1. Short title and commencement.—(1)
These rules may be called the Companies (Prospectus and Allotment of
Securities) Rules, 2014.
(2) They shall come
into force on the 1st day of April, 2014. THE GAZETTE OF INDIA : EXTRAORDINARY
2. Definitions.— (1) In these
rules, unless the context otherwise requires,—
(a) “Act” means the
Companies Act, 2013 (18 of 2013);
(b) “Annexure” means
the Annexure to these rules;
(c) “fees” means fees
as specified in the Companies (Registration Offices and Fees) Rules, 2014;
(d) ”Form” or
‘e-Form” means a form set forth in Annexure to these rules which shall be used
for the matter to which it relates;
(e) “Regional
Director” means the person appointed by the Central Government in the Ministry
of Corporate Affairs as a Regional Director;
(f) “section” means section of the Act;
(2) Words and expressions used in these rules but not
defined and defined in the Act or in the Companies (Specification of
definitions details) Rules, 2014, shall have the meanings respectively assigned
to them in the Act or in the said Rules.
3. Information to be stated in the
prospectus.— (1) The Prospectus to be issued shall contain—
(a) the names,
addresses and contact details of the corporate office of the issuer company,
compliance officer of the issuer company, merchant bankers and co-managers to
the issue, registrar to the issue, bankers to the issue, stock brokers to the
issue, credit rating agency for the issue, arrangers, if any, of the
instrument, names and addresses of such other persons as may be specified by
the Securities and Exchange Board in its regulations;
(b) the dates
relating to opening and closing of the issue;
(c) a declaration
which shall be made by the Board or the Committee authorised by the Board in
the prospectus that the allotment letters shall be issued or application money
shall be refunded within fifteen days from the closure of the issue or such
lesser time as may be specified by Securities and Exchange Board or else the
application money shall be refunded to the applicants forthwith, failing which
interest shall be due to be paid to the applicants at the rate of fifteen per
cent. per annum for the delayed period.
(d) a statement given
by the Board that all monies received out of the issue shall be transferred to
a separate bank account maintained with a Scheduled Bank;
(e) the details of
all utilized and unutilized monies out of the monies collected in the previous
issue made by way of public offer shall be disclosed and continued to be
disclosed in the balance sheet till the time any part of the proceeds of such
previous issue remains unutilized indicating the purpose for which such monies
have been utilized, and the securities or other forms of financial assets in
which such unutilized monies have been invested;
(f) the names,
addresses, telephone numbers, fax numbers and e-mail addresses of the
underwriters and the amount underwritten by them;
(g) the consent of trustees,
solicitors or advocates, merchant bankers to the issue, registrar to the issue,
lenders and experts;
(2) The capital
structure of the company shall be presented in the following manner, namely:—
(i) (a) the
authorised, issued, subscribed and paid up capital (number of securities,
description and aggregate nominal value);
(b) the size of the
present issue;
(c) the paid up
capital-
(A) after the issue;
(B) after conversion
of convertible instruments (if applicable);
(d) the share premium
account (before and after the issue);
ii) the details of the existing share capital of the issuer
company in a tabular form, indicating therein with regard to each allotment,
the date of allotment, the number of shares allotted, the face value of the
shares allotted, the price and the form of consideration:
Provided that in the
case of an initial public offer of an existing company, the details regarding
individual allotment shall be given from the date of incorporation of the
issuer and in the case of a listed issuer company, the details shall be given
for five years immediately preceding the date of filing of the prospectus:
Provided that the issuer company shall also disclose the
number and price at which each of the allotments were made in the last two
years preceding the date of the prospectus separately indicating the allotments
made for considerations other than cash and the details of the consideration in
each case.
(3) The prospectus to be issued shall contain the following
particulars, namely:—
(a) the objects of the issue;
(b) the purpose for which there is a requirement of funds ;
(c) the funding plan
(means of finance);
(d) the summary of
the project appraisal report (if any);
(e) the schedule of
implementation of the project;
(f) the interim use
of funds, if any
(4) The prospectus to
be issued shall contain the following details and disclosures, namely:—
(i) the details of
any litigation or legal action pending or taken by any Ministry or Department
of the Government or a statutory authority against any promoter of the issuer
company during the last five years immediately preceding the year of the issue
of the prospectus and any direction issued by such Ministry or Department or
statutory authority upon conclusion of such litigation or legal action shall be
disclosed;
(ii) the details of
pending litigation involving the issuer, promoter, director, subsidiaries,
group companies or any other person, whose outcome could have material adverse
effect on the position of the issuer;
(iii) the details of pending proceedings initiated against
the issuer company for economic offences;
(iv) the details of default and non-payment of statutory
dues etc.
