ISSUE AND ALLOTMENT

RIGHT ISSUE:

An invitation to the existing shareholders to purchase additional shares of the Company in proportion to their Paid Up Capital at a discounted price (i.e., lower than the market price)
Reason for right issue:

1. The control of the company remains in the hands of the existing shareholders.
2. 2. The Company is unable to borrow money from the outsiders but it has to meet its capital requirement.
3. The Company can raise more Debt as the Debt Equity ratio reduces

Procedure For Rights Issue:

1. Holding of Board Meeting for approving such issue
2. Issue of Offer Letter and Notice to Shareholders
3. Issue to remain open for Min 15 days; Max 30 days. For Private Companies, if 90% of members agree in writing / electronically, lesser period can be taken.
4. Option of Renunciation can be given (Renunciation should not be restricted by the AoA).
5. Holding of Board Meeting for allotment & thereafter file PAS-3 within 30 days and issue share certificates along with making entry in Register of Members
6. Unsubscribed shares can be disposed off by the Board in any manner not dis-advantageous to the shareholders and the Company.

EMPLOYEES STOCK OPTION SCHEME

Option given to the directors, officers or employees of a company / its holding company / subsidiary company to purchase, or to subscribe for, the shares of the company at a future date at a pre-determined price:
Employee here means:

1. Permanent Employee of the Company, its Holding & Subsidiary.
2. Director of the Company, its Holding & Subsidiary Excluding Independent Directors, Employee belonging to Promoter/Promoter Group, Director, through himself / Relative / Body Corporate holds more than 10% of Outstanding Equity Shares of the Company
3. Above two are not to Start Ups till 10 years

PROCEDURE FOR ISSUE OF ESOS:

1. Holding of Board Meeting for approving such issue & Notice of AGM and Explanatory Statement
2. Pass approval by Ordinary Resolution for Pvt Co which has not defaulted in Annual Filing and Special Resolution in other case
3. Separate Resolutions for grant of options to: (a)Employees of Subsidiary (b) Employees of Holding o Identified Employees 1% or more of the Issued Capital during any one year.
4. File MGT-14 in case of Special Resolution within 30 days
5. Make entries in SH-6 (Register of Employee Stock Option)
6. Grant Options to the Employees.
7. After Right is vested, option can be exercised. Once Option is exercised, call Board Meeting to allot shares and they shall have all rights of shareholders
8. File PAS-3 within 30 days of allotment andDisclose the same in Boards’ Report

SWEAT EQUITY SHARES

Sweat equity shares (SWEAT) mean equity shares issued by a company to its directors or employees at a discount or for consideration, other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called.
Employee here means:

1. Permanent Employee of the Company, its Holding & Subsidiary.
2. Director of the Company, its Holding & Subsidiary

PROCEDURE FOR ISSUE OF SWEAT EQUITY 

1. Obtain Report from Registered Valuer with justification of valuation
2. Call BM to approve such issue and Notice of EGM and Explanatory (File MGT-14 in case of Public Companies)
3. Pass Special Resolution in EGM which is valid for one year
4. Hold Board Meeting to allot shares and thereafter file PAS-3 within 30 days.
5. Disclose in Boards’ Report in the year when shares are issued.
6. Make entry in the Register of Sweat Equity Shares in SH-3

PREFRENTIAL OFFER

Issue of shares or other securities to selected group of persons, for cash/ consideration other than cash.
PROCEDURE FOR ISSUE OF PREFRENTIAL OFFER:

1. AOA should authorise
2. Obtain Report from Registered Valuer
3. Call Board Meeting to approve such issue and Notice of EGM and Explanatory Statement(File MGT-14 in case of Public Companies)
4. Pass Special Resolution in EGM which is valid for one year
5. Open a separate bank account in a scheduled bank
6. File MGT-14 and dispatch PAS-4 to proposed allottees within 30 Days (In case offer is to one or more existing members only, then requirement of PAS-4 shall not apply.)
7. Once the amounts are received, convene BM to allot shares and thereafter file PAS-3 within 15 days from the date of allotment
8. Issue share certificates
9. Maintain complete record in PAS-5.

PRIVATE PLACEMENT

“Private placement” means any offer of securities or invitation to subscribe securities to a select group of persons by a company (other than by way of public offer) through issue of a private placement offer letter and which satisfies the conditions specified in section 42 of Companies Act, 2013.

Procedure for Private Placement:

1. Issue of securities where offer is made only to “identified persons” not exceeding 200
2. Special Resolution for issue of Shares.
3. Issue Offer cum Application letter in PAS-4. Maintain complete record of Private Placement Offers in PAS-5.
4. No renunciation of right.
5. Payment be to received only from the bank account of subscriber
6. Separate Bank Account in Scheduled Bank to be opened
7. Securities to be allotted within 60 days from the date of receipt of application money
8. File PAS-3 within 15 days from the date of allotment
9. Amounts received can be utilized only after filing of PAS-3
10. Valuation from Registered Valuer
11. No Public Advertisement to be made.

Taxcellent will help in issue and allotment of shares with respect to the prescribed procedure.