[PUBLISHED IN THE GAZETTE OF INDIA EXTRAORDINARY PART II, SECTION 3, SUB-SECTION (i)] MINISTRY OF FINANCE (DEPARTMENT OF COMPANY AFFAIRS)

NOTIFICATION New Delhi, the 4th December, 2003 GSR_922(E). In exercise of the powers conferred by sub-section (1A) of section 81 of the Companies Act, 1956 read with section 642 of the said Act, the Central Government hereby makes the following rules, namely:1. Short title and commencement.(1) These rules may be called Unlisted Public Companies (Preferential Allotment) Rules, 2003 (2) They shall come into force on the date of their publication in the official gazette. 2. Applicability.These rules shall be applicable to all unlisted public companies in respect of preferential issue of equity shares, fully convertible debentures, partly convertible debentures or any other financial instruments, which would be convertible into or exchanged with equity shares at a later date. 3. Definitions.(1) preferential allotment means allotment of shares or any other instrument convertible into shares including hybrid instruments convertible into shares on preferential basis made pursuant to the provisions of subsection (1A) of section 81 of the Companies Act, 1956; Preferential Allotment includes issue of shares on preferential basis and/or through private placement made by a company in pursuance of a resolution passed under subsection (1A) of section 81 of the Companies Act, 1956 and issue of shares to the promoters and their relatives either in public issue or otherwise. Provided that the name, fathers name, address and occupation of persons to whom such allotment is proposed to be made shall be mentioned in the resolution passed by the members under that sub-section. Provided further that persons to whom such offer is proposed, shall not be more than forty-nine as per the first proviso to sub-section (3) of section 67 of the Companies Act, 1956.
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(2) Promoter means (a) (b) the person or persons who are in over-all control of the company; and the person or persons who hold themselves as promoters.

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Explanation: Where a promoter of a company is a body corporate, the promoters of that body corporate shall also be deemed to be promoters of the company. (3) control shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner. 4. Special Resolution.(1) No issue of shares or any other instruments convertible into shares including hybrids convertible into shares on a preferential basis can be made by a company unless authoriszed by its articles of association and unless a special resolution is passed by the members in a gGeneral mMeeting authoriszing the Board of Directors to make such issue. issue the same. (2) The special resolution referred to in sub-rule (1) shall be acted upon within a period of 12 months. 5. Pricing.Where warrants are issued on a preferential basis with an option to apply for and get the shares allotted, the issuing company shall determine before hand the price of the resultant shares. 6. Disclosures.The explanatory statement to the notice for the general meeting as required by section 173 of the Companies Act, 1956 shall contain the following particulars: (a) (b) (c) (d) (e) (f) the price or price band at which the allotment is proposed; the relevant date on the basis of which price has been arrived at; the object/s of the issue through preferential offer; the class or classes of persons to whom the allotment is proposed to be made; intention of promoters/directors/key management persons to subscribe to the offer; shareholding pattern of promoters and others classes of shares before and after the offer; (g) proposed time within which the allotment shall be completed; (h) whether a change in control is intended or expected.

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7. Audit Certificate.In case of every issue of shares/warrants/fully convertible debentures/partly convertible debentures or other financial instruments with conversion option, the statutory auditors of the issuing company / company secretary in practice shall certify that the issue of the said instruments is being made in accordance with these Rules. Such certificate shall be laid before the meeting of the shareholders convened to consider the proposed issue. 8. Invitation and allotment of securities:(1) No fresh offer or invitation shall be made unless the allotment with respect to any offer or invitation made earlier have been completed in terms of sub-section (9) of section 60B of the Companies Act, 1956. (2) Any offer or invitation not in compliance with sub-section (1A) of Section 81 read with sub-section (3) of section 67 of the said Act, shall be treated as a public offer and the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and the Securities and Exchange Board of India Act, 1992 (15 of 1992) shall be complied with. (3) All monies payable on subscription of securities shall be paid through cheque or demand draft or other banking channels but not by cash. (4) Any allotment of securities shall be completed within sixty days from the receipt of application money and in case the company is not able to allot the securities within the said period of sixty days, it shall repay the application money within fifteen days thereafter, failing which it will be required to be re-paid with interest at the rate of twelve percent per annum: Provided that the monies received on such application shall be kept in a separate bank account and shall not be utilised for any purpose other than (i) for adjustment against allotment of securities; or (ii) for the repayment of monies where the company is unable to allot securities. (5) No company offering securities shall release any public advertisements or utilise any media, marketing or distribution channels or agents to inform the public at large about such an offer. [File No: 1/4/2003-CL-V] Rajiv Mehrishi, Jt. Secretary

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