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Preferential Allotment

Procedure for issue of Shares under Preferential Allotment under section 62(1)(c) of Companies Act, 2013

Issue of Shares under Section 62(1)(c):-

Where at any time, a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares may be offered to any persons, if it is authorized by a special resolution, either for cash or for a consideration other than cash, if the price of such shares is determined by the valuation report of a registered valuer subject to such conditions as may be prescribed. These persons may include equity shareholders of the company referred to in clause or employees of the company.

Step No.1:- First off all check whether AOA is authorize to the company to issue shares under this method. If not then amend the AOA accordingly.

Step No.2:- Appoint a person having such qualification and experience and registered as a valuer in such manner, on such terms and conditions as may be prescribed for ascertaining the issue price of shares.

Step No.3:- Notice of Board Meeting as per section 173 of the Companies Act, 2013. Convene a Board meeting and pass the following resolution:

  1. Decide the names of the subscribers to the issue.
  2.  to fix the date, time and venue of General meeting and approve the notice and explanatory statement. because a company can issue its shares under this method only when it is passed by Special Resolution by the members of the company in the general meeting.

Step No.4:- After passing Special Resolution file e-form MGT-14 to ROC within 30 days of passing resolution in General Meeting.

Attachment of e-form MGT-14 for this purpose is:-

  1. Notice of General Meeting with Explanatory Statement.
  2. Certified true copy of the resolution passed at the meeting.
  3. Certified true copy of explanatory statement

Step No. 5:- Receipt of money from specified persons against issue of shares. And Stamp duty on issue of shares prescribed by the government  has to be paid accordingly.

Step No.6:-Hold a Board meeting for allotment of shares to the specified persons. Record all information pertaining to preferential allotment in PAS-5. 

Step No. 7: File the e-form PAS-3 within 30 days of allotment of shares.

Attachment of e-form PAS-3 for this purpose id:

1. Certified true copy of Board Resolution

2. List of Allottees

3. PAS-5