. 200/- for everyday during
which the default continues. [Section 192(5)]
12. Give notice of
sub-division to the concerned Registrar of Companies in Form No. 5 within
thirty days, on receipt of which he will record the notice and make any
alteration which may be necessary, in the company's Memorandum and Articles of
Association. [Section 95(1)].
13. Please keep in
mind that if default is made in giving the said notice within the said time,
your company and every officer of the company who is in default will be
punishable with fine upto Rs. 500/- for every day during which the default
continues. [Section 95(3)]
14. Pay the
required fee as prescribed under Schedule X to the Companies Act, 1956, for the
above notice by way of postal order if the amount does not exceed fifty rupees
or by cash or by way of treasury challan to the concerned Registrar of
Companies.
15. If paid by way
of treasury challan then obtain three copies of treasury challan from anyone of
the specified branches of the Punjab National Bank and fill the details and
deposit along with the fee in cash to the said branch of the bank.
16. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(1) of the Companies (Central Government's) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21-6-1996
(w.ef 21-6-1996). For account head and code please see Rule 22(1)
in Appendix 1.
17. Two copies of
the challan will be given back to the depositor, the original copy of which
should be sent to the Registrar of Companies along with Form No. 51 mentioned
in item 12.
18. If your
company is a listed company then forward the following to the, Stock Exchange
with which the shares of your company are listed:
(i) Copies of all notices sent to your company's shareholders
with respect to the alteration of conditions in the Memorandum of Association;
(ii) Six copies (one of which will be certified) of such
amendments made in the memorandum as soon as they are adopted by the company in
the General Meeting. [Clause 33 of the Standard Listing Agreement].
19. Make
necessary changes in all the copies of the Memorandum of Association and also
in share certificates, records, documents and registers of the company.
20. Please keep in
mind that if at any time your company issues any copy of Memorandum of
Association without making the necessary changes therein, the company and every
officer of the company who is in default will be punishable with fine upto Rs.
100/- for each copy so issued. [Section 40(2)]
21. Existing
listed companies who have issued shares with face value of Rs. 10/- and,
Rs. 100/- can avail the change proposed by SEBI to fix the amount of par
value of shares indicated by them in the Memorandum and Articles of Association
by splitting or consolidating the existing shares into any amount they think
fit but not below Re. 1/-. [Clause 3.7 of the SEBI (DIP) Guidelines 2000,
dated 19-1-2000 issued by SEBI] .
22. Note that if
your company's paid-up share capital is less than Rs. 50 lakhs but is
equal to or more than Rs. 10 lakhs, your company is required to obtain a
Compliance Certificate from a secretary in whole-time practice to be
filed with the Registrar of Companies mentioning therein inter alia that the
company has altered the provisions of the memorandum with respect to share
capital of the company during the year under scrutiny and complied with the
provisions of the Act as per paragraph 29 of the Form of Compliance Certificate
appended to the Companies (Compliance Certificate) Rules, 2001. [Section 383-A(1)
proviso].
Topic 40
DO YOU WISH TO RE-CONVERT STOCK
INTO FULLY PAIDUP SHARES?
1. Consult the
Articles of Association of your company to see whether they authorise such re-conversion:
if not, complete proceedings to alter them accordingly vide Topic 26 [Section
94(1)(c)].
2. Give twenty-one
days' prior notice to the recognised Stock Exchange with which the shares of
your company are listed of the proposed re-conversion of stock into fully
paid-up shares. [Clause 28 of the Standard Listing Agreement].
3. Convene a
Board Meeting after giving notice to all the directors of the company as per
Section 286 to decide about the re-conversion and to fix up the date,
time, place and agenda for calling a General Meeting to pass an Ordinary
Resolution or Special Resolutiont, if the Articles of Association of the company
so require. [Section 94].
4. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
upto Rs. 1000/-. [Section 286(2)]
5. If the shares
of your company are listed with any of the recognised Stock Exchanges, then
immediately after the Board Meeting intimate to the concerned Stock Exchange by
letter or by telegram short particulars of such alteration of share capital.
[Clause 22(c) of the Standard Listing Agreement].
6. Issue noticest
in writing at least twenty-one days before the date of the General
Meeting proposing the Ordinary or Special Resolution with suitable Explanatory
Statement. [Section 171(1) read with.section 173(2)].
7. Hold
the General Meeting and pass the Ordinary Resolution by simple majority or
Special Resolution by three fourths majority. [Section 189].
8. Forward three
copies of the notice and a copy of the proceedings of the General Meeting to
the Stock Exchange with which the shares of our company are listed. [Clause
31(c) and (d) of the Standard Listing Agreement ].
9. If the
resolution passed is a Special Resolution, file the same with concerned
Registrar of Companies in Form No. 23 within thirty days of the passing
[Section 192] after paying the requisite fee prescribed under Schedule X to the
Companies Act, 1956, either in cash, demand draft or treasury challan. [Rule
22].
10. Please also
keep in mind that if default is made in complying with the aforesaid requirement
of filing, the company and every officer of the company who is in default will
be punishable with fine of Rs. 200/- for every day during which the default
continues. [Section 192(5)]
11. Give noticet
of re-conversion to the concerned Registrar of Companies in Form No. 5
within thirty days of such re-conversion on receipt of which he will
record the notice and make any alteration which may be necessary, in the
company's Memorandum and Articles of Association. [Section 95(1)].
12. Please keep in
mind that if default is made in giving the said notice within the said time,
your company and every officer of the company who is in default will be
punishable with fine upto Rs. 500/- for every day during which the
default continues. [Section 95(3)]
13. Pay the
required fee as prescribed under Schedule X to the Companies Act, 1956, for the
above notice by way of postal order if the amount does not exceed fifty rupees
or b cash or by way of treasury challan to the concerned Registrar of
Companies.
14. If paid by way
of treasury challan then obtain three copies of treasury challan from anyone of
the specified branches of the Punjab National Bank and fill the details and
deposit along with the fee in cash to the said branch of the bank.
15. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(1) of the Companies (Central Government's) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21-6-1996
(w.e.f 21-6-1996). For account head and code please see Rule 22(1)
in Appendix 1.
16. Two copies of
the challan will be given back to the de R ositor the original copy of which
should be sent to the Registrar of Companies along with Form No. 5 mentioned in
item 11.
17. Cancel
the stock certificates and issue necessary share certificates in accordance
with the Companies (Issue of Share Certificates) Rules, 1960.
18. If your
Company is a listed company then forward the following to the Stock Exchange
with which the shares of your company are listed:
(i) Copies of all notices sent to your company's shareholders
with respect to the alteration of conditions in the memorandum of association;
(ii) Six copies (one of which will be certified) of such
alterations made in the memorandum as soon as they are adopted by the company
in the General Meeting. [Clause 33 of the Standard Listing Agreement].
19. Make
necessary changes in all the copies of the Memorandum of Association and also
in all records, documents and registers of the company.
20. Please keep in
mind that if at any time your company issues any copy of Memorandum of
Association without making the necessary changes therein, the company and every
officer of the company who is in default will be punishable with fine upto Rs.
100/- for each copy so issued. [Section 40(2)]
21. Note that if
your company's paid-up share capital is less than Rs. 50 lakhs but is
equal to or more than Rs. 10 lakhs, your company is required to obtain a
Compliance Certificate from a secretary in whole-time practice to be
filed with the Registrar of Companies mentioning therein inter alia that the
company has altered the provisions of the memorandum with respect to share
capital of the company during the year under scrutiny and complied with the
provisions of the Act as per paragraph 29 of the Form of Compliance Certificate
appended to the Companies (Compliance Certificate) Rules, 2001. [Section 383-A(1)
proviso].
Topic 41
DO YOU WISH TO CONVERT ALL OR ANY OF
YOUR COMPANY'S FULLY PAID-UP SHARES INTO STOCK?
1. Consult the
Articles of Association of your company to see whether they authorise such
conversion. If not, complete proceedings to alter them accordingly, vide Topic
26. [Section 94(1)(c)].
2. Give twenty-one
days’ prior notice to the recognised Stock Exchange with which the shares of
your company are listed, of the proposed conversion of fully paid-up
shares into stock. [Clause 28 of the Standard Listing Agreement].
3. Make an
application to the same recognised Stock Exchange for listing of the securities
converted into stock, if our company is a listed company. [Clause 28 of the
Standard Listing Agreement].
4. Convene a
Board Meeting after giving noticef to all the directors of the company as per
Section 286 to decide about the conversion and to fix up the date, place and agenda
for calling a General Meeting to pass an Ordinary Resolution or Special
Resolutiont, if the Articles of Association so require. [Section 94].
5. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
upto Rs. 1000/-. [Section 286(2)]
6. If the shares
of your company are listed with any of the recognised Stock Exchanges, then
immediately after the Board Meeting intimate to the concerned Stock Exchange by
letter or by telegram short particulars of such alteration of share capital.
[Clause 22(c) of the Standard Listing Agreement].
7. Issue noticest
in writing at least twenty-one days before the date of the General
Meeting proposing the Ordinary or Special Resolution with suitable Explanatory
Statement. [Section 171(1) read with section 173(2)].