(5) The details of directors including their appointment and
remuneration, and particulars of the nature and extent of their interests in
the company shall be disclosed in the following manner, namely:—
(i) the name,
designation, Director Identification Number (DIN), age, address, period of
directorship, details of other directorships;
(ii) the remuneration payable or paid to the director by the
issuer company, its subsidiary and associate company; shareholding of the
director in the company including any stock options; shareholding in
subsidiaries and associate companies; appointment of any relatives to an office
or place of profit;
(iii) the full particulars of the nature and extent of
interest, if any, of every director:
(a) in the promotion of the issuer company; or
(b) in any immoveable property acquired by the issuer company
in the two years preceding the date of the Prospectus or any immoveable
property proposed to be acquired by it.
(iv) where the
interest of such a director consists in being a member of a firm or company,
the nature and extent of his interest in the firm or company, with a statement
of all sums paid or agreed to be paid to him or to the firm or company in cash
or shares or otherwise by any person either to induce him to become, or to help
him qualify as a director, or otherwise for services rendered by him or by the
firm or company, in connection with the promotion or formation of the issuer
company shall be disclosed.
(6) The sources of
promoters’ contribution, if any, shall be disclosed in the following manner,
namely:— (i) the total shareholding of the promoters, clearly stating the name
of the promoter, nature of issue, date of allotment, number of shares, face
value, issue price or consideration, source of funds contributed , date when
the shares were made fully paid up, percentage of the total pre and post issue
capital;
(ii) the proceeds out of the sale of shares of the company
and shares of its subsidiary companies previously held by each of the promoters
(iii) the disclosure for sources of promoters contribution
shall also include the particulars of name, address and the amount so raised as
loan, financial assistance etc , if any, by promoters for making such
contributions and in case of own sources, complete details thereof.
4. Reports to be set out in the
Prospectus.- The following reports shall be set out with the prospectus,
namely:—
(1) The reports by the auditors with respect to profits and
losses and assets and liabilities.
Explanation.- For the purposes of this sub-rule, the report
shall also include the amounts or rates of dividends, if any, paid by the
issuer company in respect of each class of shares for each of the five
financial years immediately preceding the year of issue of the prospectus,
giving particulars of each class of shares on which such dividends have been
paid and particulars of the cases in which no dividends have been paid in
respect of any class of shares for any of those years: Provided that if no
accounts have been made up in respect of any part of the period of five years
ending on a date three months before the issue of the prospectus, a statement
of that fact accompanied by a statement of the accounts of the issuer company
in respect of that part of the said period up to a date not earlier than six
months of the date of issue of the prospectus indicating the profit or loss for
that period and assets and liabilities position as at the end of that period
together with a certificate from the auditors that such accounts have been
examined and found correct and the said statement may indicate the nature of
provision or adjustments made or which are yet to be made.
(2) The reports relating to profits and losses for each of
the five financial years or where five financial years have not expired, for
each of the financial year immediately preceding the issue of the prospectus
shall-
(a) if the company
has no subsidiaries, deal with the profits or losses of the company
(distinguishing items of a non-recurring nature) for each of the five financial
years immediately preceding the year of the issue of the prospectus; and
(b) if the company
has subsidiaries, deal separately with issuer company’s profits or losses as
provided in clause (a) and in addition, deal either –
(i) as a whole with the combined profits or losses of its subsidiaries,
so far as they concern members of the issuer company; or
(ii) individually
with the profits or losses of each subsidiary, so far as they concern members
of the issuer company; or
(iii) as a whole with
the profits or losses of the company, and, so far as they concern members of
the issuer company, with the combined profits or losses of its subsidiaries.
(3) The reports made by the auditors in respect of the
business of the company shall be stated in the prospectus in the manner
provided in sub-rule (2).
