Introduction:
It is of utmost importance that a firm, when allocating shares and securities, must file a return of allotment in e-Form PAS-3 to the Registrar on the Ministry of Corporate Affairs (MCA) portal, within thirty days, along with the full list of the beneficiaries to whom such shares and bonds have been issued.
The e-Form PAS-3 should be filed in consonance with Section 39(4) and Section 42(9) of the Companies Act, 2013 and Rule 12 and 14 of Companies (Prospectus and Securities) Rules, 2014.
Laws Regulating the e-Form PAS-3
Section 39 of the Companies Act, 2013, provides the provision for allotment of securities by the company. Sub-section 4 states that each time when an equity company makes an allocation of shares and securities, it must file a return of allocation with the Registrar in the method advised.
Section 42 of the Companies Act, provides the provision for the invitation of subscription of securities on private placement. Sub-section 9 pronounces that whenever a company or firm makes an allocation of securities, the return of allotment filed with the Registrar must also contain a full list of all the holders of such shares and bonds, as well as their full names, addresses, number of shares and bonds allocated and all other necessary information.
Rule 12 of Companies (Prospectus and Securities) Rules, 2014, additionally puts forth that a complete and accurate list of all the beneficiaries must be certified by the registrar according to the company records. If the securities, apart from the bonus shares, are awarded in whole or in part of the non-cash consideration, a copy of the contract, with an official seal should be attached to the PAS 3 form, as per which the securities have been jointly awarded in consonance to any sales contract relating to assets, properties, service contracts or other consideration. If the contract mentioned in sub-rule 3 of this Rule, is not abbreviated in writing, the company shall, together with Form PAS-3, provide the same details as the entire contract for which stamp duty is deferred, such as would be paid if the contract was abbreviated in writing. These details are to be regarded as documents under the Indian Stamp Act, 1899. The registrar, as a condition for submission of the data, may require the payment of stamp duty in accordance with Section 31 of the Indian Stamp Act, 1899. Along with the contract set forth in sub-rule (3) and sub-rule (4) of this Rule, the registered evaluator’s report on the valuation of the consideration must also be attached. A copy of a declaration passed at the general meeting authorizing the issuance of bonus shares and an evaluation report of the companies, other than the publicly listed companies, whose shares are listed on the approved stock exchange, shall also be attached to this form.
Rule 14 of Companies (Prospectus and Securities) Rules, 2014, states the rules relating to the procedure and conditions necessary to undertake a private placement offer. Section 42 of the Companies Act, 2013, defines private placement as invitations to subscribe to securities issued by a company to a specific group of people subject to the conditions specified in this section. In the case of a listed company, a private placement is usually called a “preferential issue.” Such private placement offers to make an invitation to subscribe to securities shall be made with the issuance of an offer letter in Form PAS-4 according to Rule 14 of the Companies (Prospectus and Securities) Rules, 2014 and section 42(1) of the Companies Act, 2013. Section 42(7) of the Act, states that the offer letter must contain a requisition form, sequentially numbered and specifically issued and send to the offeror within 30 days. However, no one other than the persons mentioned in the application may apply through such application and any application that does not meet the conditions shall be considered invalid.
Proposals for application to subscribe to securities has to be formerly sanctioned by the shareholders of the company by a special resolution of each proposal or invitation. Not more than 200 people shall be offered an invitation in a commercial year. However, invitations made to eligible institutional investors or an employee of the company will not be taken into consideration while calculating it within the limit of those 200 people. Payments for security applications are made from the securities applicant’s bank account and the company must keep a record of the bank account that received such application fees. Applications for securities held by co-holders must be paid from the bank account of the person whose name first appears on the application form. Section 42(3) of the Act, stipulates that distribution will be completed within 60 days from the date of receipt of the application payment, otherwise, it will be returned within 15 days after the expiration date of the term. Overdue repayments apply interest of 12% per annum. Unless the company has completed or withdrawn the previous private placement offer, it is limited to new offers of the same nature.
A corporate firm must keep a complete record of offers in the PAS-5 Form. However, copies of such records along with private placement offer letter in Form PAS-4 must be submitted for registration with fee as put forward in the Companies (Registration Offices and Fees) Rules, 2014. In the case of public companies, it shall be submitted with the Securities and Exchange Board of India (SEBI) within 30 days from the date of the issuance of the private placement offer letter. The Act also elucidates that any offer which does not comply with the provisions of Section 42 of the Companies Act, 2013, will be regarded as a public offering pursuant to those regulations. The minimum investment scale should not be lower than Rs.20000 of the securities’ face value.
The company which involves itself in an act of offering and receiving money in violation of Section 42, then such company shall be held responsible for such act with a penalty of the amount involved or two crore rupees, whichever is greater. The company shall also reimburse the totality of the sums to the subscriber within 30 days from the date on which the order applies the penalty. Thus, the capital increase is the most preferred approach allowing the company to choose to issue any type of securities to any person previously identified by the company and to guarantee investor transactions.
Information Required While Filing Form PAS-3
Issuance of Shares to the General Public
When a company declares to the Registrar of Companies (RoC) to issue shares to the general public, it must provide the following necessary information:
a) A list of allottees that includes name, address, occupation, and the number of securities allotted to each allottee;
b) If the securities are transferred for non-cash consideration, the company must present a copy (sealed) of the contract on which the securities are transferred;
c) If the contract is not simplified in writing, the company must provide details of the contract with stamp duty, which is the same as the applicable stamp tax when the contract is simplified in writing;
d) The report of the registered appraiser must be attached if the commission is received in kind;
e) If bonus shares are issued, a copy of the resolution passed at the general meeting of the shareholders authorizing the issuance of these shares must be attached;
f) If a non-listed company issues shares to a person authorized by a special resolution, it shall attach a report from a registered appraiser.
