MESSAGE FROM THE DESK OF HRD DIRECTOR: DR. Amaresh Kumar Singh
MESSAGE UPDATED ON 20th AGUST,2010, by - DR. Amaresh Kumar Singh
Friday, August 20, 2010 05:31:41 PM
First of all I am congratulating all the Promoters/Members & Financers of the
company for reposing confidence in the Governance of the Company and providing
me a trouble free time in the past operational year (2009-10) .
Further I would like to assure all of you that the department of HRD will take note of
all the facts & suggestions put forwarded by all of you and promptly take remedial
steps for your complete satisfaction.
As you know that your Company is still in the process of generating
the additional fund of Rs. Two Crore which is the least amount needed for the
company to launch its fifty branded products in the market of Bihar.
Till date your company has achieved success in generating a
capital base of Rs. Two Crore Five Lakhs fund, only due to your prompt contribution
& active participation throughout the year.
I would like to assure all of you that the department of HRD will take note of all the facts & suggestions put forwarded by all of you and promptly take remedial steps for your complete satisfaction . Our company Oriscon Biotech (I) Pvt Ltd is an ideal organisation to work and the selection is made purely on merit . The recruitment and selection is the major function of the human resource department and recruitment process is the first step towards creating the competitive strength and the strategic advantage for the organisations. Recruitment process involves a systematic procedure from sourcing the candidates to arranging and conducting the interviews and requires many resources and time.
Considering the facts that your company has already reimbursed 14% dividend for year ended (2009-10) to all the Promoters/Members according to their actual investments , besides that the share value of Rs. 10 increases to Rs. 50 in just four years and in the process the initial investment made by all of you have seen a quantum jump in terms of capital base & share price.
Now considering the financial structure of the Company I would like to state some of the drawbacks which we are still facing only due to non - fulfillment of the financial commitments by some of the Promoters despite repeated reminder. Considering the facts that their total amounts has already been deposited in the company by way of a loan amount from private financer at the time of their joining as a Promoter/Member in the Company.
As you also know that 'The time and tide waits for none', it is high time for you to think about the Company's need of hour and should make a strong contribution towards the clearance of your dues amount. For the simplicity of making calculation easy in terms of dues amount for such types of Members/Promoters as on date of financial year ( 2009-10 ),as on the end of 31st March 2010, the following method will apply:
No. of shares subscribed by Member 'A' -- 10,000 ( Ten Thousand).
'A' will have to pay a sum of Rs. 10,00,000:00 (Rs. Ten Lakhs)
Break - up is as follows:
Value of ten thousand shares = Rs. 5,00,000 :00 ( Rs. Five Lakhs as on 31st March ,10 )
Deposited amount as per original agreement = Rs. 5,00.000 :00 ( Rs. Five Lakh @ 12%interest )
Therefore, Member 'A' will have to pay the difference between Rs. Ten Lakhs and the actual amount paid by him as on 31st March 2010.
Before I end , I would like to thank all of you for your active participation and contributions
towards the cause of the Company.
Wishing you all the best,
Yours sincerely,
Dr. Amaresh Kumar Singh
(Director - Human Resources)
We will add it to our database for consideration of any
future position matching your interests and skills.
AN ARTICLE FROM
LEGAL KNOWLEDGE - DATA BASE CELL OF ORISCON BIOTECH (I) PVT LTD.
CASE STUDY CONSIDERING THE TRANSFER & FRESH ISSUE OF SHARE , PRICING OF SHARE BESIDES ACCEPTANCE OF DEPOSIT IN PRIVATE COMPANY .
A LOT OF QUESTION WHICH WAS ANSWERED IN THE RECENT PAST , HERE ONCE AGAIN WE ARE DISCUSSING THE LAW POINT WHICH SHOULD PROVIDE A GUIDELINE FOR ALL OF US :
Considering the case history of one of our Promoter who opted to withdraw his Membership by way of surrendering his share to the company and another case of further inclusion of three Promoters in the company .