5. Other matters and reports to be
stated in the prospectus.—The prospectus shall include the following
other matters and reports, namely:—
(1) If the proceeds,
or any part of the proceeds, of the issue of the shares or debentures are or is
to be applied directly or indirectly—
(a) in the purchase of any business; or
(b) in the purchase of an interest in any business and by
reason of that purchase, or anything to be done in consequence thereof, or in
connection therewith; the company shall become entitled to an interest in
either the capital or profits and losses or both, in such business exceeding
fifty per cent. thereof, a report made by a chartered accountant (who shall be
named in the prospectus) upon—
(i) the profits or losses of the business for each of the
five financial years immediately preceding the date of the issue of the
prospectus ; and
(ii) the assets and
liabilities of the business as on the last date to which the accounts of the
business were made up, being a date not more than one hundred and twenty days
before the date of the issue of the prospectus;
(c) in purchase or acquisition of any immoveable property
including indirect acquisition of immoveable property for which advances have
been paid to even third parties, disclosures regarding
(i) the names,
addresses, descriptions and occupations of the vendors;
(ii) the amount paid or payable in cash, to the vendor and,
where there is more than one vendor, or the company is a sub-purchaser, the
amount so paid or payable to each vendor, specifying separately the amount, if
any, paid or payable for goodwill;
(iii) the nature of
the title or interest in such property proposed to be acquired by the company;
and
(iv) the particulars
of every transaction relating to the property, completed within the two
preceding years, in which any vendor of the property or any person who is, or
was at the time of the transaction, a promoter, or a director or proposed
director of the company had any interest, direct or indirect, specifying the
date of the transaction and the name of such promoter, director or proposed
director and stating the amount payable by or to such vendor, promoter,
director or proposed director in respect of the transaction.
(2)(a) If –
(i) the proceeds, or
any part of the proceeds, of the issue of the shares or debentures are or are
to be applied directly or indirectly and in any manner resulting in the
acquisition by the company of shares in any other body corporate; and
(ii) by reason of
that acquisition or anything to be done in consequence thereof or in connection
therewith, that body corporate shall become a subsidiary of the company, a
report shall be made by a Chartered Accountant (who shall be named in the
prospectus) upon –
(A) the profits or losses of the other body corporate for
each of the five financial years immediately preceding the issue of the
prospectus; and
(B) the assets and liabilities of the other body corporate
as on the last date to which its accounts were made up.
(b) The said report
shall –
(i) indicate how the
profits or losses of the other body corporate dealt with by the report would,
in respect of the shares to be acquired, have concerned members of the issuer
company and what allowance would have been required to be made, in relation to
assets and liabilities so dealt with for the holders of the balance shares, if
the issuer company had at all material times held the shares proposed to be
acquired; and
(ii) where the other
body corporate has subsidiaries, deal with the profits or losses and the assets
and liabilities of the body corporate and its subsidiaries in the manner as
provided in sub-clause (ii) of clause (a).
(3) The matters
relating to terms and conditions of the term loans including re-scheduling, prepayment,
penalty, default.
(4) The aggregate number of securities of the issuer company
and its subsidiary companies purchased or sold by the promoter group and by the
directors of the company which is a promoter of the issuer company and by the
directors of the issuer company and their relatives within six months
immediately preceding the date of filing the prospectus with the Registrar of
Companies shall be disclosed. (5) The matters relating to –
(A) Material
contracts;
(B) Other material contracts;
(C) Time and place at which the contracts together with
documents will be available for inspection from the date of prospectus until
the date of closing of subscription list.
(6) The related party transactions entered during the last
five financial years immediately preceding the issue of prospectus as under –
(a) all transactions
with related parties with respect to giving of loans or, guarantees, providing
securities in connection with loans made, or investments made ;
(b) all other transactions which are material to the issuer
company or the related party, or any transactions that are unusual in their
nature or conditions, involving goods, services, or tangible or intangible
assets, to which the issuer company or any of its parent companies was a party
Provided that the
disclosures for related party transactions for the period prior to notification
of these rules shall be to the extent of disclosure requirements as per the
Companies Act, 1956 and the relevant accounting standards prevailing at the
said time.
