Issuance of new shares in a private limited

For increasing the share capital, the company has to pass a resolution. Then it has to be approved by the ROC. If you are not satisfied with the proceedings of the company, if you are not given chance to increase your share at par with other directors, you can make a complaint to the ROC.

Thanks for your reply. However, I have few more queries:

1. If both of the other directors (they constitute 2/3rd majority) vote for the resolution and I vote against it, then on what basis will ROC hear me?

2. Is it sufficient grounds to issue new shares to the two directors that they are working and not to me because I am not?

Thanks,

SSG

1. The resolution will be passed. Even then you can raise your objections in ROC.

2. If the resolution is not giving equal opportunity to you to increase your stake, you can make a complaint to ROC. There is no difference between working directors and non executive directors, in terms of shares. All the share holders are having equal rights. Directors are only executives running the company on behalf of the share holders. They can not do any act which is against the interest of the share holders, even if they are minority.

Check articles of association of the company- If they provide any pre-emptive rights to the existing shareholders then you may exercise that right to get the allotment of propotionate shares in further issue of capital.

Thanks for the replies. This is what Articles of Association has to say about Share Capital, can you please help me understand if these clauses will support the complaint to ROC:

1. The authorised share capital of the company is as mentioned in clause V of the memorandum of association of the company with power of the board of directors to sub-divide, consolidate and increase and with power from time to time, issue any shares of the original capital with and subject to any preferential, qualified or special rights, provileges or conditions as may be, thought fit, and upon the sub-division of shares apportion the right to participate in profits in any manner as between the shares resulting from sub-division and minimum paid up capital of the Company is Rs. 10 lac only.

2. The shares shall be under the control and disposal of the directors who may allot or otherwise dispose of the same to such persons and on such terms as the directors may think fit and to give any persons any shares whether at par or at a premium and for such consideration as the directors may think fit.

3. The directors may allot and issue shares in the capital of the company on full payment or part payment or for any property, goods or machinery supplied, sold or transferred or for services rendered to the company.

Thanks,

SSG

Sir,

You may contact to Practicing company  Secretary for this.. They will suggest you more information on the same... My one freind doing this .. U May  contact to him or me for more clarification...  His Name - Rushabh Desai - 9930430993, Mumbai

Thanks & Regard's

ADV. SANJAY KAPSE

9819395582

Is it mentioned in the companys act or any judgement that in a private company, the new shares are to be offered to the existing shareholders proportionate to their holdings?
 

Dear Friends,

There are many  judgements that in a private company, the new  new shares are to be offered to the existing shareholders proportionate to their holdings.A few cases are given below:
 
a)Praful M. Patel v Wonderweld Electrodes Pvt. Ltd. (2003) 115 Comp Cas 377: (2002) 2 CLC 630: (2003)56 CLA 7: (2002) 36 SCL 825(CLB)  .

b)Rashmi Seth v Chemon ( India) Pvt. Ltd. ( 1995) 82 Comp Cas 563: (1992) 3 CLJ 89: (1992) 9 CLA 89 (CLB)

c) V.B.Gopalakrishnan v New Theatres Carnatic Talkies (P) Ltd. (2001) 40 CLA 289: (2002) 111 Comp Cas 98

There is also a judgement of Hon'ble Supreme Court of India on this point which I have to find out.

It may be informed in such cases Petition is to be  filed with Company Law Board.

Regards,

Sunil K. Jain

Practising Company Secretary,

9810104162; skj13@rediffmail.com