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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:
  • small-tic Governed by Section 62 (further issue of shares) and Section 42 (private placement) of the Companies Act, 2013, along with applicable rules.
  • small-tic Foreign Exchange Management (Non-debt Instruments) Rules, 2019 will also be applicable in case of Non-Resident Investors.
Valuation Report Requirement:
  • small-tic A valuation report from a Registered Valuer accredited under the Companies (Registered Valuers and Valuation) Rules, 2017, is mandatory.
  • small-tic The valuation determines the fair value of equity shares being issued to specified investors.

Preferential Allotment Listed Companies

Governed by SEBI ICDR Regulations, 2018:
  • small-tic The process is regulated by the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018.
  • small-tic Foreign Exchange Management (Non-debt Instruments) Rules, 2019 will also be applicable in case of Non-Resident Investors.
Valuation Report Requirement:
  • small-tic A valuation report from an independent Registered Valuer is required when:
  • small-tic 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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