8. Hold the
General Meeting and pass the Ordinary Resolution by simple majority or Special
Resolution by three fourths majority. [Section 189]
9. Forward three
copies of the notice and a copy of the proceedings of the General Meeting to
the Stock Exchange with which the shares of our company are listed. [Clause
31(c) and (d) of the Standard Listing Agreement ].
10. If the
resolution passed is a Special Resolution, file the same with the concerned
Registrar of Companies in Form No. 23 within thirty days of the passing
[Section 192] after paying the requisite fee prescribed under Schedule X to the
Companies Act, 1956, either in cash, demand draft or treasury challan. [Rule
22].
11. Please also
keep in mind that if default is made in complying with the aforesaid
requirement of filing, the company and every officer of the company who is in
default will be punishable with fine of upto Rs. 200/- for every day during
which the default continues.
12. Give notice of
conversion to the concerned Registrar of Companies in Form No. 5 within thirty
days of such conversion of shares into stock on receipt of which he will record
the notice and make any alteration which may be necessary, in the company's
Memorandum and Articles of Association. [Section 95(1)].
13. Please keep in
mind that if default is made in giving the said notice within the said time,
your company and every officer of the company who is in default will be
punishable with fine upto Rs. 500/- for every day during which the
default continues. [Section 95(3)]
14. Pay the
required fee for the above notice by way of postal order if the amount does not
exceed fifty rupees or by cash or by way of treasury challan to the concerned
Registrar of Companies.
15. If paid
by way or treasury challan then obtain copies of treasury challan from any one
of the specified branches of the Punjab National Bank and fill the details and
deposit along with dthe fee in cash to the said branch of the bank.
16. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(1) of the Companies (Central Government’s) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21-6-1996
(w.e.f. 21-6-1996). For account head and code please see Rule 22(1)
in Appendix 1.
17. Two copies of
the challan will be given back to the depositor the original copy of which
should be sent to the Registrar of Companies along with Form No. 5 mentioned in
item 12.
18. Issue necessary stock
certificates in exchange of share certificates.
19. If your
company is a listed company then forward to the Stock Exchange with which the
shares of your company are listed the following :-
(i) Copies of all notices sent to your company's shareholders
with respect to the alteration of conditions in the memorandum of association;
(ii) Six copies (one of which will be certified) of such
amendments made in the memorandum as soon as they are adopted by the company in
General Meeting. [Clause 33 of the Standard Listing Agreement].
20. Make
necessary changes in all copies of Memorandum of Association and also in
records, documents and registers of the company.
21. Please keep in
mind that if at any time your company issues any copy of Memorandum of
Association without making the necessary changes therein, the company and every
officer of the company who is in default will be punishable with fine upto Rs.
100/- for each copy so issued. [Section 40(2)]
22. Note that if your
company's paid-up share capital is less than Rs. 50 lakhs but is equal to
or more than Rs. 10 lakhs, your company is required to obtain a Compliance
Certificate from a secretary in whole-time practice to be filed with the
Registrar of Companies mentioning therein inter alia that the company has
altered the provisions of the memorandum with respect to share capital of the
company during the year under scrutiny and complied with the provisions of the
Act as per paragraph 29 of the Form of Compliance Certificate appended to the
Companies (Compliance Certificate) Rules, 2001. [Section 383-A(1)
proviso].
Topic 42
DO YOU WISH TO CANCEL ANY OF YOUR COMPANY'S UNISSUED OR UNCOMMITTED
SHARE CAPITAL?
1. Consult the
Articles of Association of your company to see whether they authorise
cancellation of the share capital which has not been issued or has not been
agreed to be taken up by any person; if not, complete proceedings to alter them
accordingly, vide Topic 26. [Section 94(1)(e)].
2. Convene a
Board Meeting after giving noticet to all the directors of the company as per
Section 286 to decide about the cancellation and to fix up the date, time,
place, and agenda for calling a General Meeting to pass an Ordinary Resolution
or Special Resolution~, if the Articles of Association so require. [Section
94].
3. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
upto Rs. 1000/-. [Section 286(2)]
4. Issue noticest
in writing at least twenty-one days before the date of the General
Meeting proposing the Ordinary or Special Resolution with suitable Explanatory
Statement. [Section 171(1) read with section 173(2)].
5. Hold
the General Meeting and pass the Ordinary Resolution by simple majority or
Special Resolution by three fourths majority. [Section 189].
6. Forward three
copies of the notice and a copy of the proceedings of the General Meeting to
the Stock Exchange with which the shares of our company are listed. [Clause
31(c) and (d) of the Standard Listing Agreement ].
7. If the
resolution passed is a Special Resolution, file the same with the concerned
Registrar of Companies in Form No. 23 within thirty days of its passing
[Section 192] after paying the requisite fee prescribed under Schedule X to the
Companies Act, 1956, either in cash, demand draft or treasury challan. [Rule
22].
8. Please also
keep in mind that if default is made in complying with the aforesaid
requirement of filing, the company and every officer of the company who is in
default will be punishable with fine of upto Rs. 200/- for every day
during which the default continues. [Section 192(5)]
9. Give notice of
cancellation to the concerned Registrar of Companies in Form No. 5 within thirty
days on receipt of which he will record the notice and make any alteration
which may be necessary, in the company's Memorandum and Articles of
Association. [Section 95(1)].
10. Please keep in
mind that if default is made in giving the said notice within the said time,
your company and every officer of the company who is in default will be
punishable with fine upto Rs. 500/- for every day during which the
default continues. [Section 95(3)]
11. Pay the
required fee for the above notice by way of postal order if the amount does not
exceed fifty rupees or by cash or by way of treasury challan to the concerned
Registrar of Companies.
12. If paid by way
of treasury challan then obtain three copies of treasury challan from any one
of the specified branches of the Punjab National Bank and fill the details and
deposit along with the fee in cash to the said branch of the bank.
13. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(1) of the Companies (Central Government's) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21-6-1996
(w.e.f. 21-6-1996). For account head and code please see Rule 22(1)
in Appendix 1.
14. Two copies of
the challan will be given back to the depositor the original copy of which
should be sent to the Registrar of Companies along with form No. 5 mentioned in
item 9.
15. If your
company is a listed company then forward to the Stock Exchange with which the
shares of your company are listed, the following:
(i) Copies of all notices sent to your company's shareholders
with respect to the alteration of conditions in the memorandum of association;
(ii) Six copies (one of which will be certified) of such
alterations made in the memorandum as soon as they are adopted by the company
in the General Meeting. [Clause 33 of the Standard Listing Agreement].
16. Make necessary
changes in all copies of Memorandum of Association and also in all share
certificates, records, documents and registers of the company.
17. Please keep in
mind that if at any time your company issues any copy of Memorandum of
Association without making the necessary changes therein, the company and every
officer of the company who is in default will be punishable with fine upto Rs.
100/- for each copy so issued. [Section 40(2)]
18. Keep in mind
that such cancellation of shares does not amount to a reduction of share
capital within the meaning of the Companies Act, 1956. [Section 94(3)].
19. If a company
passes two resolutions simultaneously under Section 94(1)(a) and 94(1)(e), one
for increase in share capital and the other for cancellation of shares then so
long as the original authorised capital on which the company had already paid
the prescribed fees under the Act is not exceeded, it need not pay further fees
but filing of Form No. 5 is essential. [Circular letter No. 8/ 13/(94) 59 PR,
dated 12-2-1960].
20. Note that if
your company's paid-up share capital is less than Rs. 50 lakhs but is
equal to or more than Rs. 10 lakhs, your company is required to obtain a
Compliance Certificate from a secretary in whole-time practice to be
filed with the Registrar of Companies mentioning therein inter alia that the
company has altered the provisions of the memorandum with respect to share
capital of the company during the year under scrutiny and complied with the
provisions of the Act as per paragraph 29 of the Form of Compliance Certificate
appended to the Companies (Compliance Certificate) Rules, 2001. [Section 383-A(1) proviso].
Topic 43
DO YOU WISH TO MODIFY THE RIGHTS
ATTACHED TO ANY CLASS OF SHARES OF YOUR COMPANY?
1. Consult the
Memorandum and Articles of Association of your company to see whether any of
them authorise the company to modify rights attached to any class of shares. If
not, check up whether terms of issue of those shares do not prohibit any
variation. [Section 106 read with section 80A(2)].
2. If none of the
aforesaid conditions are fulfilled, then complete the proceedings to alter your
Memorandum or Articles of Association accordingly vide Topic 29 or Topic 26.
3. Convene a
Board Meeting after giving noticet to all the directors of the company as per
Section 286 to decide for modification and also as to which of the following
ways to adopt for modification :
(i) either by obtaining written consent of holders of not less
than threefourths of the issued shares of the class concerned; or
(ii) by calling a separate meeting of the holders of the issued
shares of the class concerned and to pass a Special Resolution thereat.
4. Please
keep in mind that every officer of the company whose duty is to give notice of
the Board Meeting as aforesaid and who fails to do so will be punishable with
fine upto Rs. 1000/-. [Section
286(2)]
5. Give twenty-one
days' prior notice to the recognised Stock Exchange with which the shares of
your company are listed, of any such proposed modification of the rights
attached to any class of shares. [Clause 28 of the Standard Listing Agreement].
6. If the Board approves the
procedure as mentioned in item 3(i) above, then:
(a) Approve
the resolution for circulation among the shareholders concerned.