(7) The summary of
reservations or qualifications or adverse remarks of auditors in the last five
financial years immediately preceding the year of issue of prospectus and of
their impact on the financial statements and financial position of the company
and the corrective steps taken and proposed to be taken by the company for each
of the said reservations or qualifications or adverse remarks.
(8) The details of
any inquiry, inspections or investigations initiated or conducted under the
Companies Act or any previous companies law in the last five years immediately
preceding the year of issue of prospectus in the case of company and all of its
subsidiaries; and if there were any prosecutions filed (whether pending or
not); fines imposed or compounding of offences done in the last five years
immediately preceding the year of the prospectus for the company and all of its
subsidiaries.
(9) The details of acts of material frauds committed against
the company in the last five years, if any, and if so, the action taken by the
company.
(10) A fact sheet
shall be included at the beginning of the prospectus which shall contain –
(a) the type of offer document (“Red Herring Prospectus” or
“Shelf Prospectus” or "Prospectus").
(b) the name of the issuer company, date and place of its
incorporation, its logo, address of its registered office, its telephone
number, fax number, details of contact person, website address, e-mail address;
(c) the names of the
promoters of the issuer company;
(d) the nature,
number, price and amount of securities offered and issue size, as may be
applicable;
(e) the aggregate
amount proposed to be raised through all the stages of offers of specified
securities made through the shelf prospectus;
(f) the name, logo
and address of the registrar to the issue, along with its telephone number, fax
number, website address and e-mail address;
(g) the issue
schedule –
(i) date of opening
of the issue;
(ii) date of closing of the issue;
(iii) date of earliest closing of the issue, if any.
(h) the credit rating, if applicable;
(i) all the grades obtained for the initial public offer;
(j) the name(s) of
the recognised stock exchanges where the securities are proposed to be listed;
(k) the details about eligible investors; (l) coupon rate,
coupon payment frequency, redemption date, redemption amount and details of
debenture trustee in case of debt securities.
6. Period for which information to
be provided in certain cases.—For the matters specified in rules 3 to 5,
which require a company to provide certain particulars or information relating
to the preceding five financial years, it shall be sufficient compliance for a
company which has not completed five years, if such company provides such
particulars or information for all the previous years since its incorporation. 7. Variation in terms of contracts referred to in the
prospectus or objects for which prospectus was issued.—
(1) where the company
has raised money from public through prospectus and has any unutilized amount
out of the so raised, it shall not vary the terms of contracts referred to in
the prospectus or objects for which the prospectus was issued except by passing
a special resolution through postal ballot and the notice of the proposed
special resolution shall contain the following particulars, namely:—
(a) the original purpose or object of the Issue;
(b) the total money
raised;
(c) the money utilised for the objects of the company stated
in the prospectus;
(d) the extent of achievement of proposed objects(that is
fifty percent, sixty percent, etc);
(e) the unutilised amount out of the money so raised through
prospectus,
(f) the particulars
of the proposed variation in the terms of contracts referred to in the
prospectus or objects for which prospectus was issued;
(g) the reason and
justification for seeking variation;
(h) the proposed time
limit within which the proposed varied objects would be achieved;
(i) the clause-wise
details as specified in sub-rule (3) of rule 3 as was required with respect to
the originally proposed objects of the issue;
(j) the risk factors
pertaining to the new objects; and
(k) the other
relevant information which is necessary for the members to take an informed
decision on the proposed resolution.
(2) The advertisement
of the notice for getting the resolution passed for varying the terms of any
contract referred to in the prospectus or altering the objects for which the
prospectus was issued, shall be in Form PAS-1 and such advertisement shall be
published simultaneously with dispatch of Postal Ballot Notices to
Shareholders.
(3) The notice shall
also be placed on the web-site of the company, if any.
8. Offer of Sale by Members.—
(1) The provisions of
Part I of Chapter III namely “Prospectus and Allotment of Securities” and rules
made there under shall be applicable to an offer of sale referred to in section
28 except for the following, namely:-
(a) the provisions relating to minimum subscription;
(b) the provisions
for minimum application value;
(c) the provisions
requiring any statement to be made by the Board of directors in respect of the
utilization of money; and
(d) any other
provision or information which cannot be compiled or gathered by the offeror,
with detailed justifications for not being able to comply with such provisions.