Issuance of Shares Through Private Placement
A company must attach the complete list of all the security holders containing the following information while filing return of allotment of securities:
a) Full name, address, Permanent Account Number (PAN) and e-mail ID of such security holder;
b) Category of securities held;
c) Date of allocation of securities;
d) The number of securities held, the face value and the amount paid for the said securities; if all securities are issued at a consideration other than cash, detailed information on the consideration received.
Final Date of Filing Form PAS-3
Issuance of Shares to the General Public
In this case, the firm should file a return of allotment of shares with the Registrar within 30 days in form PAS-3.
Issuance of Shares Through Private Placement
In this case, the firm should a return of allotment in form PAS-3 within 15 days of allotment, or,
| Manner of allotment | Time limit of filing PAS-3 |
| Allotment of shares to the general public | Within 30 days of allotment of shares |
| Allotment of shares through private placement | Within 15 days of allotment of shares |
Information to be Provided in Form PAS-3
The following information are required to be entered in form PAS-3:
i) Corporate Identification Number (CIN);
ii) Name of the company, registered office address, company’s email-ID which would be automatically captured based on CIN;
iii) Securities allotted payable in cash or for consideration other than cash: a) the total number of shares allotted (in case of cash, details of up to 5 allotments and in case of consideration other than cash, details of up to 3 allotments can be entered. However, if these number exceeds a separate form must be filled)
- Date of allocation of shares
- approval date of shareholders’ resolution
- Service Request Number (SRN) of Form No. MGT-14
- Allocation of preferred shares/ share capital with undifferentiated rights/ share capital with differentiated rights and obligations
- Thorough information about the allotment;
iv) Consideration details;
v) Bonus shares details;
vi) Private placement details;
vii) The capital structure of the company after the allocation is considered;
viii) The debt structure of the company after considering the allocation;
ix) If the complete list of allottees has been attached as an attachment;
Process of Filing Form PAS-3
The following process is to be followed to file the form –
i) the first step is to download the form from the Ministry of Corporate Affairs (MCA) portal;
ii) the next step is to enter the Corporate Identification Number (CIN), wherein the users can use the pre-fill feature to auto-fill the forms according to the information already gathered;
iii) the third step includes filling in the additional details required with respect to allotment including the firm’s capital structure;
iv) attaching the essential documents is the following step;
v) the form must be digitally signed for authorization before submission;
vi) the last step in the process is to upload the form with the payment of the required fees and with the generation of Service Request Number (SRN) and Challan which illustrates the details of the fees paid.
Attachments of Documents Necessary
i) List of allottees, it is compulsory to maintain a separate list for each allotment;
ii) Copy of the resolution passed by the Board of Directors or shareholders approving the distribution of shares, is mandatory in all cases.
iii) It is also mandatory to provide the valuation report from a certified appraiser if such a report is obtained from an appraiser.
iv) In cases where securities are allotted for consideration other than cash, a copy of the fully sealed contract with complete information must also be attached
v) In private placement cases, a complete record of all such proposals and receipts in Form PAS-5 must also be affixed
vi) In the issuance of bonus shares, a copy of the special resolution authorizing such issuance shall also be attached.
Fees Required to file PAS-3 form
The following table clearly elucidates the fee structure with respect to the share capital of the company –
| Nominal Share Capital | Fee Applicable |
| Less than 1,00,000 | Rs.200 |
| 1,00,000 to 4,99,999 | Rs.300 |
| 5,00,000 to 24,99,999 | Rs.400 |
| 25,00,000 to 99,99,999 | Rs.500 |
| 1,00,00,000 or more | Rs.1000 |
A flat fee of Rs.200 will be charged if the company does not have share capital.
Additional Fee to be Charged in Case of Delay
If a firm fails to file PAS-r within the stipulated time then an additional fee will be charged as follows –
| Period of delays | Additional Fee |
| Up to 30 days | 2 times of normal fees |
| More than 30 days and up to 60 days | 4 times of normal fees |
| More than 60 days and up to 90 days | 6 times of normal fees |
| More than 90 days and up to 180 days | 10 times of normal fees |
| More than 180 days and up to 270 days | 12 times of normal fees |
Consequences in Case of Non-Compliance of Provisions
Issuance of Shares to the General Public
According to Section 39(5) of the Companies Act, 2013, if a firm fails to file form PAS-3 within 30 days from the date of issuance, then, the defaulting firm and their agent will be subject to a fine of Rs.1,000 each day till the default continues or Rs.1,00,000, whichever is less.
Issuance of Shares Through Private Placement
Under Section 42(9) of the Companies Act, 2013, when a company fails to file PAS-3 within the time limit specified in sub-section 8 of this section, then the company, its promoters and directors will be fined Rs.1,000 per day till the non-repayment continues but such fine shall not exceed Rs.25 lakhs.
Conclusion
The capital stock refers to the assigned shares, that is, the part of the shares that anyone invests in the company by issuing to the shares of the company. The Companies Act, 2013 requires companies to inform the Registrar of Companies (“RoC”) of the distribution of shares by filling out the PAS-2 form. The regulations relating to the allocation of securities in public and private groups and the reporting regulations on the allocation of shares are set out in Section 39 and 42 of the Companies Act, 2013 read with rules 12 and 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014. And while allotting such securities, the company must file a return of allotment in e-form PAS-3 to the Registrar. Such a form is also governed by the above-mentioned regulations.
0 Comments