Compliance Update for Private Companies
Updated: Nov 9
Compliance update for listed companies - Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023
The Ministry of Corporate Affairs has on October 27, 2023 amended Companies (Prospectus and Allotment of Securities) Rules, 2014 and introduced Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023 (“Amended Rules”).
The key amendments introduced are summarized below:
1. Conversion of share warrants of public companies into dematerialized shares:
Further to this amendment, every public company which has issued share warrants prior to the commencement of the Companies Act, 2013 (“Act”) and not converted the said share warrants into shares yet, shall have to:
Timeline from the date of commencement of Amended Rules
Action to be taken
Within 3 months
Company to inform the registrar regarding the details of such share warrants in Form PAS-7
Within 6 months
Note: If any share warrant bearer does not surrender the share warrants within the period mentioned above, the company shall convert such share warrants into dematerialised form and transfer the same to the Investor Education and Protection Fund established under section 125 of the Act.
Share warrant bearer to surrender such share warrants to the company and get the shares dematerialized in their account. The company to place a notice for the share warrant bearers in Form PAS-8 on: a) Website of the company, if any; and b) Publish it in a newspaper in vernacular language which is in circulation in the district; and c) Publish it in a newspaper in the English language, widely circulated in the State in which the registered office of the company is situated.
2. Issue of securities in dematerialised form by private companies (“Rule 9B”):
In accordance with the Amended Rules, every private company, excluding small company, shall have to:
issue the securities only in dematerialised form; and
facilitate dematerialisation of all its securities.
b) Timeline for compliance:
A private company, which as on last day of a financial year, ending on or after 31st March, 2023, is not a small company as per audited financial statements for such financial year, shall, within 18 months of closure of such financial year, comply with these provisions/requirements.
c) Further Issuance:
Every private company, other than small company, making any offer for issue of any securities or buyback of securities or issue of bonus shares or rights offer, after the date when it is required to comply with this Rule 9B, shall ensure that before making such offer, entire holding of securities of its promoters, directors, key managerial personnel has been dematerialised in accordance with the provisions of the Depositories Act, 1996 and regulations made thereunder.
d) Shareholders’ Responsibility:
During Transfer – any shareholder who intends to transfer such securities on or after the date when the company is required to comply with this Rule 9B, shall get such securities dematerialised before the transfer; and
During Subscription – any subscriber before subscribing to any securities of the concerned private company whether by way of private placement or bonus shares or rights offer on or after the date when the company is required to comply with this Rule 9B shall ensure that all his securities are held in dematerialised form before such subscription.
e) Additional Applicability:
All provisions of sub-rules (4) to (10) of rule 9A of the Act shall, mutatis mutandis, apply to the dematerialization of securities under this Rule 9B.
The provisions of this Rule 9B shall not apply in case of a government company.