Checklist for Preferential Allotment in case of Foreign Direct investment

Preferential Allotment

 What is Preferential Allotment

Preferential allotment of shares refers to the procedure of bulk allotment of fresh shares to a specific group of individuals, venture capitalists, companies, or any other person by any particular company. This process is termed as the preferential allotment of shares as per Section 62(1)(c) of Companies Act 2013.

STEPS

1.  Conduct a Board Meeting ( approve EGM notice and Proposal for Allotment)

2. Call Extra Ordinary General Meeting to obtain  consent of members for allotment of equity share

3.  Conduct board meeting for allotment of shares (e.g lets suppose 2 tranches has came in India at two different dates, 1st april and 10th April. So in this case two Board meeting shall be conduct for each allotment at different dates)

4. File PAS-3 in 15 days of allotment and MGT-14 within 30 days of allotment ( First file MGT-14 and put SRN of MGT-14 in PAS-3 then file PAS-3)

Note: In case all tranche received and allotment made in 30 days of received date, in that case one PAS-3 can be filed for all allotments

5. File FCGPR form on firms.rbi.org.in Portal ( within 30 days from date of issue of Capital Instruments)

  

Documents Required for Above Purpose

1. Copy of certified True copy of Board resolution

2.   Copy of Special Resolution (For MGT-14)

3.   Explanatory Statement (For MGT-14)

4.     List of Allottee ( for PAS-3)

5.     FIRC copy form AD Bank

6.      Valuation Report (Merchant Banker or Regd Valuer)

7. KYC of Foreign Investor 6 pointer prescribed by RBI( If Remitter and investor is different obtain from both)

8. Obtain a Certificate from Company Secretary in Practice

Note: While filling FCGPR , if there is any excess amount amount is left with issuer after allotment, in that case issuer has to clarify that how that excess amount be used either refund or use for further issuance in future, attach clarification letter on firms Portal

How a Bill become an act and get enforced in India

In this article we will learn procedure, approvals are required to convert a bill into an Act. 

Bill vs Act

What is a Bill

A Bill is proposed law which is drafted by the government or by the lawmakers, to be debated and voted upon in the legislature (Parliament), where approval of both the houses is required and if passed by that legislature, to be enacted into force by a certain constitutional procedure.

What is an Act

A Bill which is passed by both the houses of Parliament and if it assented by president, in case of Central legislation and Governor, in case of state legislation then it's become law.

What is official gazette

A government gazette is a periodical publication that has been authorized to publish public or legal notices.

Who can introduced a Bill

It can be introduced either by minister or by private members. If it is introduced by a Minister it is called Government Bill or if it is introduces by Private members it is called Private member’s Bill

What is a Step by Step Procedure of making Act/Law

·  Legislative process starts in either house of parliament (Lok Sabha or Rajya Sabha). If no opposed is made by any member then it is put to vote.

· After a Bill is has been introduced. It is published in official gazette

· Once a bill has been introduced then it is referred by Presiding officer of the house to standing committee for further examination or making report thereon.

· Now second reading takes place in two stages

First Stage: It consist only general discussion on principals of Bill.

Second Stage:  It consist clause by clause reading of bill as introduced. Discussion take place on each clause of the Bill and any amendment proposed in this stage is moved permanently and incorporated in Bill for approval, if they are accepted by majority of members present and voting

Now third reading takes place. At this stage, the debate is confined to arguments either in support or rejection.

Ordinary Bill: For passing this simple majority is required members present and voting is count

For Constitutional Amendment; 

Approval of majority of total membership of the house and majority shall not be less than 2/3 of the total members present and voting

· If passed by one house of parliament it is referred to another house of parliament.

  

· And Finally Assent of President may be given and a Bill becomes an Act.

Note:-  Here President is not bound to give his assent to Bill. However in case of constitutional      amendment President is bound to give his assent.

Note:- For cancelling or repealing any Act the ultimate power lies in the hands of Parliament itself either by way of introducing new Act or making Provisions which supercede the provisions of old Law.

