The Companies (Share Capital and Debentures) Amendment Rules, 2023, were announced by the Ministry of Corporate Affairs (MCA) on January 21, 2023. The Companies (Share Capital and Debentures) Rules of 2014 are intended to be further amended by these rules. Most of the revisions aim to update different forms, including SH-7, SH-8, SH-9, and others. The aforementioned modifications will take effect on January 23, 2023.
With the Companies (Share Capital and Debentures) Amendment, the Companies (Share Capital and Debentures) Rules of 2014 that are now in effect will be modified. It seeks to modernize and improve the laws governing the issue of debentures and increase/reduction in share capital in companies.
The Companies (Share Capital and Debentures) Amendment’s primary focus is on the reform of several forms. Particularly forms utilized for debentures and pooled capital in corporate procedures. Notably, changes have been made to the aforementioned forms. These forms are important for several related actions, including sending a letter of offer (SH-8), declaring solvency (SH-9), and informing the Registrar of changes to share capital (SH-7).
Alteration of forms under Companies (Share Capital and Debentures) Amendment
The Companies Amendment Rules, 2023, proposed a few changes in the Alteration of forms under Companies (Share Capital and Debentures) Amendment with regard to the requirement of filing forms and disclosures with the Registrar of Companies after every Board Meeting and passing of resolutions by the company. The need for such an amendment was to reduce the number of forms that are required to be filled by the statutory authorities. The forms that have been amended and/or altered are –
Form SH-7
Form SH-7 is filed by the company with the Registrar, giving details about any alterations to the company’s share capital. Any alterations or revisions to a company’s shared capital structure are reported to the Registrar of Companies using this form. This ensures
that the Registrar is kept up to date on any changes, including the issue of new shares, a change in the authorized shared capital, issue price and the number of shares issued, the details of the allottees, and any other related modifications.
Amendment made to Form SH-7
As per the amendment made to Form SH-7 vide – Companies (Share Capital and Debentures) Amendment, the revised form SH-7 shall now contain the following information –
- Votes by members of the company during the Annual General Meeting
- The option to appeal to the Tribunal against the Central Government’s order.
- Date of the order of the Tribunal
- The form should accompany a working calculation for the ratios used to convert shares and debentures.
Form SH-8
It is an offer to purchase shares of the company made to the existing members under the provisions of buyback. This form is filed when the company buys back shares or debentures under section 68 of the Companies Act. A company’s current shareholders can receive a formal letter of offer in the form of Form SH-8. It is relevant when a company wants to give its investors the option to purchase more shares or debentures. The offer’s terms, conditions, and the steps involved in exercising the right to purchase more securities are all included in the form.
Amendment made to Form SH-8
As per the amended form SH-8 as per the Companies (Share Capital and Debentures) Amendment, the following information will be present in the form – shall now contain the following information –
- Details (if any) of the defaults in repayment of load nans deposits, interest debentures, shares, or dividends by the company
- Details of Instances of non-compliance with sections 92, 123, 127, and 129 of the Companies Act, 2013.
- Information about the capital structure, shareholding pattern, and details of the buyback, along with details of the company post-completion of the buyback.
- Auxiliary documents of the company, including details of promoters, shareholders, and shareholding pattern, Notice of General Meeting, Explanatory Statements u/s 102, audited accounts, balance sheets and financial statements of the past three years, and details of buyback in the previous three years are no longer required to be attached with Form SH-8.
Form SH-9
When a company does a buyback, it is required to fill a declaration of solvency with the Registrar of Companies in Form SH-9. The company’s directors make sucha declaration. When a business intends to purchase back its shares or debentures, it fulfils its function. The directors must attest on this form that the business is solvent and able to buy back its securities. They have to make this declaration without jeopardizing their debt obligations or financial soundness.
Amendment made to Form SH-9
As per the Companies (Share Capital and Debentures) Amendment,2023, the company is no longer required to file form SH-9 with the Registrar of Companies.
Form SH-11
After the buyback is completed, the company must file form SH -11 with the Registrar as a return of the buyback procedure. The form contains all necessary details about the buyback, such as the quantity and value of shares purchased, price per share and the method to arrive at such price, details of the allottees, and the manner in which the funds would be utilized. If the company is a listed company, a return must be submitted to the Securities Exchange Board of India (SEBI) as well.
Amendment made to Form SH-11.
