COMPANIES (ISSUE OF SHARE CAPITAL WITH DIFFERENTIAL VOTING RIGHTS) RULES,2001.

 

COMPANIES (ISSUE OF SHARE CAPITAL WITH DIFFERENTIAL VOTING RIGHTS) RULES, 2001.

Issued by the law of ministry, Justice and affairs of the company, (Company affairs department) Vide F.No. 1/13/2000-CL.V;  Published on India Extraordinary Part II India gazette, sub-section (1),  dated 9-3-2001 section (3).

NOTIFICATION:

G.S.R .167(E). In the conferred powers of exercise by sub-clause (ii) of clause (a) of  Section 86 read with  of sub-section (1) clause (a) and (b) of the Act of companies section 642, 1956, hereby  makes  the Central Government following rules, namely:-

Short title and Commencement:

 The Companies ( Share Capital issue with differential voting rights), Rules, 2001.defines these rules.

They shall come on their date of publication  into the force in the official gazette..

Definitions:

In these rules unless otherwise,  requires the context–

a, “Act” means the Companies Act 1956 (1 of 1956).

b, differential  voting rights as to including  voting or dividend rights “.

c, “financial year” means as the mentioned financial year  of Section  2 of the Act under clause (7).

2. Used expressions and words and not mentioned in these rules but declared in the Companies Act, 1956 shall have meaning that are same declared respectively in that Act.

Conditions: Every limited company by shares with differential rights may issue as to dividend, otherwise  or voting, if

