{"id":5240,"date":"2020-03-23T18:23:43","date_gmt":"2020-03-23T12:53:43","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=5240"},"modified":"2020-12-10T18:26:53","modified_gmt":"2020-12-10T12:56:53","slug":"issue-of-preference-shares-without-public-offer","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/issue-of-preference-shares-without-public-offer\/","title":{"rendered":"Issue of Preference Shares without Public Offer: A Complete Procedure"},"content":{"rendered":"\n<p class=\"has-drop-cap\">As per Companies Act, 2013, Preference Shares means that part of issued share capital where the preferential shareholder has the preference over the payment of dividend. In case of winding up of Company, the Preferential Shareholders are paid first then other Shareholders in the Company which were schedules after the completion of <a href=\"https:\/\/corpbiz.io\/company-registration\"><strong>Company Registration<\/strong><\/a>. The Companies Act, 2013, read with the Companies (Share Capital and Debentures) Rules, 2014, provides for the Procedure for Issue of Preference Shares. In the article, we will discuss the procedure followed for Issue of Preference Shares in Company.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/issue-of-preference-shares-without-public-offer\/#What_are_the_Prerequisites_and_Conditions_for_Issue_of_Preference_Shares\" >What\nare the Prerequisites and Conditions for Issue of Preference Shares?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/issue-of-preference-shares-without-public-offer\/#Whether_the_Preference_Share_is_issued_without_making_any_Public_Offer\" >Whether\nthe Preference Share is issued without making any Public Offer?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/issue-of-preference-shares-without-public-offer\/#What_is_the_procedure_followed_for_Issue_of_Preference_Shares\" >What\nis the procedure followed for Issue of Preference Shares? &nbsp;&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/issue-of-preference-shares-without-public-offer\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Prerequisites_and_Conditions_for_Issue_of_Preference_Shares\"><\/span>What\nare the Prerequisites and Conditions for Issue of Preference Shares?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>At the time of issuing Preference Shares, there are\ncertain prerequisites and conditions which should be followed and complied with\ntrue spirit. The conditions which should be followed are as follows:<\/em><\/strong><\/p>\n\n\n\n<ul><li>Check\nfor the bifurcation of nominal capital of the Company into Equity Share Capital\nand Preference Share Capital.<\/li><li>Check\nfor the Articles of Association (AoA) that whether the article authorizes for\nthe Issue of Preference Shares.<\/li><li>No\ndefault in the redemption of the already issued Preference Shares should be\nthere as per Rule 9 of the Companies (Share and Debentures) Rules, 2014.<\/li><li>No\ndefault in the payment of Dividends should be there as per Rule 9 of the\nCompanies (Share and Debentures) Rules, 2014. &nbsp;&nbsp;<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Whether_the_Preference_Share_is_issued_without_making_any_Public_Offer\"><\/span>Whether\nthe Preference Share is issued without making any Public Offer?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>SEBI (Substantial Acquisition of Shares and\nTakeover) Regulations, 2011, (Takeover Code) <\/em><\/strong>requires any person who is acquiring shares in Company\nhad to make a mandatory Public Offer if the person requires the share to be\nacquired in excess than the prescribed limit. Under this Takeover Code, the\nterm &#8216;Shares&#8217; does not include the preference shares as they have no voting\nright(expect provided under Companies Act, 2013). Hence, any person acquiring\npreference shares under this takeover Code is not required to make a mandatory\nPublic offer. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_procedure_followed_for_Issue_of_Preference_Shares\"><\/span>What\nis the procedure followed for Issue of Preference Shares? &nbsp;&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>The procedure followed for Issue of Preference Shares is as follows:<\/em><\/strong> Before calling for a Board Meeting look for the Articles of Association (AoA) of Company that whether the Articles authorizes for the Issue of Preference Shares or not. If there is no authorization, then the Articles of Association (AoA) should be altered accordingly tom provide for an Issue of Preference Shares. <\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"576\" height=\"351\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/image-45.png\" alt=\"procedure followed for Issue of Preference Shares\" class=\"wp-image-5241\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/image-45.png 576w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/image-45-300x183.png 300w\" sizes=\"(max-width: 576px) 100vw, 576px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Call\nfor Board Meeting<\/h3>\n\n\n\n<p>Notice\nfor Board Meeting shall be issued to the Directors <strong><em>at least 7 days before the date\nof the Board Meeting.<\/em><\/strong> The agenda of the Board Meeting should be\nmentioned in the notice. &nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Hold\nBoard Meeting<\/h3>\n\n\n\n<p><strong><em>After the notice is served the Board meeting will be convened for the following purposes:<\/em><\/strong>&#8211;<\/p>\n\n\n\n<ul><li>To check the quorum of\nthe Board Meeting.<\/li><li>To approve the Issuance\nof Preference Shares. <\/li><li>For the approval of \u201cLetter\nof Offer.\u201d<\/li><li>Issue notice of General\nMeeting.<\/li><li>Fix the time, place,\ndate and day of the General Meeting.<\/li><li>One of the Directors\nshould be authorized to Issue notice of General Meeting.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">&nbsp;Hold General Meeting<\/h3>\n\n\n\n<p><strong><em>The General Meeting will be convened for the\nfollowing purposes:<\/em><\/strong><\/p>\n\n\n\n<ul><li>To\ncheck for the quorum of General Meeting.