Posted by LAWgicAl ARUSH

DUE TO INCREASE IN FINANCIAL FRAUDS OR CYBER CRIME, RBI HAS INTRODUCED FAME (FINANCIAL AWARENESS MESSAGES) WHICH SHOULD BE FOLLOWED BY EVERY PERSON TO KEEP THEIR MONEY SAFE AND MAKE PEOPLE FINANCIAL LITERATE

Financial literacy

1.THERE IS NO FREE LUNCH! DON’T GET CHEATED

A. Don’t get cheated by emails, SMSes or phone calls promising you money in the name of   RBI/RBI governor/ or any other bank, including your own bank.

B. Do not fall prey to fake emails, offers of lottery winning or cheap funds offered in India or overseas in the name of RBI or any other bank or government organization.

C. Don’t send any money as initial deposits, commission or transfer fee to anyone to receive large sums of money from any kind of known or unknown organizations. You may be defraud.

D. RBI does not open savings account/current account/fixed deposit or any offer credit/debit card or do any transaction with any individual.

E. Don’t reveal your bank account details, internet banking user ID, password, credit/debit card number, CVV, ATM PIN or OTP to anyone.

F. Lodge a complaint with local police station or cyber crime division if you have received any fictitious offers of lottery winning or cheap funds from India or abroad.

2.KEEP IN MIND THE FOLLOWING TO HAVE A HASSLE FREE ATM EXPERIENCE

Financial literacy

A. You can withdraw money, transfer funds, check account balance, register for mobile banking, pay bills, link your Aadhaar number to bank account, etc at your ATM.

B. Do not share your ATM card details and PIN with anyone. Never leave the card in the ATM.

C. Ensure that there is no camera or other devices attached to the ATMs when you key in your pins or swipe your cards. As far as possible, cover the keypad with ine hand and use the other hand to key in your PIN. Never let anyone when it is being entered at the ATM.

D. Remember to count and check the notes dispensed.

E. Always register your mobile number with issuing bank to get the alerts on transaction execution.

F. Contact your bank immediately to block the card in case of lost or stolen or you feel it has been compromised.

G. If you have ATM related complaints, write to card issuing bank. Bank has to resolve your complaint within 7 days of receiving it, else pay compensation to you @ Rs-100 per day if the complaint was lodged within 30 days of the transaction.

H. Change your ATM card PIN regularly.

I. Look for suspicious activity or object in the ATM room or ATM machine before using the card.

Posted by LAWgicAL ARUSH
   
   Source: RBI

FUNDAMENTALS BEFORE APPEARING IN NATIONAL COMPANY LAW TRIBUNAL

In this speedy marathon about appearing before National Company Law Tribunal we will see some very effective and useful tips.

NCLT

Why need of National company law tribunal 

·        Registration of company  (illegal or falsely section 7(7)

·        Transfer of shares under section 58 and 59 of companies act 2013

·        Deposits (Class action suits)

·        Power to investigate

·        Freezing assets of company. (If company is under investigation)

·        Dealing with IBC matters

·        For Merger and amalgamation etc.

  Appearance And Presentation Skills

1)    Maintain an impeccable dressing at all time with proper attire prescribed for the forum

2)    Ensure a lively and intuitive body language

3)    Acclimatize (adopt Forum environment nature) with the catchwords and etiquette of the forum

4)    Keep the personal file with court file with proper pagination and flagged

5)    Compile a list of judgments with necessary copies thereof in adequate quantities

6)    Maintain the focus on relief time

7)    Get ready with the answers for all possible queries from the forum

8)    Take note of critical points argued by opposite parties and respond them   accordingly

9)    Avoid loosing sense of proportion

10) Avoid distraction by opposite parties

11) Ignore irrelevant submission of the opposite parties

12) Argue with a short written note,  both of the facts in the from of brief list and dates of law

Posted by LAWgicAL ARUSH

Ministry of Corporate affairs has came out with amendments in National Company Law Tribunal Rules 2020. By using it's power prescribed under section 469 of companies act 2013.read with section 230 of the Companies Act,2013, the Central Government hereby makes the following rules,

NCLT

WHAT WAS OLD SCENARIO

Earlier the provisions of Section 230(12) of Companies Act 2013 were not notified; simultaneously no rule was there in National Company Law Tribunal Rules 2016 to deal with this scenario.