[ As earlier in Para - 5 of Director's Report 2010 with the heading of RESTRUCTURING PROMOTER'S PROFILE : The company has received notice from one of Promoter Sri Rakesh Chandra Jha proposing the withdrawal from the members / Promoters list of the Company and a decision in his favour has been taken by the Board of Directors in this regard . Three new Promoters has been included in the financial year ( 2009 - 10 ). ]
WE ARE MENTIONING SOME OF IMPORTANT LAW POINT FOR YOUR KNOWLEDGE DATA.
Procedure for transfer of shares of private company
Generally articles contain the detailed provisions as regards the procedure for transfer of shares. Usually following steps shall be followed by a private company to give effect to the transfer of shares:—
(i) Transferor should give a notice in writing for his intention to transfer his share to the company.
(ii) The company in turn should notify to other members as regards the availability of shares and the price at which such share would be available to them.
(iii) Such price is generally determined by the directors or the auditors of the company.
(iv) The company should also intimate to the members, the time limit within which they should communicate their option to purchase shares on transfer.
If none of the members comes forward to purchase shares then the shares can be transferred to an outsider and the company will have no option, other than to accept the transfer.
It is to be noted that any transfer of shares to an outsider without complying with the procedure as specified in the articles for effecting transfer of shares will not be operative against the company. Even in the case where the procedure prescribed by the articles was not followed and such failure was not due to any fault on the part of the selling shareholder, the transfer to an outsider was held not to be effective.
Valuation for consideration for transfer of shares of a private company
Usually, Articles of a private company provides that the shares are to be sold under pre-emption clause at a fair price determined by directors or the company's auditors. It may also be provided that the fair price would be certified by the company's auditors.
If the pre-emption clause requires that the shares are required to be offered to other members at a price certified by the directors or auditors, the Courts are not in a position to enquire into the correctness of valuation, unless there is evidence that valuation was not correctly made. If the person who made the valuation has acted negligently and failed to take into account all the necessary factors for arriving at the value of shares, in such case the transferor may sue for damages to the person who made the valuation for difference between the value of the share, as computed by the valuer, and the real value of shares.
The Company Law Board/Tribunal ordinarily do not interfere with the valuation made by experts. Therefore, if valuation is challenged then there must be sufficient evidence in support to show that valuation is improper.
Transfer Deed is compulsory
Section 108 provides that a company shall not register a transfer of shares of, the company, unless a proper transfer deed in Form 7B as given in the Companies (Central Government's) General Rules and Forms, 1956 duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the company, alongwith the certificate relating to the shares, or if no such certificate is in existence, alongwith the letter of allotment of the shares.
Value of share transfer stamps to be affixed on the transfer deed
Stamp duty for transfer of shares is 25 paise for every Rs. 100 or part thereof of the value of shares as per Notification No. SO 130(E), dated 28-01-2004 issued by the Ministry of Finance, Department of Revenue, New Delhi.
Submission of instrument for transfer to the Company
Transfer Deed duly executed for the registration of a transfer of the shares or other interest of a member in a company may be submitted either by the transferor or by the transferee together with the relevant share certificates.
What is the validity period of share transfer deed for transfer of shares in physical mode ?
For Private Companies, I hope that 2 month will be the valid period. For example if the date of transfer is 1.09.2009, deed (Stamped) should not be prior to 1.07.2009
Deferred or founders shares it may issue
v A pure private company can issue shares of a type other than discussed earlier -section 90. Thus it may issue what are known as deferred shares. As deferred shares are normally held by promoters and directors of the company, they are usually called founders shares.
v They are usually of smaller denomination say 1 rupee each but they are given equal voting rights with equity shares of higher denomination.
v As per SEBI guidelines 2000, it is permissible to issue shares of any par value subject to the condition that the value should not be less than Re.1 or being other than the multiple of Re.
v A company may issue shares at par, premium or discount.
v The Companies Act, 1956 imposes conditions regulating the utilization of the amount collected as premium.
v 1.The premium cannot be treated as profit and cannot be distributed as dividend.
v 3. The amount of securities premium shall be kept with the same sanctity as share capital.
v 4.Securities Premium Account cannot be treated as free reserve
v 5.The amount in the securities premium account shall be used only for the purposes mentioned in section 78(2)
v Section 78(2)
v The amount in the securities premium account shall be used for
v To pay for unissued shares of the company to be issued to the members as fully paid bonus shares.
v To write off preliminary expenses of the company
v To write off expenses or the commission paid or discount allowed on any issue of shares or debentures of the company
v To provide for payment of premium payable on the redemption of redeemable preference shares or debentures.
