Research Worksheet

Uploaded by

gparth247

We take content rights seriously. If you suspect this is your content, claim it here.

Available Formats

Download as PDF, TXT or read online on Scribd

0% found this document useful (0 votes)

14 views

Research Worksheet

Uploaded by

gparth247

We take content rights seriously. If you suspect this is your content, claim it here.

Available Formats

Download as PDF, TXT or read online on Scribd

You are on page 1/ 2

Issuance of Share Warrants by Startups in India: Detailed Procedure and Provisions

Yes, startups can issue share warrants. Share warrants are instruments that give the holder the right to purchase a
company's shares at a specific price within a certain period. In India, the issuance of share warrants by startups is
governed by the Companies Act, 2013, and the Securities and Exchange Board of India (SEBI) regulations for listed
companies. Below is a detailed procedure and the relevant provisions:

Understanding Share Warrants

A share warrant is a financial instrument issued by a company that gives the holder the right, but not the obligation, to
subscribe to the company’s equity shares at a predetermined price within a specified period.

Regulatory Framework

The Companies Act, 2013

Section 62(1)(c): This section allows a company to issue shares, including share warrants, to any person, whether or not
those persons are existing shareholders, provided that a special resolution is passed by the company in a general meeting.

Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014: This rule specifies the procedure for the
issuance of shares, including warrants, on a preferential basis.

SEBI Regulations (for listed companies)

SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018: These regulations must be followed when a
listed company issues share warrants.

Detailed Procedure for Issuance of Share Warrants

Step 1: Board Meeting

- Convene a board meeting to propose the issuance of share warrants.

- Pass a board resolution approving the issuance of share warrants and fixing the terms and conditions, including the
number of warrants, the exercise price, and the exercise period.

- Authorize the company secretary or a director to issue a notice for convening an extraordinary general meeting (EGM)
to seek shareholders' approval.

Step 2: Shareholders' Approval

- Issue a notice for the EGM along with an explanatory statement as per Section 102 of the Companies Act, 2013,
detailing the purpose of issuing share warrants, the terms of the issue, and the justification for the issue.

- Hold the EGM and pass a special resolution under Section 62(1)(c) and Rule 13 of the Companies (Share Capital and
Debentures) Rules, 2014.

Step 3: Filing with the Registrar of Companies (RoC)

- File Form MGT-14 with the RoC within 30 days of passing the special resolution, attaching the certified copy of the
special resolution and the explanatory statement.
Step 4: Allotment of Warrants

- After obtaining shareholders' approval and filing the necessary forms, the board of directors can allot the share warrants
to the proposed allottees.

- Ensure that the allotment is completed within 15 days from the date of passing the special resolution, or within 15 days
from the date of receipt of the necessary approvals from any regulatory authority or the Central Government, if
applicable.

Step 5: Subscription Money

- As per Rule 13(2)(d) of the Companies (Share Capital and Debentures) Rules, 2014, the company must receive at least
25% of the consideration amount upfront at the time of allotment of the warrants. The balance 75% of the consideration
amount must be paid at the time of exercising the option to subscribe to equity shares.

Step 6: Exercise of Warrants

- The warrant holders can exercise their option to convert the warrants into equity shares within the specified period by
paying the balance 75% of the consideration amount.

- Upon receipt of the balance consideration, the company will allot the corresponding number of equity shares and issue
share certificates to the warrant holders.