Note on amendment to the Companies (Share Capital and Debenture) Rules, 2014
by MCA vide notification no. G.S.R. 210(E) dated 18 March 2015.
| EXISTING | AMENDMENT | COMMENT |
| Rule 3 of the Companies (Share Capital and Debentures)Application.- The provisions of these rules shall apply to –
(a) all unlisted pubic companies: (b) all private companies: and (c) listed companies
so far as they do not contradict or conflict with any other regulation framed in this regard by the Securities and Exchange Board of India |
Rule 3 has been substituted, the provisions of this rule shall apply to all unlisted public companies, private companies and listed Companies if so far as they do not contradict or conflict with any other regulation framed in this regard by the Securities and Exchange Board of India.” | As per the amendment, provision of this rules shall apply to all listed companies so far they do not contradict with any other regulation of SEBI. Which means, where there is conflict between the MCA Rules and SEBI Regulations, SEBI Regulations shall prevail (for listed companies). Earlier the conditions was applicable to all unlisted companies, all private companies and listed companies. |
| Clause (b) of sub-rule (3) of Rule 5 (certificate of shares) “The first provisoprovided that, in companies wherein a Company Secretary is appointed under the provision of the Act, he shall deemed to be authorized for the purpose of this rule
Second Proviso: Provided further that, if the composition of the Board permits of it, at least one of the aforesaid two directors shall be a person other than the managing or Whole time director
Third proviso Provided also that, in case of a one person company, every share certificate shall be issued under the seal of the Company, which shall be affixed in the presence of and signed by one director or a person authorized by the Board of Directors of the Company for the purpose and the Company Secretary or any other person authorized by the board for the purpose |
Clause (b) of sub-rule (3) of Rule 5 (certificate of shares)and
the first proviso are omitted by this notification
Provided that, if the composition of the Board permits of it, at least one of the aforesaid two directors shall be a person other than the managing or Whole time director
Provided further that, in case of a one person company, every share certificate shall be issued under the seal of the Company, which shall be affixed in the presence of and signed by one director or a person authorized by the Board of Directors of the Company for the purpose and the Company Secretary or any other person authorized by the board for the purpose
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Since the clause (b) of sub rule (3) of Rule 5 are omitted by this notification, so companies wherein a Company Secretary is appointed, he is not required to sign the share certificate. It can be signed by any person authorised by the Board or Secretary.The first proviso has been omitted so the wordings of second proviso substituted accordingly hence there is no effect.
The first proviso has been omitted so the wordings of third proviso substituted accordingly hence there is no effect. |
| In clause c of sub-rule 2 of Rule 6 (Issue of renewed or duplicate share certificate)In case of listed companies renewed or duplicate certificate shall be issued within 15 days from the date of submission of complete documents with the company respectively | In clause (c) of sub-rule 2 of Rule 6 (Issue of renewed or duplicate share certificate)As per notification , listed companies renewed or duplicate certificate can be issued within 45 days from the date of submission of complete documents with the company respectively | The time limit for issue of duplicate share certificates has been extended from 15 days to 45 days. |
| In clause (c) of sub-rule 1 of Rule 12,“Employee means(a) permanent employee of the company who has been working in India or outside India; or
(b) a director of the company, whether a whole time director or not but excluding an independent director (c) an employee as defined in clauses (a) or (b) of a subsidiary, in India or outside India, or of a holding company of the company and or of an associate company” |
In clause (c) of sub-rule 1 of Rule 12,the explanation of the word “employee” has been amended
“Employee refers to (a) permanent employee of the company who has been working in India or outside India; or (b) a director of the company, whether a whole time director or not but excluding an independent director (c) an employee as defined in clauses (a) or (b) of a subsidiary, in India or outside India, or of a holding company of the company”
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Since the word “of an associate company” has been omitted, now employee means employees of a subsidiary and holding company and the employees of the associate company shall not be considered for the purpose of offering ESOP. |
| In Rule 13 first proviso states thatProvided that the price of shares to be issued on a preferential basis by a listed company shall not be required to be determined by the valuation report of a registered valuer | In Rule 13, MCA has inserted following new proviso before the existing proviso“Provided that in case of any preferential offer made by a company to one or more existing members only , the provisions of sub rule (1) and proviso to sub rule (3)of rule 14 of Companies (prospectus and allotment of securities)Rules, 2014 shall not apply”
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As per notification, in case of any preferential allotment made by a company to existing members, there is no requirement of making open offer in Form PAS 4 and filling thereof with the ROC/SEBI is not required.However, complete record of private placement offers in Form PAS 5 is required to be maintained.