Issue of shares at a discount
v Section 79 provides for certain conditions to be complied with
v Resolution in general meeting and sanction by company law board.
v The issue must be of a class of shares already issued
v The maximum rate of discount must not exceed 10 per cent or such higher rate as prescribed by Company Law Board.
v Not less than one year has, at the date of issue, elapsed since the date on which the company was entitled to commence business
v The shares to be issued at a discount must be issued within 2 months of the sanction by the Company Law Board or uch extended time as the Company Law Board may specify.
v Every prospectus at the date of issue must mention particulars of the discount allowed or the exact amount of discount that has been written off.
Sweat Equity Shares Section 79A
v These are equity shares issued by the company to employees or directors at a discount or for consideration other than cash. Sweat equity may be issued for providing technical know how or making intellectual property rights.
Conditions for sweat equity
v It must be of a class of shares already issued
v Resolution passed at the general meeting
v Resolution specifies number of shares, current market price, consideration and the employees or directors to whom the issue is made.
v Not less than one year has elapsed since the date on which the company was entitled to commence business
v Those sweat equity shares of a company which are listed in a stock exchange are issued in accordance with SEBI regulations (Section 79 A(1))
v For the purpose of this subsection, the expression a company means a company incorporated, registered and formed under this Act and includes its subsidiary company incorporated outside India.
v All limitations, restrictions and provisions relating to equity shares shall be applicable to such sweat equity shares issued under subsection (1) of section 79A (23).
v Employees Stock Option Plan means the option given to wholetime directors, officers or employees of a company which gives such directors,officers or employees the benefit or right to purchase or subscribe at a future date the securities offered by the company at a predetermined price Section 2(15A)
Employees Stock Purchase Plans
v An employee shall be eligibole to participate in the ESPS.
v 2.An employee who belongs to the promoter group shall not be eligible to participate in the ESPS.
v 3.A director who either by himself or through his relatives or through any body corporate directly or indirectly holds more than 10 per cent of the outstanding equity shares of the company shall not be eligible to participate in the ESPS.
v No ESPS shall be offered to employees of the company unless the shareholders approve of the same by a special resolution in the general meetings of the company.
v The explanatory statement to the notice shall specify the price and the number of shares as well as the appraisal process for eligibility of the employee.
v The number of shares may be different for different employees.
v The special resolution shall state that the company shall conform to the specified accounting policies.
v The company shall be free to determine price of the shares to be issued.
v There should be a lock-in period of minimum one year from the date of allotment.
v If the ESPS is part of a public issue and the shares are issued to employees at the same price as in the public issue,the shares issued under ESPS shall not be subject to lock-in.
v The Director's Report or Annexure thereto shall contain inter alia the following disclosureso
v Details of the number of shares issued in ESPS
v The price at which the shares are issued
v Employees wise details
v Diluted EPS pursuant to ESPS
v Consideration received
Bonus shares
v If the articles so provide a company may capitalize its profits by issuing fully paid up shares to its members thereby transferring the Reserve Account to Share Capital Account (Section 205(3))
v SEBI's guidelines regarding bonus shares
v NoThere should be a provision in the Articles of the company.
v If on account of the bonus issue, if the subscribed and paid up capital exceed the authorized share capital resolution should be passed at the general meeting to increase the authorized capital.
Rights Shares
v Further issue of share capital has to be first offered to the already existing shareholders
v Rights issue two years from the date of incorporation or one year from the IPO whichever is earlier.
v As per section 81 of the Companies Act, 1956 the directors of the company must first offer any further issue of share capital to the existing shareholders in proportion to their share holding as nearly as circumstances admit. The company must give notice to the existing shareholders about the option to take up additional shares. The shareholder must have at least fifteen days to decide whether to exercise the option or not. Unless the Articles otherwise provide, the directors must state in the notice of the offer the fact that the shareholder shall have the right to renounce the offer in whole or in part in favor of some other person.