(b) Circulate the same and obtain the approval in writing of at
least the above number of shareholders.
(c) File the resolution, so approved, with the concerned
Registrar of Companies in Form No. 23 within thirty days of passing [Section
192] after paying the requisite fee
prescribed under Schedule X of the Companies Act, 1956, either in cash,
demand draft or treasury challan. [Rule 22].
7. If the Board approves the
procedure as mentioned in item 3(ii) above, then:-
(a) Fix up in the Board Meeting, the date, time, place and agenda
for the General Meeting to pass the Special Resolution for the same.
(b) Issue noticest in writing at least twenty-one days
before the date of the General Meeting proposing the Special Resolution with
suitable Explanatory Statement.
(c) Hold the General Meeting and pass the Special Resolutiont by
three fourths majority.
(d) File the Special Resolution with Explanatory Statement with
the concerned Registrar of Companies in Form No. 23 within thirty days of the
passing; [Section 192] after paying the requisite fee prescribed under Schedule
X of the Companies Act, 1956, either in cash, demand draft or treasury challan.
[Rule 22].
8. If
your company is a listed company then ensure that the aforesaid Special
Resolution is passed only through postal ballot. [Section 192A read with Rule
(j) of the Companies (Passing of the Resolution by Postal Ballot) Rules, 2001.]
9. Make
an application to the Stock Exchange with which the shares of your company are
listed for listing of securities as changed if your company is a listed
company. [Clause 28 of the Standard Listing Agreement ].
10. The
shareholders of the class concerned, holding, in the aggregate, not less than
ten per cent of the issued shares of that class, who did not consent to or vote
in favour of the resolution for the variation, may, within twenty-one
days after the date on which the consent was given, or the resolution was
passed, apply to the concerned High Court by petition to have the variation
cancelled. [Section 107(1) & (2)] vide Topic No. 44.
11. Please also
keep in mind that if default is made in complying with filing the Special
Resolution with the Registrar of Companies as mentioned aforesaid, the company
and every officer of the company who is in default will be punishable with fine
of upto Rs. 200/- for everyday during which the default continues.
[Section 192(5)]
12. Note also the
amended provisions of section 86(a) made by the Companies (Amendment) Act, 2000
with regard to having equity shares with voting or with differential rights as
to dividend, voting or otherwise and the Companies (Issue of Share Capital with
Differential Voting Rights) Rules, 2001.
Topic 44
DO YOU WISH TO APPLY TO THE COURT AS
DISSENTIENT SHAREHOLDERS?
1. Ensure that
the application to the concerned High Court is made by holders of not less than
ten per cent of the issued shares of the class being persons who did not
consent to or vote in favour of the resolution for the variation. [Section
107(1)].
2. Make
the application to the High Court of the State in which the registered office
of the company is situated. [Section 10(1)(a)].
3. If you are a
corporate shareholder, see that the approval of the Board of Directors is taken
for making the said application and also for obtaining authority in favour of
any of the directors of the company or the company secretary to sign the
application, and other related documents and affirm the affidavit by convening
a Board Meeting.
4. Make the
application by way of a petition and the heading of the petition should be ih
Form No. 1 of the Companies (Court) Rules, 1959. [Rule 4 read with Rule 11(4)
of the said Rules].
5. Make the
aforesaid petition to the High Court within twenty-one days after the
date on which consent was given or the resolution for variation was passed.
[Section 107(2)].
6. Ensure
that the aforesaid petition is either made by all the dissentient shareholders
or by one or more of them on behalf of the others.
7. If the
petition is made by one of them then see that the letter of authority signed by
the dissentient shareholders so entitled authorises the shareholder or
shareholders to present the petition on their behalf is annexed to the petition
and the names and addresses of all the said shareholders and the number of
shares held by each one of them is set out in the petition. [Section 107(2)
read with Rule 66(1) of the Companies (Court) Rules, 1959].
8. Ensure that the aforesaid
petition sets out the following:
(a) particulars
of registration of the company and its share capital;
(b) different classes of shares into which the share capital of
the company is divided and the rights attached to each class of shares;
(c) provisions of the Memorandum or Articles of Association
authorising the variation of the rights attached to the various classes of
shares;
(d) total
number of shares of the class whose rights have been varied;
(e) nature of the variation made and so far as may have been
ascertained by the petitioner;
(f) number of shareholders of the class who gave their consent to
the variation or voted in favour of resolution for variation and the number of
shares held by them;
(g) number of shareholders who did not consent to the variation
or who voted against the resolution and the number of shares held by them;
(h) date or dates on which the consent was given or the
resolution for variation was passed;
(i) reasons for opposing the variation. [Rule 66(2) of the
Companies (Court) Rules, 1959].
9. Draw
the affidavit veryifying the petition in Form No. 3 of the Companies (Court)
Rules, 1959 and ensure that the said affidavit is made by the petitioner if
there is one or by one of the petitioners if there are more than one petitioner.
[Rule 21 of the said Rules].
10. Annex
to the petition a true copy of the Memorandum and Articles of Association.
[Rule 22 read with Annexure II to the Companies (Court) Rules, 1959].
11. Affix
requisite Court Fee Stamp on the petition before filing according to the
Schedule of the Court Fee Stamps Act.
12. On receipt of
the concerned High Court's Order see that a certified true copy thereof is
filed with the concerned Registrar of Companies within thirty days of obtaining
the copy of the order in Form No. 21 by the other company after paying
requisite fees prescribed under Schedule X to the Act, either by way of cash,
demand draft or treasury challan. (Rule 22).
13. Please keep in
mind that if the other company fails to file the Court's order as aforesaid,
and if default is made in complying with the said requirement, the other
company and every officer of the other company who is in default will be
punishable with fine of Rs. 500/-. [Section 107(5)]
14. On
modification being effective make necessary changes in all the papers,
documents, registers etc.
15. If by
variation of rights attached to shares of one class, the rights attached to
another class are also affected, for example, where dividend is increased on
preference shares thereby affecting the surplus otherwise available to equity
shareholders, proceed simultaneously on similar lines for getting the approval
for the said variation of the shareholders of the other class also.
Topic 45
DO YOU WISH TO INCREASE SHARE CAPITAL BY
AN ORDER OF THE CENTRAL GOVERNMENT?
1. Where
the Central Government makes an order to convert loans or debentures of a
company into shares either on its own opinion under Section 81(4) or on the
application of any financial institutions under Section 94A(2), the Memorandum
of Association of the company shall stand altered where such order increases
the nominal share capital of such company.
2. In the
aforesaid case both the nominal and paid-up share capital of such company
shall stand increased by an amount equal to the amount of the value of the
shares into which such debentures or loans have been converted. [Section
94A(1)].
3. On receipt of
the copy of the order of the Central Government, file a return with regard to
the increase of share capital with the concerned Registrar of Companies' in
Form No. 5 within thirty days from the date of such receipt.
4. See that the
aforesaid form is filed along with a copy of the order of the Central
Government [Section 94A(3)], after paying the requisite fee prescribed under
Schedule X to the Companies Act, 1956, either in cash, demand draft or treasury
challan. [Rule 22].
5. Please keep in
mind that if default is made in filing the said form within the said time, the
company and every officer of the company who is in default will be punishable
with fine of upto Rs. 500/- for every day during which the default continues.
[Section 97(3) read with section 94A(3)]
6. If
the terms and conditions of such conversion ordered by the Central Government
are not accepted by the company, do not file the above return but make an
appeal to the concerned High Court within thirty days of the receipt of the
order or within such further time as may be granted by the said Court. [Section
81(7)].
7. The order of
the Central Government shall be final and conclusive only subject to the
decision of the concerned High Court to whom an appeal has been made against
the order. [Section 81(7)].
8. If
the concerned High Court makes an order confirming the order of the Central
Government then file the return with the concerned Registrar of Companies in
Form No. 5 within thirty days of the said Court's order along with the copy of
the Court's order so received as mentioned in item 3 above.
9. If more than
thirty days are taken to obtain a copy of the concerned High Court's order,
then file the above mentioned return with the concerned Registrar of Companies
with an undertaking that the copy of the Court's order will be sent as soon as
it is obtained from the said Court.
10. If the
concerned High Court makes an order altering the terms and conditions of the
order of the Central Government, then file the return in Form No. 5 with the
concerned Registrar of Companies within thirty days of the order of the said
Court along with a copy of the Court's order making such alteration in the
terms and conditions of the order of the Central Government, in the manner as
mentioned in item 3 of this Topic.
Topic 46
1. Check whether
your company is a limited company and whether limited by shares or limited by
guarantee and if limited by guarantee then whether it has share capital,
because only limited company with share capital can keep a portion of its share
capital which is not called-up will not be capable of being called-up
except in the event and for the purposes of the company being would up.
[Section 99].
2. Determine
the specific portion of share capital which will not be capable of being called-up
out of the share capital not already been called-up.
3. Convene a
Board Meeting after issuing notices to all the directors of the company as per
Section 286 and fix up the date, time, place and agenda for the General Meeting
to pass a Special Resolution and pass necessary resolutionj to that effect.
4. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
upto Rs. 1000/-. [Section 286(2)]
5. Issue notices in
writing at least twenty-one days before the date of the meeting for the
General Meeting proposing the Special Resolution with suitable Explanatory
Statement. [Section 17](1) read with section 173(2)].
