Companies (Share Capital and Debentures) Amendment Rules, 2023

On January 21, 2023, the Ministry of Corporate Affairs (MCA) released the Companies (Share Capital and Debentures) Amendment Rules, 2023. These rules aim to further amend the Companies (Share Capital and Debentures) Rules 2014. The amendments primarily focus on revising various forms, such as SH-7, SH-8, SH-9, and others. These changes will become effective starting from January 23, 2023.

Companies (Share Capital and Debentures) Amendment Rules 2023 - Overview

The MCA has issued an update on the Companies (Share Capital and Debentures) Amendment Rules, 2023. This amendment seeks to introduce changes to the existing Companies (Share Capital and Debentures) Rules of 2014. It aims to refine and update the regulations on share capital and debentures in companies. One of the key focus areas of the amendment is the revision of various forms. Specifically, forms used in the corporate processes related to shared capital and debentures. Specifically, forms like SH-7, SH-8, SH-9, SH-11 and SH-14 have undergone modifications. Such forms play significant roles in notifying the Registrar of alterations in share capital (SH-7), issuing a letter of offer (SH-8), and making a declaration of solvency (SH-9), among other related activities. It is important to note that these amendment rules are effective on January 23, 2023. Companies operating in India must comply with the revised forms and associated requirements from that date onward. The amendments aim to promote greater transparency, compliance, and efficiency in share capital and debentures processes. The official notification is linked below for reference:

Forms SH-7, SH-8, SH-9, SH-11, and SH-15

Various corporate processes require the use of Forms SH-7, SH-8, SH-9, SH-11, and SH-15, particularly those related to shared capital and debentures.

Form SH-7: Notice to Registrar of any alteration of share capital

This form notifies the Registrar of Companies of any modifications or amendments to a company's shared capital structure. This guarantees that the Registrar stays informed of changes such as an increase or decrease in authorised shared capital, the issuance of additional shares, or any other connected changes.

Form SH-8: Letter of offer

Form SH-8 is a document that serves as a formal letter of offer to existing shareholders of a company. It comes into play when a firm proposes to offer its shareholders the chance to acquire more shares or debentures. The form contains details about the offer, including the terms, conditions, and procedures for exercising the right to buy additional securities.

Form SH-9: Declaration of Solvency

Form SH-9 is a declaration made by the directors of a company. It serves its purpose when a company is planning to conduct a buy-back of its own shares or debentures. This form requires the directors to declare that the company is solvent and capable of repurchasing its securities. They must declare so without adversely affecting its financial stability or obligations towards creditors.

Form SH-11: Return of buy-back

Form SH-11 is filed with the Registrar of Companies after the completion of a share buy-back by a company. It provides detailed information about the buy-back transaction. It includes the number and value of shares repurchased, the source of funds utilized and other relevant details. Listed companies must also submit this form to the Securities and Exchange Board of India (SEBI).

Form SH-15: Certificate of compliance in respect of the buy-back of securities

Previously used for buy-back transactions, Form SH-15 a certificate issued by a company's auditors or company secretary. This form helped certify that the buy-back of securities had complied with the relevant legal provisions and regulations. Form SH-15 has been omitted, indicating that the requirement for a separate certificate of compliance for buy-back transactions has been removed.

Amendments Made to Companies (Share Capital and Debentures) Amendment Rules 2023

The Companies (Share Capital and Debentures) Amendment Rules of 2023 has introduced revisions to specific forms used in various processes related to share capital and debentures in companies. These revisions aim to ensure compliance with applicable regulations and improve the transparency of such transactions.

Form SH-7:

The revised Form SH-7 now includes the following information:

Voting by members during the general meeting.
The option to appeal to the Tribunal against the Central Government's order.
Date of passing the Tribunal's order and its receipt.
The form is available to request the cancellation of unissued shares in one class and an increase in shares in another class. Additionally, a working for calculating ratios in case of conversion must accompany the form.

Form SH-8:

The updated Form SH-8 now includes the following details:

Instances of default in repayment of deposits, interest, debentures, preference shares, term loans, interest on term loans, and payment of dividends.
Instances of non-compliance with sections 92, 123, 127, and 129 of the Companies Act, 2013.
The requirement to submit information about the objective of the buyback and the expected capital structure before and after the buyback has been removed.
Attaching certain documents, such as details of company promoters, a notice of the general meeting, explanatory statement, audited financial statements, and buyback details of the last three years, is no longer necessary.

Form SH-9:

The updated Form SH-9 no longer requires attaching the board resolution and special resolution.

Form SH-11:

The amendment rules also specify the filing requirements after a buy-back is complete. Companies must submit Form SH-11 to the Registrar after completing the buy-back process. Listed companies and the Registrar must file this form with the Securities and Exchange Board of India (SEBI). The Securities and Exchange Board of India regulates the securities market in the country. The revised SH-11 now includes additional details, such as the source of the buyback and promoter-wise shareholding information. The previously necessary information about the stock exchanges where the company is listed and the appointed merchant banker is no longer necessary. Furthermore, submitting the balance sheet and the Certificate of compliance with buyback rules is no longer required.

Form SH-15:

The amendment rules have removed Form SH-15. This form previously pertained to the Certificate of Compliance regarding the buy-back of securities. This indicates that a separate certificate of compliance for buy-back transactions is no longer necessary. A specific change has been made to sub-rule 14 of Rule 17 to ensure compliance with the new rules. According to the revised sub-rule, a declaration must accompany Form SH-11. If applicable, two company directors, including the Managing Director, should sign the declaration. The declaration certifies that the buy-back of securities took place in line with the Act's provisions and the associated rules. Overall, the Companies (Share Capital and Debentures) Amendment Rules of 2023 introduced revisions to several forms and filing requirements related to share capital and debentures. These changes aim to enhance transparency, ensure compliance, and streamline the processes associated with such transactions in companies.