Issue of Shares
Issue of Shares is the allocation of shares to a particular group of individuals or entities who have expressed interest, on a preferred basis, at a pre-determined price. It excludes shares or other securities distributed through public offerings, rights issues, employee stock option schemes, employee stock purchase schemes, sweat equity share issuances, bonus shares, or depository receipts offered outside of India or foreign securities.
Preferential Allotment for Unlisted Companies
Compliance with Companies Act, 2013:
- Governed by Section 62 (further issue of shares) and Section 42 (private placement) of the Companies Act, 2013, along with applicable rules.
- Foreign Exchange Management (Non-debt Instruments) Rules, 2019 will also be applicable in case of Non-Resident Investors.
Valuation Report Requirement:
- A valuation report from a Registered Valuer accredited under the Companies (Registered Valuers and Valuation) Rules, 2017, is mandatory.
- The valuation determines the fair value of equity shares being issued to specified investors.
Preferential Allotment Listed Companies
Governed by SEBI ICDR Regulations, 2018:
- The process is regulated by the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018.
- Foreign Exchange Management (Non-debt Instruments) Rules, 2019 will also be applicable in case of Non-Resident Investors.
Valuation Report Requirement:
- A valuation report from an independent Registered Valuer is required when:
- Preferential allotment may lead to a change in control. Allotment to an investor (or group acting in concert) exceeds 5% of the post-issue fully diluted share capital.
Key Points to Consider
01
Which is the Governing Law for Unlisted Companies
Companies Act 2013
02
Which is the Governing Law for Listed Companies
Securities and Exchange Board Of India (Issue Of Capital and Disclosure Requirements) Regulations, 2018
03
Who Does it
Registered Valuer
04
When it is required
Before the Issuance
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