Article: Allotment of Shares 4 Consideration other than Cash

Company secretary

PROCEDURE FOR ALLOTMENT OF SHARES FOR CONSIDERATION OTHERWISE THAN IN CASH

 

Issue of shares for consideration other than in cash can be made for any of the following considerations:—

 

(a) acquisition of assets of other company;

(b) acquisition of shares of other company;

(c) acquisition of technical know-how;

(d) other purposes.

 

Where shares are being issued in lieu of acquisition of assets of other company, it should be ensured that the transferor company has passed appropriate ordinary resolution in general meeting under section 293(1)(a) of the Companies Act, 1956.

 

In case if acquisition of assets of other company results in amalgamation with other company the Court/Tribunal order, if any, shall be forwarded with the Registrar.

 

In case the shares (not being bonus shares) are allotted as fully or partly paid up otherwise than in cash, the company shall produce, for the inspection and examination of the Registrar a contract duly stamped in writing constituting the title of the allottee to the allotment together with any contract of sale or a contract for service or other consideration in respect of which the allotment was made. [Section 75(1)(b)]

 

In such case the following documents shall be filed by company with the concerned Registrar of Companies:—

 

(1) Copies of all contracts, as aforesaid, verified in the prescribed manner to be filed by a company with the Registrar pursuant to section 75(1)(b) by an affidavit of a responsible officer of the company stating that they are true copies.

 

(2) Where a contract such as stated under section 75(1)(b) has not been reduced in writing, the company shall, within 30 days after the date of allotment, file with the Registrar of Companies the prescribed particulars of the contract stamped with the same stamp duty as would have been payable if the contract has been reduced to writing. The prescribed particulars shall be filed electronically in e-Form 3 in addition to the e-Form 2. [Section 75(2)].

 

If the Registrar is satisfied that in the circumstances of any particular case the period of thirty days specified in sections 75(1) and 75(2) for compliance with the requirements of this section is/was inadequate, he may, on application made in that behalf by the company, whether before or after the expiry of the said period, extend that period as he thinks fit, and if he does so, the provisions of sections 75(1) and 75(2) shall have effect in that particular case as if for the said period of thirty days the extended period allowed by the Registrar were substituted.

 

PROCEDURE FOR ISSUE OF SHARES FOR CONSIDERATION OTHER THAN CASH

 

(1) Convene a meeting of the Board of directors after issuing notice in accordance with the provisions of section 286 for considering allotment of shares for consideration other than cash.

 

(2) In case of listed company, immediately after the Board meeting send intimation of allotment of shares for consideration other than cash to the stock exchanges.

 

(3) If the allotment is to be made to the NRIs/Non-residents, obtain consent from RBI.

 

(4) After allotment having been made, within next 30 days, file a return of allotment of shares in e-Form 2 with the ROC.

 

(5) A certified copy of the agreement in pursuance of which allotment has been made shall also be filed with the ROC in e-Form 3, within 30 days after the allotment. If the agreement is not in writing, its main terms and conditions shall be reduced to writing in e-Form 3 and it shall be filed after being stamped.

 

(6) Issue share certificates in accordance with the Companies (Issue of Share Certificate) Rules, 1960.

 

(7) Make entry of the particulars in the Register of Members.

 

 

 

SPECIMEN OF BOARD RESOLUTIONS

 

Allotment of shares for consideration other than cash

 

“RESOLVED THAT pursuant to Clause ____ of the contract for the supply of machinery, 5,000 equity shares of Rs. 10 each, bearing distinctive numbers from ______ to ______, fully paid be allotted to the suppliers M/s. ____________ Limited in full and final settlement of the contract value.

 

RESOLVED FURTHER THAT Company Secretary be and is hereby authorised to file the return of allotment in Form No. 3 with the Registrar of Companies, file the distribution schedule with the Stock Exchange, dispatch the share certificates and comply with all other formalities in this regard.”

 

YOU MAY ALSO USE ANOTHER USEFUL RESOLUTION FORMAT

 

“RESOLVED THAT pursuant to Clause ____ of the contract for the transfer of Plot No. ………………. admeasuring about ……… square ft. on the total consideration of Rs. 5.00 Lacs only 1,00,000 equity shares of Rs. 10 each, bearing distinctive numbers from 3,00,001 to 4,00,000, fully paid be allotted to the suppliers M/s. Cipla Private Limited in full and final settlement of the contract value for consideration otherwise than in case.

 

RESOLVED FURTHER THAT 20,000 Fully paid up Equity Shares of Rs. 10 each of the Company be issued to the said allotees and the entries be made in the Register of Members of the Company.

 

RESOLVED FURTHER THAT Mr. Somesh and Mr. Jayesh, Directors of the Company be and are hereby authorised to sign the Share Certificates for and on behalf of the Board of Directors of the Company and the Common Seal of the Company be affixed in presence of above said two Directors and Company Secretary of the Company.

 

RESOLVED FURTHR THAT Mr. Rohan, Director of the Company be and is hereby authorized to file e-Form 2 & 3 with the MCA/Registrar of Companies for and on behalf of the Company.”

 

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Total likes : 1 times

 
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Advocate

Definitely the procedure is very typical but anyhow we all have to follow this.

 
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Can a share be alloted against payment being received in cheque? Cheque not presented and cleared. Got the cheque today and allotted the shares today. Is it illegal?

 
Reply   
 
Company secretary

Yes it is allowed and not illegal. But avoid unnecessary delay in presentation of your cheque.

 
Reply   
 

Thanks for the advice

 
Reply   
 
Service

In case of allotment share for consideration other than cash, at the time of filing of eForm 2, its require to attache contract in this respect. If one entered in to agreement, then it impact substantially from stamp duty point of view.

 
Reply   
 
Practicing Company Secretary

Dear Ankur Sir,

Thankyou Sir for your guidance. I was benefitted by it.

 

One clarification was required in that regards:

 

You have mentioned that "Where shares are being issued in lieu of acquisition of assets of other company, it should be ensured that the transferor company has passed appropriate ordinary resolution in general meeting under section 293(1)(a) of the Companies Act, 1956".

I would like you to explain me that how section 293(1)(a) is applicable here as an ordinary resolution in general meeting comes under Section 189 of the Companies Act, 1956.

Regards

Mansi

 

 
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hello sir,

if a private ltd company wants to issue shares to its holding company to setoff unsecured loan taken from holding company.. please kindly tell me the procedure and roc compliances

 
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Dear Sir,

Whether Company can not issue the shares to individuals for acquiring their land ?

Is it mandatory that the transferor should be a Company only ?

 

 

 
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