However due to dynamic business environment and continuous changes in business practices Ministry has amended the provisions in relation to regulation of Takeover bid for listed Company in the process of Compromise and Arrangements

WHAT IS NEW SCENARIO

In the National Company Law Tribunal Rules, 2016 (hereinafter referred
to as the principal rules), after rule 80, the following rule shall be inserted,
Namely:-

Rule 80A- An application under sub Section (12) of section 230 may be made in Form NCLT-1 and shall be accompanied with such documents as are mentioned in Annexure B

S.NO 22A Inserted for FEES for Application of takeover bids for unlisted companies  shall Rs.5000

Annexure A got amended with rule 80A

Annexure B got amended with S.NO 12A, where list of documents to be attached with application are given

Following new documents Inserted in case of takeover offer of not listed company

1. Affidavit verifying the petition

2. Memorandum of appearance with copy of boards resolution or the executed vakalatnama, as the case may be

3. Documents in support of the grievance against the takeover

4. Any other relevant documents

Ministry of Corporate affairs has came out with amendments in Companies (Compromise, Arrangements and Amalgamation) Rule 2016. By using it's power prescribed under section 469 of companies act 2013.read with section 230 of the Companies Act,2013 (18 of 2013), the Central Government hereby makes the following rules,

Merger & Amalgamation

REFERENCE OF SECTION 230(11)OF COMPANIES ACT 2013.

Any compromise or arrangement may include takeover offer made in such manner as may be prescribed,

Provided that in case of listed companies, takeover offer shall be as per the regulations framed by the Securities and Exchange Board.

INTERPRETATION BY AUTHOR

The provisions for takeover has already been given during the process of compromise and Arrangements in the Companies  Act 2013, however it was not notified.

In the rule 3(4), It is mentioned that the Application made to the Tribunal for Compromise or Arrangement-Creditor’s Responsibility Statement Creditor’s Responsibility Statement to be included in the Scheme of CDR.

WHAT'S NEW IN THE AMENDMENT

In the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, (hereinafter referred to as the principal rules), in rule 3, after Sub-rule (4), the following sub-rules shall be inserted, namely:

5. SUB RULE AS AMENDED BY,

A member of the company shall make an application for, arrangement for the purpose of takeover offer in terms of sub-section (11) of section 230, when such member along with any other member holds not less than three-fourths of the shares in the company, and such application has been filed for acquiring any part of the remaining shares of the company.

Explanation- Nothing in this sub-rule shall apply to any transfer or transmission of shares through a contract, arrangement or succession, as the case may be, or any transfer made in pursuance of any statutory or regulatory requirement.

INTERPRETATION BY AUTHOR

# What holding is required to make Takeover offer in arrangement process ?

Ans.  A member holding at least 3/4 of shares either alone or with any other member carrying voting rights (Rights gained under section 47(2) is also considerable).

# Can a member's holding who is making offer be considered in 3/4 value along with other person?

Ans. No, strictly it is mentioned that a member can make such offer and his 3/4th shares value shall be considered along with any other member only.

If a member is holding equal to more than 3/4th shares value along with any company or body corporate, then it shall not be considered in 3/4th share value

# What is the meaning of remaining shares?

Ans. Other than those 3/4 shares, means offer can be made for remaining 1/4 shares

e.g. Suppose Mr. A is a member of company X LTD and he holds 75 shares in X LTD and further he is willing to acquire remaining 25 share. This 25 share is to be taken for reference of remaining shares.

Cases which are exempted from this subrule

# Any transfer or transmission executed by contract arrangements or succession

# Any transfer by statutory or regulatory requirement

6. SUB RULE AS AMENDED BY,

 An application of arrangement for takeover offer shall contain:_

(a) The report of a registered valuer disclosing the details of the valuation

of the shares proposed to be acquired by the member after taking into a account the following factors: -

(i) the highest price paid by any person or group of persons fore acquisition of shares during last twelve months;

(ii) the fair price of shares of the company to be determined by their registered valuer after taking into account valuation parameters including return on net worth, book value of shares, earning pers share price earning multiple vis-d-vis the industry average, and such other parameters as are customary for valuation of shares of such Companies.

(b) Details of a bank account, to be opened separately, by the member wherein a sum of amount not Iess than one-half of total consideration of the takeover offer is deposited.

NOTE: In the principal rules, in Schedule of Fees, for S.No. 1, fees for filling application is now 5000.

Posted by LawgicAL ARUSH