Companies can avoid Penalties if deedmed public issue to less than 200 person

By | December 3, 2015
(Last Updated On: December 3, 2015)

Securities and Exchange Board of India

Deemed Public Issues

Post April 01, 2014, any offer or allotment of securities shall be considered as public issue if the number of offerees / allottees exceeds 200 persons in a financial year under the Companies Act, 2013 as against the cap of 49 persons provided in the Companies Act, 1956. The Board has approved that in respect of the cases involving issuance of securities to more than 49 persons but up to 200 persons in a financial year, the companies may avoid penal action if they had provided the investors with an option to surrender the securities and get the refund amount at a price not less than the amount of subscription money paid along with 15% interest p.a. thereon. The exit may be provided by the company itself or by the promoters or by such persons as arranged by the company / promoters. The companies may adjust the amounts already paid to the allottees either as interest / dividend or otherwise from the amount of refund to be paid to the the investors. In case of transfer of securities by the original allottees, option for refund may be provided to the current holders of the securities.

The refunds made by the company following the option for refund exercised by investors would be certified by independent practicing Chartered Accountants / practicing Company Secretaries / practicing Cost Accountants.

The proposal has taken into account the interest of investors while recognising their right to stay invested in case they feel it is beneficial to them.

Source : Extract from SEBI Board Meeting   PR No. 283/2015 Dated 30.11.2015

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