The Companies (Share Capital and Debentures) Amendment 2023 additionally outline the conditions for filing following the completion of a buyback. Form SH-11 must be submitted by companies to the Registrar upon completion of the buyback procedure. This form is to be submitted to the Securities and Exchange Board of India (SEBI) by listed firms and companies that govern the securities exchange market in India.
The notification further necessitates the companies to disclose more information in the updated SH-11, including the source of the buyback and promoter-by-promoter shareholding pattern. The rules have now done away with the requirement to provide information about the designated merchant banker and the stock markets on which the company is listed. Moreover, it is no longer necessary to provide the balance sheet and the certificate of compliance as per the Companies Act 2013.
Form SH-15
Form SH-15 is a certificate issued by a company or firm’s auditors or a practising company secretary, which was previously used in buyback transactions. This form assisted in verifying that the securities buyback procedure had adhered to all applicable laws and rules. Under the Companies Amendment Rules 2023,the requirement to submit Form SH-15 has been left out, implying that buyback transactions are no longer subject to the need for a separate certificate of compliance.
Amendment made to Form SH-15
Form SH-15 has been omitted by the Companies (Share Capital and Debentures) Amendment, 2023. This form was used in relation to the certificate of compliance for securities buybacks. This means that buyback transactions no longer require a separate certificate of compliance.
Rule 17, sub-rule 14 of the Companies (Share Capital and Debentures) Amendment, Rules 2023, has been modified to guarantee adherence to the updated regulations. According to the amended sub-rule, Form SH-11, which is the return of buyback, must be submitted with a declaration. The Managing Director and two other company directors should sign the declaration. The declaration attests to the fact that the securities buyback was executed in accordance with the terms of the Act and its implementing regulations.
In conclusion, the Companies (Share Capital and Debentures) Amendment, 2013 made changes to a number of forms and filing prerequisites pertaining to share capital and debentures. The alterations are intended to improve transparency, ensure compliance, and streamline the procedures linked to these kinds of deals within business transactions.
Conclusion
Companies (Share Capital and Debentures) Amendment, 2023 introduced some changes in the reporting requirements and disclosures that are required to be made with the regulatory authorities. While some forms were omitted, some were altered and modified to include/exclude additional information about the business transaction taking place in the company. The amendment proposed changes to forms SH-7, SH-8, SH-9, SH-11 and SH-15.
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Frequently Asked Questions (FAQs)
The Companies (Share Capital and Debentures) Rules, 2014 rules, are the guiding force behind the process of increasing/reducing the share capital of a company through fresh issues of shares and securities. It is the law that lays down the process of various modes of issue of shares such as rights issues, preferential allotment, ESOPs, buyback, and issue of preference shares and debentures.
The Companies (Share Capital and Debentures) Amendment has introduced changes have been made to the aforementioned forms. These forms are important for a number of related actions, including sending a letter of offer (SH-8), declaring solvency (SH-9), and informing the Registrar of changes to share capital (SH-7). In contrast, some forms have been omitted as well.
Companies (Share Capital and Debentures) Amendment Rules, 2023 has amended Form SH-7. The revised form SH-7 shall now contain information about Votes by members during the General Meeting, an appeal to the Tribunal against the Central Government’s order, the date of the order of the Tribunal, and a working calculation for the ratios used to convert shares and debentures should be accompanied with the form.
SH-8 is an offer to purchase the shares given by the company to the interested persons. It is an offer to purchase shares of the company made to the existing members of the company under the provisions of buyback. The amended form shall contain details of the company’s financial and regulatory status, defaults in repayment, instances of non-compliance with specific sections of the Companies Act, 2013, and information on capital structure, shareholding pattern, and buyback details.
As per the Companies (Share Capital and Debentures) Amendment, 2023, the company is no longer required to file form SH-9, which is the declaration of solvency with the Registrar of Companies.
The Companies Amendment Rules, 2023, outlined the conditions for filing forms following the completion of a buyback. Form SH-11 must be submitted by companies to the Registrar upon completion of the buyback procedure and contains details such as the origin of the repurchase and the details of promoter holdings. Furthermore, it is no longer necessary to appoint a merchant banker or provide information about the stock exchange.
Form SH-15 is a certificate issued by a company or firm’s auditors or a practising company secretary, which assists in verifying that the securities buyback procedure has adhered to all applicable laws and rules. Form SH-15 has been omitted by the Companies Amendment Rules 2023. This form was used in relation to the certificate of compliance for securities buybacks.
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