Tag Archives: share capital

Changes in Eligibility Criteria for Class Action Application

The Ministry of Corporate Affairs (“MCA”) on 08 May 2019 amended the National Company law Tribunal Rules, 2016, (“Rules”) which will streamline the provisions of Rule 84 of the said Rules (i.e. Right to apply under the Companies Act in case of Oppression and Mismanagement) and Section 245 (Class Action) of the Companies Act, 2013 (the Act).

While reading Section 245(1) of the Act together with the amended Rules it can be derived that following classes of members or depositors can Class Action under Section 245 of the Act before the National Company law Tribunal for seeking its order:

Category Criteria
In case of a company having a share capital The application shall be made by at least:

(a) 5% of total members or 100 members, whichever is less; or

(b) In case of an unlisted company, members holding at least 5% of issued share capital; or

(c) In case of a listed company, members holding at least 2% of issued share capital.

In the case of a company not having a share capital The application shall be made by atleast one-fifth of the total number of its members.
In case applicants are Depositors The application shall be made by at least:

 

(a) 5% of the total number of depositors or 100 depositors, whichever is less; or

(b) Depositors to whom the company owes 5% of total deposits of the company.

 

Source: http://www.mca.gov.in/Ministry/pdf/AmendmentRules1_08052019.pdf

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Regulatory update: Amendment to Private Placement process

Prior to allotment of shares, a company has to follow the process of private placement or rights issue.

In view of resolving the ambiguities and to amend various provisions of the Companies Act 2013 (the Act), the Ministry of Corporate Affairs (“MCA”) had notified the Companies (Amendment) Act, 2017 (the Amendment Act) on 3 January 2018 to amend certain provisions of the Act. Through this Amendment Act, the MCA has revised the provisions with respect to private placement offer which is effective from 7 August 2018.

The key changes brought in through the said amendment are:

(a) Investment Money received under the private placement offer should not be used until the allotment is made and the return of allotment is filed in Form PAS 3 with the Registrar of Companies (the RoC).

(b) Return of Allotment in Form PAS-3 to be filed within 15 days from the date of allotment.

(c) Offeree under private placement shall not transfer his right to subscribe to any other person.

(d) (i) A Company need not pass any special resolution, in case of issuance of non- convertible debentures, where the amount to be raised through such non-convertible debentures is less than Total Paid-up share capital (+) Free reserves (+) Securities Premium.  (ii) In case of issuance of non- convertible debentures, where the amount to be raised through such non-convertible debentures is more than Total Paid-up share capital (+) Free reserves (+) Securities Premium, then a Company can pass one special resolution for all the offers for such debentures during the year.

(e) A private placement offer cum application letter shall be in Form PAS-4 serially numbered and addressed specifically to the person to whom the offer is made and shall be sent to him, either in writing or in electronic mode, within thirty days of recording the name in Form PAS 5.

(f) A company shall issue private placement offer cum application letter (i.e. Form PAS 4) only after the relevant resolution is been filed in Form MGT 14 with the RoC.

(g) The requirement of investment size of not less than twenty thousand rupees of face value of the securities per person has been done away with;

Source: http://www.mca.gov.in/Ministry/pdf/CommencementNoti07_08082018.pdf