Exceptions
v The company may by a special resolution passed at the general meeting decide that the directors need not offer further issue of equity share capital to the existing shareholders and that they may dispose them off in such manner as they may think expedient to do so.
v In Om Prakash Gupta and others v Hicks Thermometer and Another, 50000 equity shares of Rs.10 each were allotted to the Managing Director at par with a lock in period of 5 years. A resolution under Section 81(1A) had been duly passed for the purpose as was evident from the minutes of the general meeting.
v Held that in the explanatory statement it had been stated that the issue was being made to the Managing Director to meet the long term working capital needs of the company as the banks had expressed their inability to provide the same. Thus the legal requirements regarding further allotment of shares were complied with and hence the allotment was valid.
v But where it has been possible to obtain ordinary majority only, the directors may not offer the shares to the existing shareholders if permission is obtained from the Central Government.
v Section 81 does not apply to a private company.
v Section 81 does not apply to a scheme of conversion of loans or debentures into shares.
v Duty of the Transferor to transferee
v There may be pending transfers at a time when the rights issue takes place. This raises the question whether the transferor of an unregistered transfer in under any obligation towards his transferee to apply for rights shares for the benefit of the transferee. The Bombay High Court in the case of D.Venkatarama Reddy v Padampat Singhania held that it was the duty of the transferor to apply for the new shares and hold them in trust for the transferee. But the Supreme Court in the case of R.Mathalone v Bombay Life Insurance Company Limited observed that after the transfer form has been executed, the transferee cannot be held to undertakewher any additional financial burden in respect of the shares at the instance of the transferee where after the transfer of the shares but before the company regis ters the transfer the company offers rights shares to the members
LOAN FROM INDIVIDUALS/OUTSIDERS
v A private limited company can take unsecured loan from its shareholders, directors and their relatives and the same would not be covered under section 58A and other deposit provisions as such transaction is exempt by deposit rules 1975.
v But if a private company take unsecured loans from persons other than its shareholders, directors and their relatives the same would be considered as deposit under section 58A read with Companies (Acceptance of Public Deposit) Rules, 1975 and violation of section 3(1)(iii)(d).
Advantages of Private Company
v Private company enjoys a number of exemptions from the operation of the Act. It is by virtue of these exemptions that a private company has been described as an incorporated partnership combining the advantages of both elements the privacy of partnership and the permanence of corporate constitution. Ordinary companies are like bees working in glass hives. Private companies can keep there affairs to themselves. Private companies exist with the sanction and encouragement of the legislature enjoy there benediction some of the advantages are follows.
v In formation of required to person this facilitates is harmonious functioning and makes the choice of a private companies most suitably for friendly or family concerns.
v Public participation by issuing the prospectus is prohibited and therefore it has not to file a statement in lieu of prospectus and can commence business immediately after incorporation without having to obtain a certificate for the commencement of business.
v A private company is required to have two directors. All the directors can be given permanent appointment and be appointed by a single resolution.
v A private company has not to hold statutory meaning or file statutory report.
v It can issue new share to outsiders.
v Following are some of the privileges and exemptions of a private limited company.
v Minimum number is a member is two (7 in case of public companies).
v Prohibition of allotment of the shares or debentures in certain cases unless statement in lieu of prospectus has been delivered to the Registrar of Companies doesn't apply.
v Restriction contained in section 81 related to the rights issues of Shares don't apply. A special resolution to issue shares to non members is not required in case of private companies.
v Restriction contained in section 149 on commencement of business by a company doesn't apply. A private company doesn't need a separate certificate of commencement of business.
v Provision of section 165 relating to statutory meeting and submission of statutory report do not apply.
v One (if 7 or less members are present) or two members (if more than 7 member are present) in person at a meeting of the company can demand pole.
v Minimum number of directors is only two (3 in case of public company.