6. Hold
the General Meeting and pass the Special Resolution by three fourths majority.
[Section 189(2)].
7. File
the Special Resolution with Explanatory Statement with the concerned Registrar
of Companies in Form No. 23 within thirty days [Section 192(4)(d)] after paying
the requisite fee prescribed under Schedule X to the Companies Act, 1956,
either in cash, demand draft or treasury. challan [Rule 22].
8. Please also
keep in mind that if default is made in complying with the aforesaid
requirement of filing, the company and every officer of the company who is in
default will be punishable with fine of upto Rs. 200/- for every day during
which the default continues. [Section 192(5)]
9. If paid by way
of treasury challan then obtain three copies of the treasury challan from any
of the specified branches of the Punjab National Bank and fill the details and
deposit all the three copies along with the registration fee in cash to the
said branch of the bank.
10. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(1) of the Companies (Central Government's) General
Rules, and Forms, 1956 and as amended vide GSR 251(E) dated 21-6-1996
(w.e.f. 21-6-1996). For account head and code please see Rule 22(1)
in Appendix 1.
11. Two copies of
the challan will be given back to the depositor, the original copy should be
sent to the concerned Registrar of Companies along with Form No. 23 mentioned
in item 7.
12. Make
necessary changes in every copy of the Memorandum and Articles of Association
and in all other papers and documents.
13. Please keep in
mind that if at any time your company issues any copy of Memorandum and
Articles of Association without making the necessary changes therein, the
company and every officer of the company who is in default will be punishable
with fine upto Rs. 100/- for each copy so issued. [Section 40(2)]
Topic 47
1. Check whether
your unlimited company is having a share capital as an unlimited company with a
share capital can only provide for reserve share capital on re-registration
as a limited company. [Section 98 read with section 32(1)]
2. If your
unlimited company is not having a share capital then first you have to change
the structure of your unlimited company to have a share capital by altering
your company's Memorandum of Association.
3. Also keep in
mind that your unlimited company with a share capital can provide for reserve
share capital only through its resolution for registration as a limited company
under section 16(1)(a).
4. Determine
the specific portion of share capital which will be kept as reserve share
capital.
5. Further
determine whether that amount of reserve share capital is to be provided by way
of either of the following:
(i) increase the nominal amount of your unlimited company's
share capital by increasing the nominal amount of each of its shares, but
subject to the condition that no part of the increased capital shall be capable
of being called-up except in the event and for the purposes of the
company being wound-up;
(ii) provide that a specified portion of its uncalled share
capital will not be capable of being called-up except in the event and
for the purposes of the company being wound-up.
6. Convene
a Board Meeting after issuing notices to all the directors of the company as
per section 286 to consider the proposal for providing for a reserve share
capital and to fix up the date, time, place and agenda for the General Meeting
to pass an Ordinary Resolution by passing necessary board resolutions.
7. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
upto Rs. 1000/-. [Section 286(2)]
8. Issue notices
in writing at least twenty-one days before the general meeting with
suitable Explanatory Statement. [Section 171(1) read with section 173(2)].
9. Hold the
General Meeting and pass the Ordinary Resolution by simple majority. [Section
189(1)].
10. If reserve
share capital ha s been provided by way of increase of nominal amount of share
capital then file the notice of increase with the concerned Registrar of
Companies in Form No. 5 within thirty days on which the Registrar of Companies
will make necessary changes in the company's Memorandum and Articles of
Association. [Section 97].
11. Please keep in
mind that if default is made in filing the said notice within the said time,
the company and every officer of the company who is in default will be
punishable with fine upto Rs. 500/- for every day during which the
default continues. [Section 97(3)]
12. While filing
the above notice, the registration fees for the increased authorised share
capital should be paid either by way of treasury challan paid into any of the
specified branches of the Punjab National Bank or by demand draft drawn in
favour of the concerned Registrar of Companies.
13. See that the
aforesaid amount to be payable is the difference between the fees payable at
the existing rate on the authorised capital before and after the increment as
calculated on the basis of Schedule X to the Companies Act, 1956.
14. If paid by way
of treasury challan then obtain three copies of the treasury challan from any
of the specified branches of the Punjab National Bank4 and fill the details and
deposit all the three copies along with the registration fee in cash to the
said branch of the bank.
15. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(1) of the Companies (Central Government's) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21-6-1996
(w.ef 21-6-1996). For account head and code please see Rule 22(1)
in Appendix 1.
16. Two copies of
the challan will be given back to the depositor, the original copy should be
sent to the concerned Registrar of Companies' along with Form No. 5 mentioned
in item 10.
17. Make necessary
changes in every copy of the Memorandum and Articles of Association and in all
other papers and documents.
18. Please keep in
mind that if It any time your company issues any copy of Memorandum and
Articles of Association without making the necessary changes therein, the
company and every officer of the company who is in default will be punishable
with fine upto Rs. 100/- for each copy so issued. [Section 40(2)]
D Buy-back
of Shares or Other Securities
[Both for Listed and Unlisted Companies]
Topic 48
1. Consult the
Articles of Association of your company to see whether they authorise your
company to purchase your own shares or other specified securities (buy-back):
[Section 77A(2)(a)]. If they do not authorise, complete proceedings to alter
them accordingly, vide Topic 26
2. Decide whether
the buy-back will be made from the existing security holders on a
proportionate basis or from the open market or from odd lots or by purchasing
the securities issued to employees of the company pursuant to scheme of stock
option or sweat equity. [Section 77A(5)].
3. Keep in mind
that buy-back of shares can be made from odd lots only if your company is
a public company whose shares are listed on a recognised stock exchange and the
lot of securities is smaller than the marketable lot specified by the stock
exchange. [Section 77A(5)(c)].
4. Further
keep in mind that your company buys-back shares or other specified
securities only out of the following:
(i) its
free reserves; or
(ii) the
securities premium account; or
(iii) the
proceeds of any shares or other specified securities. [Section 77A(1)].
5. Note
that free reserves will mean those reserves which as per latest audited balance-sheet
of your company are free for distribution as dividend and will include balance
to the credit of the securities premium account but will not include share
application money. [Section 77A(11) Explanation (b) read with section 372A(10)
Explanation (b)]
6. Note that no
buy-back of any kind of shares or other specified securities is made out
of proceeds of an earlier issue of the same kind of shares or same kind of
other specified securities. [Section 77A(1) Proviso].
7. Further keep
in mind that the amount of buy- back proposed to be made is or less than
25% of the total paid-up capital and free reserves of your company,
[Section 77A(2)(c)] and the buy-back of equity shares in any financial
year does not exceed 25% of your company's total paid-up equity capital-
in that financial year. [Section 77A(2)(c) Proviso].
8. Before going for buy-back,
ensure the following
(i) the ratio of debt including all amounts of unsecured and
secured debts owed by your company is not more than twice the capital and its
free reserves after such buy-back, [Section 77A(2)(d)] except otherwise a
higher ratio is prescribed by the Central Government for a class or classes of
companies. [Section 77A(2)(d) proviso].
(ii) all the shares or other specified securities which are to be
bought back are all fully paid up. [Section 77A(2)(e)].
9. Note
that specified securities will include stock option or other securities as may
be notified by the Central Government from time to time. [Section 77A(11)
Explanation (a)].
10. If your
company is a listed company then do not forget to give prior notice of at least
7 days to the Stock Exchanges about the Board Meeting at which the proposal for
buy-back of securities is considered. [Clause 19 of the Listing Agreement
as amended by Circular No. 1/02/SMD/Policy, dated 2-1-2002].
11. Convene a
Board Meeting after- issuing noticest to the directors of your company as
per section 286 to decide about the details of proposed buy-back and to
fix up the date time place and agenda for convening a General Meeting and to
pass a special Resolutiont for the same. [Section 77A(2)(b)].
12. Note that your
company need not pass any Special Resolution if the proposed buy-back is
or less than 10% of the total paid up equity capital and free reserves.
[Section 77A(2)(6) proviso (A)]
13. In the
aforesaid case, just convene a Board Meeting as above and pass a board
resolution authorising the proposed buy-back of shares of your company.
[Section 77A(2)(b) proviso (B)]
14. Keep in mind
that in the aforesaid case your company cannot make any offer of buy back
within a period of 365 days reckoned from the date of the preceding offer of
buy-back if any of your company. [Section 77A(2)(b) second proviso].
15. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
upto Rs. 1000/-. [Section 286(2)]
16. Intimate the
Stock Exchanges within 15 mintues of the closure of your company's Board
Meeting about the decision on buy-back of securities if your company is a
listed company [clause 20 of the Listing Agreement as amended by Circular No.
1/02/SMD/Policy dated 2-1-2002.]
17. If the
shares of your company are listed with any of the recognised Stock Exchange,
then follow the Securities and Exchange Board of India (Buy-Back of
Securities) Regulations, 1998, in this behalf. [Section 77A(2)(f)], given in
items 48 to 118.
18. If the shares
of your company are listed then ensure that the aforesaid Special Resolution
for buy-back is only passed through postal ballot. [Section 192A], read
with Rule 4(c) of the Companies (Passing of the Resolution by Postal Ballot)
Rules, 2001.]