(2) The prospectus
issued under section 28 shall disclose the name of the person or persons or
entity bearing the cost of making the offer of sale along with reasons.
9. Dematerialisation of securities.—The
promoters of every public company making a public offer of any convertible
securities may hold such securities only in dematerialised form:
Provided that the
entire holding of convertible securities of the company by the promoters held
in physical form up to the date of the initial public offer shall be converted
into dematerialised form before such offer is made and thereafter such promoter
shareholding shall be held in dematerialized form only. 10. Shelf prospectus
and Information Memorandum.—The information memorandum shall be prepared in
Form PAS- 2 and filed with the Registrar along with the fee as provided in the
Companies (Registration Offices and Fees) Rules, 2014 within one month prior to
the issue of a second or subsequent offer of securities under the shelf
prospectus.
11. Refund of Application Money.—
(1) If the stated minimum amount has not been subscribed and the sum payable on
application is not received within the period specified therein, then the
application money shall be repaid within a period of fifteen days from the
closure of the issue and if any such money is not so repaid within such period,
the directors of the company who are officers in default shall jointly and
severally be liable to repay that money with interest at the rate of fifteen
percent per annum. (2) The application money to be refunded shall be credited
only to the bank account from which the subscription was remitted.
12. Return of Allotment.- (1)
Whenever a company having a share capital makes any allotment of its
securities, the company shall, within thirty days thereafter, file with the
Registrar a return of allotment in Form PAS-3, along with the fee as specified
in the Companies (Registration Offices and Fees) Rules, 2014.
(2) There shall be attached to the Form PAS-3 a list of
allottees stating their names, address, occupation, if any, and number of
securities allotted to each of the allottees and the list shall be certified by
the signatory of the Form PAS-3 as being complete and correct as per the
records of the company.
(3) In the case of securities (not being bonus shares)
allotted as fully or partly paid up for consideration other than cash, there
shall be attached to the Form PAS-3 a copy of the contract, duly stamped,
pursuant to which the securities have been allotted together with any contract
of sale if relating to a property or an asset, or a contract for services or
other consideration.
(4) Where a contract
referred to in sub-rule (3) is not reduced to writing, the company shall
furnish along with the Form PAS-3 complete particulars of the contract stamped
with the same stamp duty as would have been payable if the contract had been
reduced to writing and those particulars shall be deemed to be an instrument
within the meaning of the Indian Stamp Act, 1899 (2 of 1899), and the Registrar
may, as a condition of filing the particulars, require that the stamp duty
payable thereon be adjudicated under section 31 of the Indian Stamp Act, 1899.
(5) A report of a registered valuer in respect of valuation
of the consideration shall also be attached along with the contract as
mentioned in sub-rule (3) and sub-rule (4).
(6) In the case of
issue of bonus shares, a copy of the resolution passed in the general meeting
authorizing the issue of such shares shall be attached to the Form PAS-3.
(7) In case the shares have been issued in pursuance of
clause (c) of sub-section (1) of section 62 by a company other than a listed
company whose equity shares or convertible preference shares are listed on any
recognised stock exchange, there shall be attached to Form PAS-3, the valuation
report of the registered valuer.
Explanation.- Pending notification of sub-section (1) of
section 247 of the Act and finalisation of qualifications and experience of
valuers, valuation of stocks, shares, debentures, securities etc. shall be
conducted by an independent merchant banker who is registered with the
Securities and Exchange Board of India or an independent chartered accountant
in practice having a minimum experience of ten years.
13. Payment of commission.—A company may pay
commission to any person in connection with the subscription or procurement of
subscription to its securities, whether absolute or conditional, subject to the
following conditions, namely: -
(a) the payment of such commission shall be authorized in
the company’s articles of association;
(b) the commission may be paid out of proceeds of the issue
or the profit of the company or both;
(c) the rate of commission paid or agreed to be paid shall
not exceed, in case of shares, five percent of the price at which the shares
are issued or a rate authorised by the articles, whichever is less, and in case
of debentures, shall not exceed two and a half per cent of the price at which
the debentures are issued, or as specified in the company’s articles, whichever
is less;
(d) the prospectus of
the company shall disclose—
(i) the name of the underwriters;
(ii) the rate and amount of the commission payable to the
underwriter; and
(iii) the number of securities which is to be underwritten
or subscribed by the underwriter absolutely or conditionally.
