In a bid to enhance corporate transparency and investor protection, the Ministry of Corporate Affairs (MCA) introduced the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023 on October 28, 2023. These new rules are aimed at addressing the conversion of share warrants into shares, with specific requirements for public companies that had issued share warrants prior to the commencement of the Companies Act, 2013
Rule 9 Becomes Rule 9(1):
In accordance with the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023, the existing Rule 9 of the Companies (Prospectus and Allotment of Securities) Rules, 2014, is renumbered as Rule 9(1). Following this change, the amendment introduces two new sub-rules.
Sub-Rule 2: Reporting Requirements:
Sub-rule (2) of the new amendment focuses on public companies that issued share warrants before the initiation of the Companies Act, 2013 (18 of 2013) and have not yet converted them into shares. Such companies are now subject to two important obligations.
(a) Informing the Registrar:
Within a period of three months from the commencement of the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023, these companies must provide the Registrar with details of these share warrants using Form PAS-7.
(b) Surrender and Dematerialization:
Within a period of six months from the commencement of the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023, these companies are required to notify bearers of the share warrants to surrender the warrants and have the shares dematerialized into their respective accounts. To fulfill this requirement, the company must post a notice in Form PAS-8 on its website, if available, and publish the same notice in a vernacular language newspaper circulating in the district and in an English newspaper widely circulated in the state where the company's registered office is situated.
Sub-Rule 3: Conversion in Case of Non-Compliance:
In the event that a bearer of a share warrant does not surrender the warrant within the specified time frame mentioned in Sub-Rule 2, the company is obliged to take action. The company shall convert such share warrants into dematerialized form and transfer the shares to the Investor Education and Protection Fund, established under section 125 of the Act.
This significant amendment serves to streamline share warrant practices in public companies that have been slow to convert these instruments into shares. By mandating disclosure, timely surrender, and dematerialization of these warrants, the MCA aims to ensure a more transparent and secure environment for investors and companies alike. Compliance with these new rules is critical for companies to avoid penalties and protect the rights of their shareholders.
DOWNLOAD COMPANIES ACT 2013 AMENDMENT DATED 28.10.2023
THE LEGAL TIME.
Коментарі