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1. Note: This presentation uses the word “prescribed” in many slides. It refers to that part of the law, which will be prescribed later through Rules.
I NTRODUCTION The Companies Act 2013 will impact some of below given areas of corporate behaviour & conduct of business:
I NTRODUCTION
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RAISING OF MONEY Fund Raising Through Through Securities Deposits Initial/ Follow on Public Offers (IPO/FPO ) Only prescribed companies with a prescribed credit Private Placement rating allowed this route Rights/ Bonus Shares The Act seeks to regulate raising of money through all types of securities, and not just shares or debentures The Act also requires all listed companies or companies intending to get listed have to comply with the provisions of The SEBI Act, 1992
6. R AISING OF M ONEY RAISING OF MONEY Changes in provisions regarding fund raising through SECURITIES
RAISING OF MONEY PRIVATE PLACEMENT OFFER PUBLIC OFFER CONDITIONS Comply with provisions of To a section of public other Companies Act, Securities than QIBs and Employees Contract Regulation Act, 1956 under ESOP and SEBI Act, 1992 To not more than 50 people or such higher number as may be prescribed YES NO Should comply with prescribed terms & conditions Conditions Invitation through private fulfilled? placement offer letter and not prospectus
RAISING OF MONEY PROCEDURAL ASPECTS OF PRIVATE PLACEMENT Offer to be made by Allotment to be name and to those made within 60 whose name is days of receipt of recorded by the funds company prior to invitation Offer to be made Funds to be only after received only allotments under through the any previous offer banking channel, have been and not as cash completed
9. RAISING OF MONEY Significant changes in the provisions of PROSPECTUS V ARIATION IN OF P ROSPECTUS OR WILL BE : Subject to Special Resolution Require Mandatory Exit Option to dissenting shareholders Face restriction on use of amount raised by it for buying, trading or dealing in equity shares of another company
RAISING OF MONEY I SSUANCE OF The provision will no more be limited to Public Financial Institutions, Public Sector Banks or Scheduled Banks
RAISING OF MONEY Separate Provisions with respect to offer of Sale by existing shareholders Subject to prescribed conditions, Global Depository Receipts may be issued by passing a Special Resolution under the current scenario Preferential Guideline is to be followed
RAISING OF MONEY A Company may pay commission to any person in connection with subscription of its securities but subject to prescribed conditions
RAISING OF MONEY Changes in provisions regarding fund raising through DEPOSITS
RAISING OF MONEY The provisions relating to acceptance of deposits will not apply to NBFCs. They will be governed by rules issued by the Reserve Bank of India. Only those companies fulfilling the prescribed conditions and carrying a prescribed credit rating are eligible to accept deposits
R AISING OF M ONEY- By Deposits Prohibition on accepting deposits from public, except in the prescribed manner Accepting deposits from members subject to approval by shareholders only
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SHARES & SECURITIES Various changes regarding Shares & Securities GENERAL CHANGES Changes regarding VOTING RIGHTS Changes regarding ISSUE OF SHARES
SHARES & SECURITIES C Act seeks to regulate all type of securities as opposed to equity and debentures only, causing an
SHARES & SECURITIES V ARIATIONS IN Company can issue shares with to other matters
S HARES & S ECURITIES – General Changes OF S HARES in Public Companies also Recognition and or more persons regarding transfer of securities, enabling
SHARES & SECURITIES U SE OF that comply with accounting standards prescribed for such companies
SHARES & SECURITIES Various changes regarding Shares & Securities GENERAL CHANGES Changes regarding VOTING RIGHTS Changes regarding ISSUE OF SHARES
S HARES & S ECURITIES – Voting Rights Equitable voting rights for On resolutions affecting equity and preference rights of both categories shareholders with respect to their paid up capital Preference shareholders allowed If dividend payable to any to vote on every resolution class of preference placed before shareholders’ shareholders in arrear for more than 2 years meeting No classification between cumulative and For identification of voting non-cumulative preference rights shares
SHARES & SECURITIES Various changes regarding Shares & Securities GENERAL CHANGES Changes regarding VOTING RIGHTS Changes regarding ISSUE OF SHARES
SHARES & SECURITIES Private companies have to comply with provisions for further issue of shares that were applicable to public companies only New provision for allotment of ESOP, rules will be provided soon
SHARES & SECURITIES I SSUE OF Shares cannot be issued at a discount, except as which can be issued at a discount even now
SHARES & SECURITIES OF R IGHTS S HARES Company can dispose off only those shares in a Rights issue that haven’t been subscribed to by shareholders in a manner advantageous to the company
SHARES & SECURITIES P ROHIBITION ON A company cannot go for a bonus issue if it has defaulted in payment of: Interest or principal on fixed deposits or debt securities issued by it Statutory dues of employees such as contribution to provident fund, gratuity and bonus
SHARES & SECURITIES C ALCULATION OF Issue price of shares offered to persons other than existing shareholders and employees under ESOP shall be computed on the basis of Registered Valuer’s report
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32. RESTRUCTURING & REVIVAL Reduction of Capital Compromise or Sick Company Arrangement Fast Track Merger
RESTRUCTURING & REVIVAL Reduction of Capital accounting treatment proposed by the company for such reduction conforms with the accounting standards if the company is in arrears for payment of deposits
RESTRUCTURING & REVIVAL Compromise or Arrangement Notice of any meeting in this matter M required by the Tribunal to also be E given to the Central Government, Income Tax Authorities, RBI, SEBI E and CCI T I Calling of meeting of members or N creditors now mandatory (after consent received by postal ballot) for G approval of compromise by persons representing at least 3/4 th of the S value of members of creditors
35. RESTRUCTURING & REVIVAL Additional Disclosures in the notice for Compromise/Arrangement Effect on material interests of the directors Valuation Report or the debenture trustees Effect on creditors, KMPs, members, debenture holders
R ESTRUCTURING & R EVIVAL Compromise or Arrangement Abolition of Treasury Stocks Shares arising out of arrangement or compromise to be cancelled and extinguished and not to be held by the transferee company in Trust’s its own or a name, whether on its behalf or on behalf of a subsidiary or associate company
RESTRUCTURING & REVIVAL Additional information to be included in affidavit for the compromise/arrangement application of company, if consented by at any least 75% secured creditors
RESTRUCTURING & REVIVAL Affidavit for Scheme of Corporate Debt Restructuring (CDR) should include for all assets by a Registered Valuer Safeguards for Statement if for certifying secured/ CDR adopted that fund unsecured requirements post CDR will confirm to liquidity test
RESTRUCTURING & REVIVAL Fast Track Merger for merger between two or more small companies or a holding and its wholly owned subsidiary or some other class of companies to approve & effect the scheme if the Official Liquidator and the Registrar to the scheme have no objections
RESTRUCTURING & REVIVAL Fast Track Merger of certain Companies between Indian companies and foreign companies incorporated in prescribed jurisdictions and the scheme must provide for payment to shareholders of the merging companies in any combination of cash and depository receipts
RESTRUCTURING & REVIVAL Sick Company : Any company, and not just an industrial unit, can be declared as a sick company Erosion of 50% of net worth no longer a criteria Inability to repay 50% or more of secured debts within 30 days of being served notice by the creditors. Application to declare a company sick may be moved by: The company itself, OR The creditors representing 50% or more of secured debts
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ACCOUNTS & AUDIT Financial Statements and statement of changes in company’s equity now to be parts of Financial Statements i.e. Apr-Mar to be adopted by all the companies. (Relaxation only to foreign companies and subsidiaries of overseas companies subject to Tribunal’s approval) combining accounts of subsidiaries, associates and joint ventures
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