(e) there shall not
be paid commission to any underwriter on securities which are not offered to
the public for subscription;
(f) a copy of the
contract for the payment of commission is delivered to the Registrar at the
time of delivery of the prospectus for registration.
14. Private Placement.—
(1)(a) For the
purposes of sub-section (1) of section 42, a company may make an offer or
invitation to subscribe to securities through issue of a private placement
offer letter in Form PAS-4.
(b) A private placement offer letter shall be accompanied by
an application form 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 names of such persons in
accordance with sub-section (7) of section 42:
Provided that no person other than the person so addressed
in the application form shall be allowed to apply through such application form
and any application not conforming to this condition shall be treated as
invalid.
(2) A company shall
not make a private placement of its securities unless –
(a) the proposed offer of securities or invitation to
subscribe securities has been previously approved by the shareholders of the
company, by a Special Resolution, for each of the Offers or Invitations:
Provided that in the explanatory statement annexed to the notice for the
general meeting the basis or justification for the price (including premium, if
any) at which the offer or invitation is being made shall be disclosed:
Provided further that in case of offer or invitation for non-convertible
debentures, it shall be sufficient if the company passes a previous special
resolution only once in a year for all the offers or invitation for such
debentures during the year.
(b) such offer or invitation shall be made to not more than
two hundred persons in the aggregate in a financial year:
Provided that any
offer or invitation made to qualified institutional buyers, or to employees of
the company under a scheme of employees stock option as per provisions of
clause (b) of sub-section (1) of section 62 shall not be considered while
calculating the limit of two hundred persons;
Explanation.– For the
purposes of this sub-rule, it is hereby clarified that –
(i) the restrictions under sub-clause (b) would be reckoned
individually for each kind of security that is equity share, preference share
or debenture;
(ii) the requirement of provisions of sub-section (3) of
section 42 shall apply in respect of offer or invitation of each kind of
security and no offer or invitation of another kind of security shall be made
unless allotments with respect to offer or invitation made earlier in respect
of any other kind of security is completed;
(c) the value of such
offer or invitation per person shall be with an investment size of not less
than twenty thousand rupees of face value of the securities;
(d) the payment to be
made for subscription to securities shall be made from the bank account of the
person subscribing to such securities and the company shall keep the record of
the Bank account from where such payments for subscriptions have been received:
Provided that monies
payable on subscription to securities to be held by joint holders shall be paid
from the bank account of the person whose name appears first in the
application.
(3) The company shall maintain a complete record of private
placement offers in Form PAS-5: Provided that a copy of such record along with
the private placement offer letter in Form PAS-4 shall be filed with the
Registrar with fee as provided in Companies (Registration Offices and Fees)
Rules, 2014 and where the company is listed, with the Securities and Exchange
Board within a period of thirty days of circulation of the private placement
offer letter
- For the purpose of this rule, it is hereby clarified that
the date of private placement offer letter shall be deemed to be the date of
circulation of private placement offer letter.
(4) A return of
allotment of securities under section 42 shall be filed with the Registrar
within thirty days of allotment in Form PAS-3 and with the fee as provided in
the Companies (Registration Offices and Fees) Rules, 2014 along with a complete
list of all security holders containing-
(i) the full name, address, Permanent Account Number and
E-mail ID of such security holder;
(ii) the class of
security held;
(iii) the date of
allotment of security ;
(iv) the number of
securities held, nominal value and amount paid on such securities; and
particulars of consideration received if the securities were issued for
consideration other than cash.
(5) The provisions of clauses (b) and (c) of sub-rule (2)
shall not be applicable to –
(a) non-banking
financial companies which are registered with the Reserve Bank of India under
Reserve Bank of India Act, 1934; and
(b) housing finance companies which are registered with the
National Housing Bank under National Housing Bank Act, 1987, if they are
complying with regulations made by Reserve Bank of India or National Housing
Bank in respect of offer or invitation to be issued on private placement basis:
Provided that such companies shall comply with sub-clauses (b) and (c) of
sub-rule (2) in case the Reserve Bank of India or the National Housing Bank
have not specified similar regulations
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