19. If the shares
of your company are not listed, then follow the Private Limited Company and
Unlisted Public Limited Company (Buy-back of Securities) Rules, 1999
prescribed by the Department of Company Affairs. [Section 77A(2)(g)].
20. Prepare the
draft of the notice of the General Meeting and also the draft of the
Explanatory Statement to accompany the notice where the proposed buy-back
is more than 10% of the total paid-up equity share capital and free
reserves of your company.
21. While
drafting the Explanatory Statement to be issued with the notice, ensure that it
contains the following:-
(a) a
full and complete disclosure of all material facts;
(b) the
necessity for the buy-back;
(c) the
class of security intended to be purchased under the buy-back;
(d) the
amount to be invested under the buy-back; and
(e) the time limit for completion of buy-back [not
exceeding 12 months from the date of passing of the special resolution].
[Section 77A(3) and (4)].
22. Have the draft
notice of the General Meeting and the draft Explanatory Statement prepared
under items 20 and 21 above approved by a Board Meeting.
23. Issue notices
in writing at least twenty-one days before the date of the meeting
[Section 171(1)] for the General Meeting with the Explanatory Statement.
[Sections 173(2) read with 77A(3)].
24. Hold the
General Meeting and pass the Special Resolutiont by three fourth majority.
[Section 189] as required under item 11 above.
25. If the shares
of your company are listed with any of the recognised Stock Exchange, then
forward three copies of the notice and a copy of the proceedings of the General
Meeting to the Stock Exchange. [Clause 31(c) and (d) of the Standard Listing
Agreement].
26. File the
Special Resolution so passed with the Explanatory Statement with the concerned
Registrar of Companies in Form No. 23 within thirty days [Section 192(4)(a)]
after paying the requisite fee'o prescribed under Schedule X to the Companies
Act, 1956, either by cash, demand draft or treasury challan [Rule 22].
27. Please keep in
mind that if default is made in complying with the aforesaid requirement of
filing, the company and every officer of the company who is in default will be
punishable with fine of upto Rs. 200/- for every day during which the
default continues. [Section 192(5)]
28. If paid by way
of treasury challan then obtain three copies of the treasury challan from any
of the specified branches of the Punjab National Bank and fill the details and
deposit all the three copies along with the registration fee in cash to the
said branch of the bank.
29. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(1) of the Companies (Central Government's) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21-6-1996
(w.e.f. 21-6-1996). For account head and code pleasesee Rule 22(1)
in Appendix 1.
30. Two copies of
the challan will be given back to the depositor, the original copy should be
sent to the concerned Registrar of Companies along with Form. No. 23 mentioned
in item 26
31. If your
company is a listed company, immediately after passing the Special Resolution
or the Board Resolution" as the case May be to buy-back your
company's own shares or other securities and before making such buy-back,
file with the Registrar of Companies and the Securities and Exchange Board of
India a declaration of solvency in the prescribed, Form No. 4A to the effect
that the Board has made a full inquiry into the affairs of the company as a
result of which they have formed an opinion that it is capable of meeting its
liabilities and will not be rendered insolvent within a period of one year of
the date of declaration adopted by the Board, and signed by at least two
directors of the company, one of whom shall be the managing director, if any.
[Section 77A(6)].
32. If your
company's shares are not listed on any recognised Stock Exchange, your company
need not file the aforesaid declaration of solvency with the Securities and
Exchange Board of India but file the declaration of solvency in Form No. 4A
only with the concerned Registrar of Companies. [Section 77A(6) Proviso].
33. Extinguish
and physically destroy the securities so bought back within 7 days of the last
date of completion of buy-back. [Section 77A(7)].
34. Complete the
buy-back proceeding within 12 months from the date of passing of the
Special Resolution or the Board Resolution as the case may be [Section 77A(4)].
35. Do not make
further issue of the same kind of shares including allotment of further shares
under clause (a) of sub-section (1) of section 81 or other specified
securities within a period of 24 months from the completion of buy-back
of shares or other specified securities, except by way of bonus issue or in the
discharge of subsisting obligations such as conversion of warrants, stock
option schemes, sweat equity or conversion of preference shares or debentures
into equity shares. [Section 77A(8)].
36. Maintain a
register of securities so bought back, the consideration paid for the
securities bought back, the date of cancellation of securities the date of
extinguishing and physically destroying of securities and such other
particulars in Form no. 4B. [Section 77A(9)].
37. File with the
Registrar of Companies and the Securities and Exchange Board of India, a Return
containing such particulars relating to buy-back within 30 days of
completion of the buy-back as is given in Form No. 4C. [Section 77A(10)].
38. Keep in mind
that if your company's shares are not listed on any recognised stock exchange,
your company need not file the aforesaid return with the Securities and
Exchange Board of India. [Section 77A(10) Proviso].
39. Further keep
in mind that if your company makes default in complying with the provisions of
section 77A or any rules made thereunder, or any regulations made under clause
(f) of sub-section (2) of section 77A your company or any officer of your
company who is in default will be punishable with imprisonment for a term,
which may extend to 2 years or with fine of upto Rs. 50,000/- or with
both. [Section 77A(11)].
40. Do not
directly or indirectly purchase your company's own shares or other specified
securities through any subsidiary company including your company's own
subsidiary. [Section 77B(1)(a)].
41. Do not
directly or indirectly purchase your company's own shares or other specified
securities through any investment company or group of investment companies.
[Section 77B(1)(b)].
42. Do not
directly or indirectly purchase your company's own shares or other specified
securities, if a default in repayment of deposit or interest payable thereon
redemption of debenture or preference shares or payment of dividend to any
shareholder or repayment of any term loan or interest payable thereon to any
financial institutions or bank is subsisting. [Section 77B(1)(c)].
43. Do not
directly or indirectly purchase your company's own shares or other specified
securities in case your company has not complied with the provisions of
sections 159, 207 and 211 relating to, filing of annual return, failure to
distribute dividends within forty-two days and maintaining specified form
and contents of balance-sheet and profit and loss account. [Section
77B(2)].
44. If your
company purchases its own shares out of free reserves, then transfer the sum
equal to the nominal value of shares so purchased to the capital redemption
reserve account referred to in section 80(1)(d) and also disclose in the
balance-sheet of your company the details of such transfer. [Section
77AA].
45. Note that if
your company is a Private Limited Company or a Unlisted Public Limited Company
then you should follow the Private Limited and Unlisted Public Limited Company
(Buy-back Securities) Rules, 1999, as per steps given in item Nos. 119 to
140.
46. Further note
that if your company's paid-up share capital is less than Rs. 50 lakhs
but is equal to more than Rs. 10 lakhs, your company is required to obtain a
compliance certificate from a secretary in whole-time practice mentioning
therein inter alia that the company has bought book its shares during the
financial year after complying with the provisions of the Acts as per paragraph
of the Form & Compliance certificate appended to the companies (Compliance
Certificate) Rules, 2001. [Section 383-A (1) proviso].
Buy-back of shares of Listed Companies
47. Further note
that if your company is a listed company then you should also follow the
Securities and Exchange Board of India (Buy-Back of Securities)
Regulations 1998 as per steps given below.
I. Special Provisions for buy-back of Shares
of Listed Companies
48. Decide
whether your company wants to buy-back its shares from the existing
share-holders on a proportionate basis through the tender offer or from
open market through stock exchange or book building process or from odd lot
holders. [Regulation 4(1)].
49. Ensure that
the Explanatory Statement annexed to the notice of the general meeting relating
to the special resolution for buy-back of shares contains disclosures as
specified in Schedule I of the said Regulations. [Regulation 5(1)].
50. File a copy of
the special resolution passed for buy-back of shares with the SEBI Board
and also with all the stock exchanges where the shares of your company are
listed within seven days from the date of passing of the resolution.
[Regulation 5(2)].
51. Keep in mind
that your company does not buy-back its shares from any person through
negotiated deals, whether on or of the stock exchange or through spot
transactions or through any private arrangement. [Regulation 4(2)].
52. Further keep
in mind that your company can buy-back its securities under first proviso
to clause (b) of sub-section (2) of section 77A if it is authorised by a
resolution passed by the board of directors of its meeting subject to the
following conditions:-
(a) before making a public announcement under regulation 8(1) a
public notice should be given in at least one English national daily, one Hindi
national daily and a regional language daily, all with wide circulation at the
place of the registered office of the company is situated;
(b) the public notice should be given within 2 days of the
passing of the resolution by the board of directors;
(c) the public notice should contain the disclosures as specified
in Schedule I [Regulation 5A(a)]
53. File a copy of
the resolution passed by the board of directors of its meeting, authorising buy-back
of its securities with the SEBI Board and the stock exchanges where the
securities of X our company are listed within 2 days of the date of the passing
of the resolution. [Regulation 5A(2)].
IA. BUY-BACK FROM EXISTING SECURITY-HOLDERS ON A
PROPORTIONATE BASIS THROUGH THE TENDER OFFER
54. If your
company decides to buy-back its specified securities from its existing
shareholders on a proportionate basis then ensure that the Explanatory
Statement annexed to the notice under section 173 of the Companies Act,. 1956
or the public notice under sub-regulation (1) of regulation 5A contains
the following disclosures in addition to the disclosures specified in Schedule
I of the Regulations:
(a) The maximum price at which the buy-back of shares shall
be made and whether the Board of Directors of the company are being authorised
at the general meeting to determine subsequently the specific price at which
the buy-back may be made at the appropriate time;
(b) If
the promoter intends to offer their shares,
(i) the
quantum of shares proposed to be tendered,
(ii) the details of their transaction and their holdings for the
last six months prior to the passing of the special resolution for buyback
including information of number of shares acquired, the price and the date of
acquisition. [Regulation 7].