<\/li><li>To\npresent the \u201cLetter of Offer\u201d to the members of the Meeting. <\/li><li>To\npass a Special Resolution for the Issue of Preference Shares.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Filing\nof MGT-14<\/h3>\n\n\n\n<p>After\npassing of the Special Resolution in the General Meeting, the <strong><em>Form\nMGT-14 is filed with the Registrar of Companies (RoC).<\/em><\/strong> The Form MGT-14\nshould be filed within <strong><em>30 days <\/em><\/strong>of passing of the Special\nResolution. <strong><em>The following things should be attached with the MGT-14 form:<\/em><\/strong><\/p>\n\n\n\n<ul><li>The\nnotice of the General Meeting with the explanatory statement<\/li><li>A\nTrue Certified Copy of the Special Resolution passed.<\/li><li>The\nminutes of the General Meeting.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Circulation\nof Letter of Offer<\/h3>\n\n\n\n<p>The\nLetter of Offer should be sent to the shareholders through Registered post or\nspeed post or an electronic medium. <strong><em>The Letter of Offer should be sent at least\n3 days before the opening of the Issue of Preference Shares. The Offer will be\nopen to shareholders for 15 days but should not exceed 30 days. &nbsp;<\/em><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Notice\nof Board Meeting<\/h3>\n\n\n\n<p>The\nnotice of Board Meeting should be sent to all the directors <strong><em>at\nleast 7 days before the date of the Board Meeting<\/em><\/strong>. The notice should\ninclude the agenda of the Board Meeting to be held.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Hold\nBoard Meeting<\/h3>\n\n\n\n<p><em><strong>The Board Meeting will be convened for the following purposes:<\/strong><\/em><\/p>\n\n\n\n<ul><li>Check\nfor the Quorum of the Board Meeting.<\/li><li>For\nthe approval of the Allotment of Shares by passing Board Resolution.<\/li><li>To\npresent the list of Allottees before the Board.<\/li><li>To\npass the resolution for Issue of Share Certificate<\/li><li>To\nauthorize 2 Directors and one more person to sign the Share Certificates to be\nissued to the Shareholders.&nbsp;&nbsp; <\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Allotment\nof Shares<\/h3>\n\n\n\n<p><strong><em>The Allotment of Shares should be done within 60\ndays of receiving of the application money by the Shareholders. After passing\nof the Board Resolution for Allotment of Shares, a Director is authorized to\nfile e-form PAS-3 to the Registrar of Companies (RoC).<\/em><\/strong> The PAS-3 is Return of Allotment Form\nwhich should be filed within 30 days of passing of the Board Resolution. <strong><em>The\nPAS-3 should be attached with the following attachments:<\/em><\/strong><\/p>\n\n\n\n<ul><li>Resolution\nfor Allotment of Shares<\/li><li>List\nof Allottees&nbsp;&nbsp; &nbsp;<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Issue\nShare Certificate<\/h3>\n\n\n\n<p>The\nShare Certificates should be issued to the Shareholders <strong><em>within 2 months from the date of\nAllotment of Shares. The Share certificate should be issued in Form SH-1.<\/em><\/strong>\n<\/p>\n\n\n\n<p>The Register of Members should be maintained as per <em><strong>Section 88 of the Companies<\/strong><\/em><strong> <\/strong><em><strong>Act,<\/strong><\/em><strong> <\/strong><em><strong>2013<\/strong><\/em><sup><a href=\"http:\/\/www.mca.gov.in\/SearchableActs\/Section88.htm\"><strong>[1]<\/strong><\/a><\/sup><em>.<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p style=\"text-align:left\"><strong><em>Section 55 of the Companies Act, 2013,<\/em><\/strong> the Company can issue redeemable Preference Shares. The Public Offer is not mandatory for Issue of Preference Shares to the Shareholders. The accounts of the Preferential Shareholders are settled before than the other Shareholders. The process of issue of Preference Shares is lengthy. We at <a href=\"https:\/\/corpbiz.io\/\"><strong>Corpbiz<\/strong><\/a>, have experts who can help you with the process of Issue of Preference Shares without Public Offer. Our experts will assure the successful completion of your work in the prescribed time.  <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/issue-of-shares-through-private-placement\/\">Issue of Shares through Private Placement\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>As per Companies Act, 2013, Preference Shares means that part of issued share capital where the preferential shareholder has the preference over the payment of dividend. In case of winding up of Company, the Preferential Shareholders are paid first then other Shareholders in the Company which were schedules after the completion of Company Registration. The [&hellip;]<\/p>\n","protected":false},"author":16,"featured_media":5244,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[120,340],"tags":[417],"acf":{"service_id":"321"},"authorName":"Sakshi Sharda","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/02\/sakshi-sharda.jpg","authorDescription":"Sakshi Sharda has done BBALLB(HONS) and holds a strong knowledge on the matters pertaining to finance and law. From the past one year she is working as a legal advisor and in her leisure time she works on improvising her knowledge. Sakshi is spreading her knowledge by writing for Corpbiz.","postViews":54773,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/5240"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=5240"}],"version-history":[{"count":12,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/5240\/revisions"}],"predecessor-version":[{"id":21572,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/5240\/revisions\/21572"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/5244"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=5240"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=5240"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=5240"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}