COMPANIES (SHARE CAPITAL AND DEBENTURES) RULES, 2014

1 · Substituted by the Companies (Share Capital and Debentures) Amendment Rules, 2015, W.e.f. 18-3-2015. Prior to its substitution; rule 3 read as under "3. Application. The provisions of these rules shall apply to (a) all unlisted public companies; all private companies; and (c) listed companies,

1 · First proviso inserted by the Companies (Share Capital and Debentures) Third Amendment Rules, 2016, W.ef: 19-7-2016. 2: Substituted by the Companies (Share Capital and Debentures) Amendment Rules, 2014, W.e.f. 18-6-2014_ Prior to its substitution, Explanation read as under Explanation. For the purposes of this rule, it is hereby clarified that differential rights attached to such shares issued by any company under the provisions of Companies Act; 1956, shall continue till such rights are converted with the differential rights in accordance with the provisions of the Companies Act; 2013.'

3 · Substituted for 'issued under the seal of the company" by the Companies (Share Capital and Debentures) Second Amendment Rules; 2015, W.e.f: 29-5-2015. 4 Substituted by the Companies (Share Capital and Debentures) Second Amendment Rules, 2015, w.e.f. 29-5-2015. Prior to its substitution, clause (b) , as amended by the Companies (Share Capital and Debentures) Amendment Rules; 2015, w.e.f: 18-3-2015, read as under

5 · Substituted for "within fifteen days" by the Companies (Share Capital and Debentures) Amendment Rules, 2015, W.e.f. 18-3-2015.

1 · Second proviso inserted by the Companies (Share Capital and Debentures) Third Amendment Rules, 2016, W.e.f. 19-7-2016.

9 · Issue and redemption of preference shares: (1) A company having a share capital may, if so authorised by its articles, issue preference shares subject to the following conditions, namely: (a) the issue of such shares has been authorized by passing a special resolution in the general meeting of the company. (b) the company, at the time of such issue of preference shares, has no subsisting default in the redemption of preference shares issued either before Or after the commencement of this Act O in payment of dividend due O any preference shares (2) A company issuing preference shares shall set out in the resolution, particulars in respect of the following matters relating to such shares, namely: (a) the priority with respect to payment of dividend O repayment of capital vis-a-vis equity shares; the participation in surplus fund; the participation in surplus assets and profits, on winding-up which may remain after the entire capital has been repaid; the payment of dividend on cumulative Or non-cumulative basis; {0 the conversion of preference shares into equity shares; the voting rights; (g) the redemption of preference shares (3) The explanatory statement to be annexed to the notice of the general meeting pursuant to section 102 shall , inter alid, provide the complete material facts concerned with and relevant to the issue of such shares, including (a) the size of the issue and number of preference shares to be issued and nominal value of each share; (b) the nature of such shares i.e. cumulative or non-cumulative, participating or non- participating, convertible O non-convertible; the objectives of the issue; {8 the manner of issue of shares; the price at which such shares are proposed to be issued;

10 · Issue and redemption of preference shares by company in infrastructural projects A company engaged in the setting up and dealing with of infrastructural projects may issue preference shares for a period exceeding twenty years but not exceeding thirty years, subject to the redemption of a minimum ten per cent of such preference shares per year from the twenty first year onwards Or earlier, on proportionate basis, at the option of the preference shareholders.

11 · Instrument of transfer: (1) An instrument of transfer of securities held in physical form shall be in Form No.SH.4 and every instrument of transfer with the date of its execution specified thereon shall be delivered to the company within sixty days from the date of such execution. (2) In the case of a company not having share capital, provisions of sub-rule (1) shall apply as if the references therein to securities were references instead to the interest of the member in the company. (3) A company shall not register a transfer of partly paid shares, unless the company has given a notice in Form No. SH.S to the transferee and the transferee has given no objection to the transfer within two weeks from the date of receipt of notice.