1. The company has profits distributable of Section 205 in terms of the Companies Act, 1956 for three financial years preceding the year to issue shares in which it was described.
2. The company has not defaulted in annual accounts filing and annual returns immediately for three financial years preceding of the year which it was decided to issue that shares.
3. The company has not failed its deposits to repay or thereon interest on the due date or its debentures to redeem on the due date or dividend pay.
4. The Articles of Association of the authorized company shares the issue with differential voting rights.
5. The company has not been convicted arising under any offense Securities Contracts (Regulations Act), 1956, Foreign Exchange Management Act, 1999.
6. The company in meeting investor’s grievances has not defaulted.
7. The company has obtained the shareholder’s approval by passing the resolution in General meeting as required under sub-clause(a) provision (a) Sub-clause (1) of section 94 read with mentioned section read with Sub-section(2).
8. The obtained shareholders approvals of the obtained public company through Postal Ballot.
9. The meeting notice at which the proposed resolution to be passed is accompanied by an explanatory statement stating–
10. The voting right rate which the equity share capital with voting right differential shall carry;
11. The proportion or the scale to which such class of the voting rights or shares type will differ.
12. The company shall not convert its equity capital with voting rights into equity share capital with differential voting rights and the differential voting rights shares into equity share capital with voting rights;
13. For company registration the company has obtained the shareholder’s approval by passing the resolution in General meeting as required under sub-clause(a) provision (a) Sub-clause (1) of section 94 read with mentioned section read with Sub-section(2).
14. The obtained shareholders approvals of the obtained public company through Postal Ballot.
15. The meeting notice at which the proposed resolution to be passed is accompanied by an explanatory statement stating–
16. The voting right rate which the equity share capital with voting right differential shall carry;
17. The proportion or the scale to which such class of the voting rights or shares type will differ.
18. The company shall not convert its equity capital with voting rights into equity share capital
19. The company has obtained the shareholder’s approval by passing the resolution in General meeting as required under sub-clause(a) provision (a) Sub-clause (1) of section 94 read with mentioned section read with Sub-section(2).
20. The obtained shareholders approvals of the obtained public company through Postal Ballot.
21. The meeting notice at which the proposed resolution to be passed is accompanied by an explanatory statement stating–
22. The voting right rate which the equity share capital with voting right differential shall carry;
23. The proportion or the scale to which such class of the voting rights or shares type will differ.
24. The company shall not convert its equity capital with voting rights into equity share capital;
25. The differential voting rights shares shall not extend the total capital issued should not extend 25%;
26. The company member holding any equity share with differential voting rights to bonus shares shall be entitled to shares of bonus, the same class right shares.
27. The holders equity with different voting rights shall enjoy all other rights to which  entitled holder is expecting
28. right to vote as mentioned in (a) above.
29. Register : Every company in Rule 3 referred shall maintain registrar under Section 150 of Act containing the differential particular holders to which the holder is entitled.
30. SECURITIES AND EXCHANGE BOARD OF INDIA(ISSUE OF SWEAT EQUITY) REGULATIONS, 2002.
31. S.O.No. 1031(E) In the powers exercise by section 30 of the Securities and Exchange Board of India Act, 2002 conferred, 1992(15 f 1992) read with clause (d) of sub-section (1) of Section 79A of the Companies Act, 1956 (1 of 1956) as inserted of Companies (Amendment) Act, 1999 (1 of 1999), hereby, the Board , makes the following regulations, namely;-
32.                                                   PRELIMINARY:
33. These regulations shall be called the Securities and Exchange Board of India (Issue of Sweat Equity) Regulations 2002.
34. These regulations shall come into force on their publication date in the Official Gazette.
35. Definitions.
36. Unless otherwise the context needs in these regulations following :
37. a, “Act” means the Securities and Exchange Board of India Act, 1992.
38. b, “associate” includes the person,
39. i, who directly or indirectly by himself or in combination with relatives, over the company exercise control; or,
40. ii, whose employee, director is also a director or officer or another company employee.
41. c, “Board” means the Board as defined in clause (a) of sub-section (1) of section 2 of the Act.
42. d, ” control” shall include the right to appoint the directors majority or the management to control or decisions of the policy exercisable by a person or persons individually acting or in concert, indirectly or directly, including by virtue of their management or share holding rights or shareholders or agreements of voting or in any other manner.
43. “company” means a company as mentioned in the Companies Act, 1956;
44. “director” means as defined director in Sub-section (13) of section (2) of the Companies Act, 1956;
45. “employee’ means
46. a, a permanent company employee working in India or abroad or
47. ii the company director, whether a full time director or not.
48. “ESOS” means Employee Stock Option Scheme as mentioned in Securities and Exchange Board of India (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999;
49. “insider” means an insider as defined in clause(e) of regulation 2 of Securities and Exchange Board of India (Insider Trading prohibition) Regulations 1992;
50. “merchant banker” means a merchant banker registered under Section 12 of the Act;
51. “promoter” means promoter as mentioned in clause (h) of sub-regulation (1) of regulation (2) of the Securities and Exchange Board of India (Substantial Acquisition of Takeovers and Shares) Regulations, 1997;
52. “registrar” means to issue an registrar and includes a transfer of share agent registered under Section 12 of the Act;
53. “securities” means securities as mentioned in clause (h) of Section 2 of the Securities contracts (Regulation) Act, 1956(42 of 1956);
54. “statutory auditor” means an auditor by a company appointed under section 224 of the Companies Act, 1956 (1 of 1956);
55. “Recognized Stock Exchange” means a stock exchange that has been granted recognition under Section 4 of the Securities Contracts (Regulation)  Act, 1956 (42 of 1956);