55. After passing
of the special resolution or the board resolution as the case may be and before
buy-back of specified securities, make a public announcement in at least
one English National Daily, one Hindi National Daily and regional language
daily, all with wide circulations at the place where the registered office of
your company is situated and ensure that such public announcement contains all
the material information as specified in Schedule II of the Regulations.
[Regulation 8(1)].
56. Further ensure
that the public ananoucement, as aforesaid, specifies a date which shall be the
'specified date' for the purpose of determining the names of the securities-holders
of your company to whom the letter of offer will be sent. [Regulation 8(2)].
57. Further
ensure that the specified date mentioned in the public announcement should not
be earlier than thirty days and not later than forty-two days from the
date of the public announcement. [Regulation 8(3)].
58. File
with the SEBI Board, within seven working days of the public annoucement, a
draft letter of offer containing disclosures as specified in Schedule III of
the Regulations through a merchant banker who should not be associated with
your company. [Regulation 8(4)].
59. Pay the
requisite fee as specified in Schedule IV of the Regulations along with the
draft letter of offer by way of Demand Draft in favour of 'Securities and
Exchange Board of India' and payable at Mumbai. [Regulation 8(5)].
60. Despatch
the letter of offer not earlier than twenty-one days from its submission
to the SEBI Board mentioned under item 58 above. [Regulation 8(6)].
61. Also file
along with draft letter of offer a declaration of solvency in Form No. 4A given in the Companies (Central
Government's) General Rules and Forms 1956 as prescribed under sub-section
(6) of section 77A of the Companies Act 1956. [Regulation 8(7)].
62. Carry out the
modifications, if any, suggested by the SEBI Board within twenty-one days
from the date of submission of the draft letter of offer and then despatch the
letter of offer to the security-holders. [Regulation 8(6) Proviso].
63. Keep the offer
for buy-back of specified securitieS21 open to the members of your
company for a period of not less than fifteen days and not exceeding thirty
days. [Regulation 9(1)].
64. Ensure that
the date of the opening of the offer is not earlier than seven days or later
than thirty days after the specified date mentioned in the public announcement.
[Regulation 9(2)].
65. Further ensure
that the letter of offer is sent to the security-holders so as to reach
the shareholders before the opening of the offer. [Regulation 9(3)].
66. In case your
company receives from the security-holders. offer of number of specified
securities which is more than the total number of specified securities to be
bought back by your company, ensure that the acceptances per security-holder
is equal to the acceptances tendered by the security-holders. divided by
the total acceptances received and multiplied by the total number of specified
securities to be bought back by your company. [Regulation 9(4)].
67. Complete the
verifications of the offers received by your company within fifteen days of the
closure of the offer and the shares lodged should be deemed to be accepted
unless a communication is made within fifteen days from the closure of the
offer. [Regulation 9(5)].
68. Deposit in an
escrow account, on or before the opening of the offer the following sum by way
of security for performances of obligations by your company under the
Regulations:-
(i) if
the consideration payable does not exceed Rs. 100 crores 25% of the consideration payable;
(ii) if
the consideration payable exceeds Rs. 100 crores 25% upto Rs. 100 crores and thereafter.
[Regulation 10(1) and (2)].
69. Keep in mind
that the escrow account referred above, can consist of either cash deposited
with a scheduled commercial bank or bank guarantee in favour of the merchant
banker or deposit of acceptable securities with appropriate margin with the
merchant banker or a combination of the above. [Regulation 10(3)].
70. If your
company has deposited the specified sum in an escrow account with a scheduled
commercial bank then while opening4he account, empower the merchant banker to
instruct the bank to issue a banker's cheque or Demand Draft for the amount
lying to the credit of the escrow account. [Regulation 10(4)].
71. If the escrow
account consist of a bank guarantee, ensure that the said bank guarantee is in
favour of the merchant banker which will be valid, until thirty days after the
closure of the offer. [Regulation 10(5)].
72. If the
escrow account consist of securities, then empower the merchant banker to
realise the value of such escrow account by sale or otherwise and if there is
any deficit on realisation of the value of the securities the merchant banker
will be liable to make good any such deficit. [Regulation 10(6)].
73. If the
escrow account consist of bank guarantee or approved securities see that the
merchant banker does not return them till the completion of all obligations of
buy-back of securities under the Regulations. [Regulation 10(7)].
74. If the escrow
account consist of bank guarantee or deposit of approved securities ensure that
your company also deposits with the bank in cash a sum of at least one per cent
of the total consideration payable as and by way of a security for fulfilment
of the obligations by your company under the Regulations. [Regulation 10(8)].
75. Keep in mind
that the SEBI Board may in the interest of security-holders forfeit the
escrow account either in full or in part in case your company fails to fulfil
the obligations under the Regulations. [Regulation 10(10)].
76. Further keep
in mind that the SEBI Board will distribute the amount forfeited as above pro-rata
amongst security-holders who accepted the offer and balance, if any, will
be utilised for investor protection. [Regulation 10(11)].
77. Open a special
account with the bankers to an issue registered with the SEBI Board immediately
after the date of closure of the offer and deposit therein such sum as would
together with the amount lying in the escrow account make up the entire sum due
and payable as consideration for buy-back in terms of the Regulations and
for this purpose your company may transfer the funds from the escrow account.
[Regulation 11(1)].
78. Make
payment of consideration in cash, within seven days from fifteen days of the
closure of the offer, to those security-holders whose offer has been
accepted or return share certificates to the shareholders. [Regulation 11(2)].
79. Extinguish and
physically destroy the security certificates of specified securities bought
back by your company in the presence of a Registrar or the merchant banker or
the statutory auditor of your company within seven days from the date of
acceptance of the shares. [Regulation 12(1)].
80. In case the
specified securities offered for buy-back by your company have already
been dernaterialised then extinguish and destroy them in the manner specified
under Securities apd Exchange Board of India (Depositories and Participants) Regulations,
1996 and the bye-laws framed therein. [Regulation 12(2)].
81. Furnish a
certificate to the SEBI Board duly verified by the following within severt days
of extinguishment and destruction of the certificates as to the compliance of
the step taken in item 79 above:
(a) the
registrar and whenever there is no registrar through the merchant banker;
(b) two whole-time Directors including the Managing
Director; and
(c) the statutory auditor of the company. [Regulation 12(3)].
82. Furnish to the
stock exchanges where the specified securities of your company are listed the
particulars of the security certificates extinguished and destroyed within
seven days of the extinguishment and destruction. [Regulation 12(4)].
83. Maintain a
record of security certificates which have been cancelled and destroyed as
prescribed in sub-section (9) of section 77A of the Companies Act 1956 in
Form No. 4B. [Regulation 12(5)].
84. If your
company decides to buy-back specified securities from odd lots holders
take the steps given above for buy-back through tender offer. [Regulation
13].
IB. BUY-BACK
FROM OPEN MARKET THROUGH STOCK EXCHANGE
85. If your
company decides to buy-back its specified securities from the open market
through stock exchange then follow the procedure given below.
86. Ensure that
the special resolution or the resolution passed by the board of directors at
its meeting as referred to in regulation 5A for buy-back of specified
securities passed by your company's general meeting specifies the maximum price
at which the buy-back of specified securities29 of your company are to be
made. [Regulation 15(a)].
87. Do not
buy-back specified securities from the promoters or persons in control of
your company. [Regulation 15(b)].
88. Appoint
a merchant banker and make a public announcement given in item Nos. 55 to 62.
[Regulation 15(c)] .
89. Make the
public announcement at least seven days prior to the commencement of your
company's buy-back of specified securities. [Regulation 15(d)] .
90. File a copy of
the public announcement with the SEBI Board within two days of such
announcement along with the fees as specified in Schedule IV of the Regulations
by way of Demand Draft in favour of 'Securities and Exchange Board of India'
and payable at Mumbai. [Regulation 15(e)].
91. Ensure that
the public announcement contains disclosures regarding details of the brokers
and stock exchanges through which the buy-back of specified securities
would be made by our company. [Regulation 15(f)].
92. See
that the buy-back of your company's specified securities is made only on
stock exchanges with electronic trading facility. [Regulation 15(g)].
93. Ensure
that the buy-back is made only through the order matching mechanism
except 'all or none' order matching system. [Regulation 15(h)].
94. Give
information to the stock exchange on daily basis regarding the specified
securities" purchased for buy-back and publish the same information
in a national daily. [Regulation 15(i)].
95. Ensure
that the identity of your company as a purchaser appears on the electronic
screen when the order is placed. [Regulation 15(j)].
96. Extinguish
and physically destroy the security certificates of specified securities bought
back by your company in the manners specified in items 79 to 84. [Regulation
16(1)].
97. Complete the
verifications of acceptance within fifteen days of the payout. [Regulation
16(2)].