12 · Issue of employee stock options A company, other than a listed company, which is not required to comply with Securities and Exchange Board of India Employee Stock Option Scheme Guidelines' shall not offer shares to its employees under a scheme of employees' stock option (hereinafter referred to as "Employees Stock Option Scheme") unless it complies with the following requirements, namely: (1) The issue of Employees Stock Option Scheme has been approved by the shareholders of the company by passing a special resolution. Explanation :For the purposes of clause (b) of sub-section (1) of section 62 and this rule 'Employee' means (a) a permanent employee of the company who has been working in India O outside India;

8 · Inserted by the Companies (Share Capital and Debentures) Amendment Rules, 2015,w.e.f. 18-3-2015. 8a Clause (c) omitted by the Companies (Share Capital and Debentures) Third Amendment Rules; 2016, w.e.f. 19-7-2016. Prior to its omission, said clause read as under (c) the securities allotted by way of preferential offer shall be made fully paid up at the time of their allotment. 8aa Clause (h) substituted by the Companies (Share Capital and Debentures) Third

1 · Inserted by the Companies (Share Capital and Debentures) Third Amendment Rules, 2016, W.e.f. 19-7-2016.

6 · (i)

1 · Proviso inserted by the Companies (Share Capital and Debentures) Amendment Rules; 2016, W.e.f: 10-3-2016. 2 Proviso inserted by the Companies (Share Capital and Debentures) Second Amendment Rules, 2016, W.e.f: 29-3-2016.

12 · [Provided further*that in case of any issue of debentures by a Government company which is fully secured by the guarantee given by the Central Government or one or more State Government or by both, the requirement for creation of charge under this sub-rule shall not apply_ Provided alsotthat in case of any loan taken by a subsidiary company from any bank or financial institution the charge or mortgage under this sub-rule may also be created on the properties or assets of the holding company:] (2) The company shall appoint debenture trustees under sub-section (5) of section 71, after complying with the following conditions, namely: (a) the names of the debenture trustees shall be stated in letter of offer inviting subscription for debentures and also in all the subsequent notices Or other communications sent to the debenture holders; (b) before the appointment of debenture trustee O trustees, a written consent shall be obtained from such debenture trustee or trustees proposed to be appointed and a statement to that effect shall appear in the letter of offer issued for inviting the subscription of the debentures; A person shall not be appointed as a debenture trustee, if he beneficially holds shares in the company; is a promoter, director or key - managerial personnel or any other officer Or an employee of the company O its holding, subsidiary O associate company; (iii) is beneficially entitled to moneys which are to be paid by the company otherwise than as remuneration payable to the debenture trustee; (iv) is indebted to the company, Or its subsidiary O its holding O associate company O & subsidiary of such holding company; has furnished any guarantee in respect of the principal debts secured by the debentures or interest thereon; has any pecuniary relationship with the company amounting to two per cent Or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year; (vii) is relative of any promoter O any person who is in the employment of the company as a director or key managerial personnel. d) the Board may fill any casual vacancy in the office of the trustee but while any such vacancy continues, the remaining trustee O trustees, if any, may act: Provided that where such vacancy is caused by the resignation of the debenture trustee, the vacancy shall only be filled with the written consent of the majority of the debenture holders. (e) any debenture trustee may be removed from office before the expiry of his term only if it is approved by the holders of not less than three fourth in value of the debentures outstanding, at their meeting: (3) It shall be the duty of every debenture trustee to (a) satisfy himself that the letter of offer does not contain any matter which is inconsistent with the terms of the issue of debentures or with the trust deed; (b) satisfy himself that the covenants in the trust deed are not prejudicial to the interest of the debenture holders; call for periodical status O performance reports from the company; (9 communicate promptly to the debenture holders defaults, if any, with regard to payment of interest or redemption of debentures and action taken by the trustee

10 · Substituted by the Companies (Share Capital and Debentures) Amendment Rules, 2014, W.e.f. 18-6-2014. Prior to its substitution; proviso read as under "Provided that company engaged in the setting up of infrastructure projects may issue secured debentures for a period exceeding ten years but not exceeding thirty years; 10a Sub-clause (iii) substituted by the Companies (Share Capital and Debentures) Third Amendment Rules, 2015, W.e.f. 6-11-2015. Prior to its substitution; said sub-clause read as under '(iii) 'Infrastructure Debt Fund Non-Banking Financial Companies' as defined in clause (b) of direction 3 of Infrastructure Debt Fund Non-Banking Financial Companies (Reserve Bank) Directions, 2011;' 11 Clause (b) substituted by the Companies (Share Capital and Debentures) Third Amendment Rules, 2016, w.e.f. 19-7-2016. Prior to its substitution, said clause read as under

16 · Substituted for "Form No: SH.14" by the Companies (Share Capital and Debentures) Amendment Rules, 2015, W.e.f. 18-3-2015.