56. “sweat equity shares” means sweat equity shares as mentioned in Explanation II of Sub-section (1) of Section 79A of the Companies Act, 1956;
57. “Schedule” means these regulations schedule;
58. “valuer” means a Chartered Accountant or a merchant banker appointed to make sure the intellectual property value  rights or other addition value;
59. Words and expressions not mentioned in these regulations shall have the meaning that are same as have been assigned to them under the Act or the Securities Contracts (Regulation) Act, 1956 or the Companies Act, 1956, or any statutory modification or thereof re-enactment, as may be the case;
60. Applicability.
61. Nothing contained in these regulations shall apply to a company unlisted.
62. Provided the coming out unlisted company with initial public offering and seeking listing of its securities on the exchange of stock, pursuant of sweat quality shares to issue, shall comply with the Securities and Exchange Board of India  (Disclosure and Protection Investor) Guidelines, 2000.
63.                ISSUE OF SWEAT QUALITY BY LISTED COMPANY :
64. Sweat equity shares may be issued to the promoter of the employee.
65. A company whose listed equity shares on the stock exchange recognized may issue sweat equity shares in respect with Section 79A of the Companies Act, 1956 and these regulations to its;
66. a, Directors,
67. b, Employees,
68. Special Resolution:
69. For passing a special resolution purposes under clause (a) of the Sub-section (1) of Section 79A of the companies Act, 1956 the explanatory statement to be annexed to the notice for the general meeting pursuant to Section 173 of the Companies Act, 1956 shall contain as specified disclosures in the schedule.
70. The sweat quality shares issue to promoters shall be requirements subject specified in regulation 6 of these regulations.
71. Issue of sweat equity shares to promoters;
72. In case of the sweat equity shares to the promoters issue, the same shall also be approved by the shareholders simple majority in General meeting.
73. Provided that for such resolution passing, voting through postal ballot as mentioned under companies (Passing of the resolution by postal Ballot)Rules, 2001 shall be adopted also.
74. Further provided to whom that the promoters such Sweat Equity shares are proposed to be issued in such resolution shall not participate.
75. Each transaction of the Sweat e=Equity issue shall be voted by a separate resolution.
76. The resolution for sweat Equity issue shall be valid for a period of not more than twelve months from the resolution passing date.
77. For the purpose of the resolution passing, the explanatory statement shall contain as specified the disclosures in the Schedule.
78. Pricing of sweat equity shares.
79. The sweat equity shares price should not be higher than mentioned:
80. a, the average of the weekly high and the closing prices low of the equity shares related during the preceding last six months the relevant date or;
81. the average of the weekly high and the closing prices low of the related equity shares during the preceding two weeks of the relevant date.
82. Explanation “Relevant date”or the date for this purpose the date which is thirty days prior on which the shareholders general meeting meeting is convened,of clause (a) of sub-section (1) in terms of Section 79A of the Companies Act.
83. If the shares are listed on more than one exchange of stock, but quoted only on one stock exchange on the date given, then the price on that exchange of stock shall be considered.
84. If the share price is quoted on more than one exchange of stock, then the stock exchange where there is highest trading volume during the date shall be considered.
85. If the shares are not mentioned on the date given, then the share price on the next day of trading shall be considered.
86. INTELLECTUAL PROPERTY VALUATION:
87. The intellectual property valuation of the rights of the property or of the know-how provided or other addition value explained in explanation II of subsection (1) of Section 79A of the Companies Act, 1956 shall be carried out by a banker in the merchant.
88. The merchant banker may consult such valuers and experts, as he may deem fit having regard to the industry nature and the property nature or other addition of value.
89. The merchant banker shall obtain a certificate from the Chartered Accountant independent that the intellectual property valuation or other addition value is in respect with the accounting standards relevant.
90. ACCOUNTING TREATMENT:
91. Where the issued equity shares for a consideration of non-cash, such non-cash consideration shall be treated in the following manner in the company accounts books.
92. a. where the consideration of non-=cash takes in the form of a depreciable or asset amortizable, it shall be carried to the company balance sheet in respect with the accounting standards that are relevant; or
93. where clause (a) is not applicable, as provided it shall be expensed in the accounting standards that are relevant.
94. Placing of auditors certificate before annual general meeting.
95. In the general meeting to the sweat equity subsequent, the Board of Directors shall place the shareholders before, a certificate from he auditors of the company that sweat equity shares issue has been made in respect with the regulations and in respect with the passed resolution by the company of such Sweat Equity shares authorizing the issue.
96. Ce-ling on managerial r enumeration.
97. The sweat equity shares amount issued shall be treated as part of renumeration managerial for the purposes of Sections 198, 309, 310, 311, and 387 of the 1956, the Companies Act, 1956, if the following conditions are fulfilled;
98. the Sweat equity shares to any director are issued or manager and
99. they are issued for consideration of non-cash , which does not take an asset form which can be carried to the company balance sheet in accordance with the accounting standards that are relevant.
100. Lock-in of sweat equity shares.
101. The sweat equity shares shall be locked in fro three years period from the allotment date.
102. The securities and exchange board of India (Investor Protection and disclosure) guidelines, 2000 on issue of public of lock-in and promoters computation contribution shall apply if makes public issue of the company after sweat equity has issued.
103. Listing.
104. The issued sweat equity by a company listed shall be eligible for only listing if such issue are in accordance with these regulations .
105. Takeover Applicability.
106. Any sweat equity shares acquisition shall be subject to the Securities provision and exchange board of India (Substantial Acquisition of shares and Takeovers) Regulations, 1997.
107.