IC. BUY-BACK FROM OPEN MARKET THROUGH BOOK BUILDING PROCESS
98. If your
company decides to buy-back its specified securities through the book
building process then follow the procedure given below.
99. Take the steps
given in item Nos. 86, 88, 89 and 90. [Regulation 17(a),(b),(c) & (e)].
100. Deposit in the
escrow account the amount determined with reference to the maximum price as
specified in the public announcement and such deposit should be made before the
date of the public announcement. [Regulation 17(1)(d)]. Refer to item Nos. 68
to 76.
101. Ensure that
the public announcement contains detailed methodology of the book building
process, the manner of acceptance, the format of acceptance to be sent by the
security -holders pursuant to the public announcement and the details of
bidding centres. [Regulation 17(1)(f)].
102. Make the book
building process through an electronically linked transparent facility and the
number of bidding centres should not be less than thirty and there should be at
least one electronically linked computer terminal at all the bidding centres.
[Regulation 17(1)(g) & (h)].
103. Keep the offer
for buy-back open to the security-holders for the period not less
than fifteen days and not exceeding thirty days. [Regulation 17(1)(i)].
104. Have the buy-back
price determined by your company and the merchant banker appointed by your
company on the basis of the acceptances received. [Regulation 17(1)(j)].
105. Have the
highest price accepted be the final buy- back price and that price should
be paid to all the security-holders whose specified securities have been
accepted for buy-back. [Regulation 17(j)(k)].
106. Follow the
procedure given in Item Nos. 67, 77 and 78 pertaining to verification of
acceptances and opening of special account and payment of consideration.
[Regulation 17(2)].
107. Follow the
procedure given in Item Nos. 79, 80, 81, 82 and 83 pertaining to extinguishment
of security certificates" of specified securities bought back by your
company. [Regulation 18].
ID. OBLIGATIONS
OF A COMPANY OPTING FOR BUY-BACK OF SHARES
108. Ensure that
the letter of offer, the public announcement of the offer or any other advertisement,
circular, brochure and publicity material or public notice referred to in
clause (a) of sub-regulation 5A contain true, factual and material
information and they should not contain any misleading information and must
also state that the directors of your company accept the res onsibility for
information contained in such documents. [Regulation 19(1)(a)].
109. Further ensure
that no shares including by way of bonus are issued till the date of closure of
the offer of buy-back of specified securities under the Regulations.
[Regulation 19(1)(b)].
110. Pay the
consideration for buy-back of specified securities to the securityholders
whose specified securities have been bought back only by way of cash.
[Regulation 19(1)(c)].
111. Do not
withdraw your company's offer to buy-back specified securities after the
draft letter of offer is filed with the SEBI Board or the public announcement
of the offer to buy-back specified securities is made. [Regulation
19(1)(d)].
112. Keep in mind
that no promoter or any other person deals in the shares of your company in the
stock exchanges with which your company's shares are listed during the period
the buy-back offer is open. [Regulation (1)(e)].
113. Do not make
any public announcement of buy-back of specified securities during the
pendency of any scheme of amalgamation or compromise or arrangement pursuant
to the provisions of the.Cbmpanies Act, 1956. [Regulation 19(2)].
114. Nominate a
compliance officer and investor service centre for compliance with the buy-back
regulations and to redress the grievances of the investors. [Regulation 19(3)].
115. Furnish to the
stock exchanges where shares of your company are listed the particulars of
security certificates extinguished and destroyed within seven days of such
extinguishment and destruction of the certificates. [Regulation 19(4)].
116. Do not buy-back
the locked-in share and non- transferable shares till the pendency
of the lock-in or till the shares become transferable. [Regulation
19(5)].
117. Issue a public
advertisement in a national daily within two days of the completion of buy-back disclosing the following:
(i) number
of specified securities bought;
(ii) price
at which the specified securities bought;
(iii) total
amount invested in buy-back;
(iv) details of the security-holders from whom specified
securities exceeding one per cent of the total specified securities bought
back; and
(v) the consequent changes in the capital structure and the
shareholding pattern after and before the buy-back. [Regulation 19(7)].
118. Keep in mind
that if Foreign Institutional Investors (FII) are holding shares in your
company and their investment exceeds the limits of 24% or 30% as the case may
be as a percentage of the reduced capital post buy-back capital of your
company, the exceeded limit would be frozen by SEBI and further investment by
FIls would not be permitted.
II. Special Provisions for Private and Unlisted
Public Companies
119. Decide whether
your company wants to buy-back its shares from the existing shareholders
on a proportionate basis through private offers or by purchasing the securities
issued to employees of the company pursuant to a scheme of stock option or
sweat equity. [Rule 3(a) & (b)].
120. Ensure that
the Explanatory Statement annexed to the notice of the general meeting relating
to the special resolution for buy back of shares contains disclosures specified
in Schedule I of the said Rules. [Rule 4].
121. File with the
concerned Registrar of Companies a draft letter of offer containing particulars
specified in Schedule II of the said Rules subsequent to the passing of the
special resolution for buy-back of shares but before the buy-back
of shares [Rule 5(1)].
122. Also file
along with the letter of offer as mentioned above a declaration of solvency in
Form No. 4A. [Rule 5(2)] already -mentioned in item 31.
123. Despatch the
letter of offer to the shareholders of the company whose shares are being
bought back immediately after filing it with the Registrar of Companies but not
later than 21 days from the date of such filing. [Rule 6(1)]
124. Ensure that
the offer for buy-back remains open to the members for a period not less
than 15 days and not exceeding 30 days from the date of despatch of letter of
offer. [Rule 6(2)]
125. In case the number
of shares offered by the shareholders is more than the total number of shares
to be brought back by the company, see that the acceptance per shareholder is
made on proportionate basis. [Rule 6(3)]
126. Complete the
verifications of the offers received within 15 days from the date of closure of
the offer. [Rule 6(4)].
127. Keep in mind
that unless a communication of rejection is made within 21 days from the
closure of the offer shares lodged with the company will be deemed to be
accepted. [Rule 6(4)].
128. Open a special
bank account immediately after the date of closure of the offer and deposit
therein such sum as would make up the entire sum due and payable as
consideration for the buy-back in terms of the said Rules. [Rule 7(1)].
129. Make payment
of consideration in cash or bank draft/pay order to those shareholders whose
offer has been accepted or return the share certificates to the shareholders
forthwith within 7 days from 15 days from the date of closure of the offer.
[Rule 7(2)].
130. File with the
Registrar of Companies a return in the Form specified in Annexure A to the said
Rules within 30 days of the completion of buy-back as mentioned in item
37. [Rule 9 read with section 77A(10) proviso].
131. Extinguish and
physically destroy the share certificates so bought back within 7 days from the
date of acceptance of the shares as mentioned in item 33 in the presence of the
Company Secretary in whole-time practice. [Rule 10(1)].
132. Furnish a
certificate to the Registrar of Companies within 7 days of the extinguishment
and destruction of the share certificates of bought back shares. [Rule 10(2)].
133. Ensure the
above certificate is verified by two whole-time directors including the
managing director and. company secretary in whole-time practice
certifying compliance of the said Rules including the requirement of
extinguishment and physical destruction of share certificates within 7 days-as
mentioned in item 131 above. [Rule 10(2)].
134. Maintain a
record of share certificates which have been cancelled and destroyed within 7
days of buy-back of shares. [Rule 10(3)].
135. Also maintain
a Register of Shares bought back by your company in the Form specified at
Annexure B of the said Rules. [Rule 11].
136. Ensure that the letter of offer mentioned in item
121 contains the following:-
(i) true
factual and material information;
(ii) no
misleading information;
(iii) a statement that the directors of the company acc4ept the
responsibility for the information contained in it. [Rule 8(1)(a)].
137. Do not issue
any shares including bonus shares till the date of the closure of the offer of
buy-back of shares. [Rule 8(1)(b)].
138. Confirm in the
letter of offer the opening of separate bank account testifying the
availability of funds earmarked for it and also about payment of consideration
only by way of cash or Bank Draft/pay order. [Rule 8(1)(C)].
139. Do not
withdraw the offer once the draft letter of offer has been filed with the
Registrar of Companies. [Rule 8(1)(d)].
140. Do not utilize
any money borrowed from Banks/Financial Institutions for the purpose of buying
back your company's shares. [Rule 8(1)(e)] .
(Topic 49 to Topic 51)
Topic 49
DO YOU WISH TO VARY RIGHTS OF ANY CLASS
OF SHAREHOLDERS BY MOVING THE COURT UNDER SECTION 391?
1. Please note
that arrangement which may be sanctioned by the Court under Section 391
includes a reorganisation of the share capital of the company by the
consolidation of shares of different classes, or by the division of shares into
shares of different classes or, by both these methods. [Section 390(b)].
2. Please check
whether the articles authorise the Board of Directors to effect an
"arrangement" as at above. Otherwise, alter the articles authorising
the Board to do so by passing a Special Resolution, if necessary, as per Topic
26.
3. Pass a
resolutiont of the Board by convening a Board Meeting after issuing notices to
directors of your company as per section 286 resolving that, pursuant to the
specific article of the Articles of Association or the Special Resolution, as
the case may be, an application be moved to the court for such variation in the
rights of any class of shares as is intended.
4. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
upto Rs. 1000/-. [Section 286(2)]
5. Move an
application to the concerned High Court to take out Judge's summons ex parte
for a meeting of the members of any class likely to be affected by the proposed
arrangement.
6. Along with the
application the proposed arrangement and its details must be furnished to the
court as an exhibit along with an affidavit.
7. The aforesaid
summons shall be in Form No. 33 of the Companies (Court) Rules, 1959 and the
affidavit in support must be in Form No. 35 ibid. Affidavit should be, before
filing, either notarised by the Notary Public or sworn before the Oath
Commissioner.
8. In the
application for taking out the summons, indicate the class or classes of
members whose meetings are required to be held for effecting the arrangement.
9. On the
application being moved and summons being taken out, the court will pass an
order on the summons in Form No. 35 of the Court Rules, with such variations as
the court may deem fit, in respect of any of the following matters:
(1) determining the class or classes of creditors and/or of
members whose meeting or meetings have to be held for considering the proposed
compromise or arrangement;
(2) fixing
the time and place of such meeting or meetings;
(3) appointing a Chairman or Chairmen for the meeting or meetings
to be held, as the case may be;
(4) fixing the quorum and the procedure to be followed at the
meeting or meetings, including voting by proxy;
(5) determining the values of the creditors and/or the members,
or the creditors or members of any class, as the case may be, whose meetings
have to be held;
(6) notice to be given of the meeting or meetings and the
advertisement of such notice;
(7) the time within which the Chairman of the meeting is to
report to the Court the result of the meeting; and
such other matters as the Court may deem necessary.
10. Furnish to
every member entitled to attend the meeting convened by the concerned High
Court, free of charge and within 24 hours of requisition being made in this
behalf, a copy of the proposed arrangement together with a copy of the
statement required to be furnished under Section 393 unless the same had
already been furnished to the member.
11. Please keep in
mind that if default is made in complying with the aforesaid requirements, the
company and every officer of the company who is in default will be punishable
with fine upto Rs. 50,000/-. [Section 393(4)]
12. After
the meeting is held as directed by the concerned FEgh Court and if, at the
meeting, majority in the number of members or class of members, as the case may
be, present either by person or by proxy, agree to the arrangement, the
arrangement shall, when sanctioned by the said Court, be binding on all the
members or all members of the class, as the case may be, and also upon the company.
13. The concerned
High Court, before sanctioning the arrangement needs to be satisfied that the
company which has moved the application has disclosed to the said Court by
affidavit, or otherwise, all material facts relating to the company, such as
the latest financial position of the company, latest auditors' report on the
accounts of the company, the pendency of any investigation proceedings in
relation to the company under sections 235 to 251, and the like.
14. In order to
ensure that the High Court is satisfied it is advisable to furnish all the
documents and material facts in this behalf along with the application itself
for taking out the summons.
15. After
the arrangement is sanctioned at the meeting, the Chairman will give a report
to the concerned High Court.
16. On such report
being given by the Chairman approving the arrangement, at the meeting, a
petition should be moved to the Court for confirming the arrangement.
17. The aforesaid
petition must be presented to the Court in Form No. 404 of the Companies
(Court) Rules, 1959 [Rule 79 of the said Rules].
18. The concerned
High Court will fix a date of hearing of the petition and a notice will be
issued in the newspapers where the original notice of the meeting had been
given, about the hearing of the petition, the advertisement to appear in the
newspapers at least ten days before the date of hearing.
19. When the
concerned High Court sanctions the arrangement, the said Court will pass an
order and in the order such directions may be made by the said Court as the
Court may deem fit.
20. In the
aforesaid case the Court will also direct that a certified copy of the order
shall be filed with the Registrar of Companies within fourteen days of the date
of the order or within such other time as the Court may fix in this behalf.
21. The order of
the said Court will be made in Form No. 41 of the Companies (Court) Rules,
1959 [Rule 81 of the said Rules].
22. After the
order of the concerned High Court is filed with the Registrar, as directed by the said Court, the arrangement
shall become fully effective and binding.
23. Please ensure
that in future, with any memorandum that may be issued by the company, a copy
of the concerned High Court's order is annexed. [Section 391(4)]
24. Please keep in
mind that if default is made in complying with aforesaid requirement, the
company and every officer of the company who is in default will be punishable
with fine upto Rs. 100/- for each copy in respect of which default is
made. [section 391(5)]
Topic 50
DO YOU WISH TO CHANGE THE FINANCIAL YEAR
OF YOUR COMPANY?
A. Where it is desired to change the financial year of the
holding company or the subsidiary and to postpone the submission of relevant
accounts to a General Meeting (More or less than twelve months but not
exceeding fifteen months) :
1. Convene a
Board Meeting after giving notice to all the directors of the company as per
Section 286 of the company which seeks the extension and adopt a new financial
year and pass a resolution for postponing submission of accounts to the Annual
General Meeting of the concerned company.
2. Please keep in
mind that every officer of the company, whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
upto Rs. 1000/-.[Section 286(2)]
3. Apply to the
Registrar of Companies after paying requisite filing fee in cash as per
Schedule X of the Companies Act, 1956, if necessary for extension of time to
hold the Annual General Meeting (vide Topic 218) under section 166(1) second
proviso.
4. Please also
keep in mind that if such extension is not obtained from the Registrar of
Companies, the company and every officer of the company who is in default will
be punishable with fine upto Rs. 50,000/- and in case of continuing
default with a further fine upto Rs. 2,500/- for every day after the
first during which such default continues. [Section 168]
5. Note that as
per the Citizen's Charter of the Department of Company Affairs, Schedule III
Serial No. 5, the said extension should be given by the Registrar of Companies
within 10 days. [No. 5/25/99-CL-V; Press Note No. 9/99, dated 9-8-1999.
6. Obtain consent
of the Assessing Officer under Section 3d of the Income Tax Act, 1961.
B. Where it is desired to change the financial year of either
the holding company or of the subsidiary so that one coincides with that of the
other (More than eighteen months):
1. This may be
achieved by adding a suitable prayer in the application under Section 212(8)
while seeking exemption from attaching annual accounts of the subsidiary to
those of the holding company (vide Topic 218) or by making a specific
application under Section 213(1) (vide Topic 208).
C. Where it is desired to change the financial year only
(irrespective of whether the company is a holding company or subsidiary or
not):
1. Convene a
Board Meeting after giving notice to all the directors of the company as per
Section 286 of the company and at the meeting adopt a new financial year and
approve preparation of next accounts for the new period which may be more or
less than a year. [Section 210(4)].
2. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
up to Rs. 1000/-. [Section 286(2)]
3. Obtain the
permission of the concerned Registrar of Companies by making an application
after payment of the requisite filing fee in cash as per Schedule X of the
Companies Act, 1956, if the period to which the next account relates exceeds
fifteen months. [Section 210(4), Proviso].
4. Please also
keep in mind that if any director of the company or any other person having
been charged by the Board of Directors to comply with aforesaid requirement,
fails to do so, the director and that other person will be punishable with
imprisonment for a term which may extend to 6 months or with fine upto Rs.
10,000/- or with both. [Section 210(5) & (6)]
5. Note that as
per the Citizen's Charter of the Department of Company Affairs Schedule III Serial No. 6 extension for
application under section 210(4) proviso should be given within 7 days by the
Registrar of Companies. [No. 5/25/99-CL-V; Press Note No. 9/99, dated
9-8-1999].
6. Obtain the
consent of the Assessing Officer as required under Section 3 of the Income-tax
Act, 1961.
7. Obtain, if
necessary, the approval of the concerned Registrar of Companies to the
extension of time for holding the Annual General Meeting beyond fifteen months
vide Topic 206. [Section 166(1), second Proviso].
Note:- Where the financial year of the subsidiary does not coincide with that
of the holding company, the financial year aforesaid of the subsidiary shall
not end on a day which precedes the day on which the holding company's
financial year ends by more than six months. [Section 212(2)(c)].
Topic 51
1. Convene a
Board Meeting after giving noticel to all the directors of the company as per
Section 286 to fix up the date, time, place and agenda for convening a General
Meeting to pass an Ordinary Resolutiont for varying the terms of any contract
mentioned in the prospectus or statement in lieu of prospectus of your company.
[Section 61].
2. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of upto Rs. 1000/-.[Section 286(2)]
3. Issue noticesf
in writing at least twenty-one days before the meeting for the General
Meeting with suitable Explanatory Statement regarding the proposed variation to
be made in the prospectus or statement in lieu of prospectus. [Section 173(2)].
4. Hold the
General Meeting and pass the Ordinary Resolutiont by simple majority. [Section
189(1)].
5. Intimate the
concerned Registrar of Companies and forward to him a copy of the Ordinary
Resolutiont passed along with the Explanatory Statement immediately after the
holding of the General Meeting, varying the terms of any contract mentioned in
the prospectus or statement in lieu of prospectus.
6. If the shares
of your company are listed on a recognised Stock Exchange, forward promptly to
it a certified true copy of the Ordinary Resolution varying the terms of any
contract mentioned in the prospectus or statement in lieu of prospectus.
[Standard Listing Agreement].
7. In case of
listed tompanies and in case where the prospectus was vetted by the Securities
and Exchange Board of India (SEBI) prior permission to vary the terms of the
contract mentioned in the prospectus should be obtained from SEBI.