The first proviso has been newly inserted so the wordings of first proviso substituted to “Provided further” that accordingly hence there is no effect.
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| existing clause (d) of Rule 18(1) states that(d) the security for the debentures by way of a charge or mortgage shall be created in favour of the debenture trustee on-(i) any specific movable property of the company (no being in the nature of pledge ); or
(ii) any specific immovable property wherever situate, or any interest therein.
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MCA has amended existing clause (d) of Rule 18(1),(d) the security for the debentures by way of a charge or mortgage shall be created in favour of the debenture trustee on-(i) any specific movable property of the company; or
(ii) any specific immovable property wherever situate, or any interest therein. Provided that in case of non-banking financial company, the charge or mortgage under sub clause (i) may be created on any movable property. Provided further that in case of any issue of debentures by a government company which is fully secured by the guarantee given by the Central Government or one or more State Government or by both, the requirement for creation of charge under this sub-rule shall not apply.
Provided also that in case of any loan taken by a subsidiary company from any bank or financial institution the charge or mortgage under this sub-rule may also be created on the properties or assets of the holding company.
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As per the notification, now the security for the debenture can be created on any specific movable property including pledge of specific movable property.However, in case of non-banking financial company, the charge or mortgage may be created on any movable property (need not be specific).
Further notification states that the issue of debentures by a government company which is fully secured by the guarantee given by the Central Government or one or more State Government or by both, the requirement for creation of charge under this sub-rule shall not apply.
And where any loan is availed by a subsidiary company from any bank or financial institution, its holding company are allowed to offer its property as security –i.e. the charge or mortgage may also be created on the properties or assets of the holding company. Use of words ‘may also’ suggests ‘in addition’ and not ‘alternatively’. Thus, where debentures are issued by a subsidiary, it need to create charge on its own assets. In addition, charge over assets of holding company is permitted where debenture issuing subsidiary company has availed loan from bank or financial institution.
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| In Sub rule 5 of Rule 18A trust deed in Form No SH 12 shall be executed by the company in favour of debenture trustees within 60 days of allotment of debentures | Now trust deed in Form SH.12 shall be executed by the company in favour of the debenture trustees within three months of closure of the issue or offer of debentures | This provision has been amended in line with clause 15(1) of SEBI (Issue and listing of Debt Securities) Regulations, 2008. |
| – | Following new rules has been inserted after existing sub-rule (8) of Rule 18 of Companies (Share Capital and Debenture)9. Nothing contained in this rule shall apply to any amount received by a company against issue of commercial paper or any other similar instrument issued in accordance with the guidelines or regulations or notification issued by the Reserve Bank of India.
10.In case of any offer of foreign currency convertible bonds or foreign currency bonds issued in accordance with the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 or regulations or directions issued by the Reserve Bank of India, the provisions of this rule shall not apply unless otherwise provided in such Scheme or regulations or directions
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Rule 18 is made not applicable to companies raising funds by issue of commercial paper or any other similar instrument (i.e. money market instruments) or FCCB or FCB. |
| Form SH 13 for nomination and Form SH 14 for cancellation or variation in nomination | As per the notification , in the Form SH 13 and Form SH 14 “particulars of nominee in case minor nominee dies before attaining age of majority” has been inserted | Format of Form SH 13 and Form SH14 has been revised – now it includes details of nominee, in case minor nominee dies before attaining age of majority. |