Procedure for issuance of CCPS to a person residing outside India

S.No. Step Details Applicable law Timeline 1) Announcement of the board meeting The notice is sent to the members of the Board of Directors, stating the date, time and location of the meeting, together with the agenda of the meeting. Secretarial Standards -1 (SS-1). Not less than seven days before such meeting. 2) Board meeting to approve the issuance of CCPS and convene the General Meeting. Before approving the issuance of the CCPS, the Board will consider the following:

• The issuance of preference shares is regulated in the AOA.
• At the time of such an issue of preference shares, the company is no longer in default in the redemption of issued preference shares, nor in the payment of the dividend due on preference shares.

The board approves and adopts the following decision:

• Approval for issuance of CCPS.
• Compensation/price determined for CCPS as per the valuation report as per the FEM (non-debt) rules, as specified above.
• Finalization of the list of identified persons and the offer period for PROI.
• Determination of the day, date, time and place of the General Meeting for seeking approval from the Members for the proposed issue of shares.
• Approval of draft offer and application letter.
• Approval for opening a foreign currency account with an authorized dealer in India in accordance with the Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2016.

The meeting of the Council requires the following compliance:

1. Sending a notice of meeting stating the date and time of the meeting, together with the agenda of the meeting, together with not less than seven days before the date of such meeting.

2. The meeting of the Board of Directors must be held in compliance with the provisions of the Companies Act, 2013 and Secretarial Standards -1 (SS-1).

3. The quorum of the board meeting shall be 1/3 of the total strength of the board of directors or two directors, whichever is higher.

Board meeting:

• Section 173 and 174 and Secretarial Standards -1 (SS-1).

CCPS

• Section 42 Companies Act, 2013
• Rule 9, Companies (Share Capital and Debentures) Rules, 2014
• Currency Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019

3) Distribution of draft minutes to all directors The draft minutes of the board meeting will be distributed to all directors and they will confirm or comment on the draft minutes within seven days. Rule 3 of the Company Rules (Meetings of the Board of Directors and its powers), 2014 Within 15 days after the meeting via (registered mail/speed mail/email). 4) Completing minutes of consultations with the ROC Once the minutes have been approved by all directors, the MGT-14 form must be filed with the Registrar of Companies where the board resolution is passed.

• Section 117 r/w Section 179(3), Companies Act 2013
• Rule 14 Companies (Prospectus and Allotment of Securities), 2014.

Within 30 days of the adoption of such resolution, submitted together with the notice of such meeting. 5) Notice of general meeting Notification

• The notice of the General Meeting will be sent to all directors, accountants, shareholders and secretarial accountants of the company not less than twenty-one days before the general meeting.
• The notice shall be accompanied by an explanatory memorandum describing the CCPS in detail.

Explanatory statement

(a) the nature of such shares;

b) identified persons.

c) Draft offer cum application letter.

d) the size of the issue and the number of preference shares to be issued and the nominal value of each share;

e) details of the offer, including the date on which the decision of the Board of Directors was adopted;

f) the objectives of the issue;

g) the method of issuing shares;

h) the price at which the issue of such shares is proposed;

i) the basis on which the price was determined;

j) the terms of issue, including the conditions and dividend rate on each share, etc.;

k) the repayment terms, including the duration of the repayment, the repayment of shares at premium and, if the preference shares are convertible, the conversion conditions;

l) the mode and modes of salvation;

m) the current shareholder pattern of the company;

n) the expected dilution of the share capital upon conversion of preference shares.

(n)(l) the class or classes of persons to whom the allocation is proposed;

o) The pattern of share ownership before and after issuance;

p) the intention of promoters, directors or key management personnel to subscribe to the offer;

q) the proposed time within which the allocation will be completed;

r) the names of the proposed beneficiaries and the percentage of post-preferential offer capital they may hold;

s) any change in control of the company that would take place as a result of the preferential offer;

t) the number of persons to whom allocations on a preferential basis have already been made during the year, both in terms of number of securities and price;

Notification

• Section 101 and 102 Companies Act, 2013
• Secretarial Standards – 2 (SS-2)

Explanatory statement

a) Section 102 of the Companies Act, 2013

b) Rules 9 and 13 Companies (Share Capital and Debentures), 2014

c) Companies (Prospectus and Allotment of Securities) Rule 14, 2014.

Not less than 21 days before such meeting 6) Adoption of a special resolution for the issuance of ESOPs The shareholder will adopt a special resolution (the votes in favor of approving the issuance of CCPS to the PROI will amount to ¾ of the total votes).

The minutes of the resolution contain the following details:

(a) the priority with regard to the payment of dividends or the repayment of capital compared to ordinary shares;

(b) participation in the surplus fund;

(c) the participation in surplus assets and profits, in the event of liquidation, which may survive after the full capital has been repaid;

(d) the payment of dividends on a cumulative or non-cumulative basis.

e) the conversion of preference shares into ordinary shares.

f) voting rights;

(g) the repurchase of preference shares;

Sections 14, 55 and 114 (2) of the Companies Act 2013.

Rule 9(2) Share Capital and Debentures) Rules, 2014

7) Completing minutes of the general meeting with the ROC The MGT-14 form must be filed with the Registrar of Companies within 30 days of the passing of the special resolution amending the AOA, along with the specified documents:

• Certified, true copies of the special resolutions, together with explanatory notes;
• Copy of the notice sent to the members together with all attachments;

A printed copy of the board decision of the amended articles of association.

• Section 117 r/w Section 179(3), Companies Act 2013
• Rule 14 Companies (Prospectus and Allotment of Securities), 2014.

Within 30 days of the adoption of such resolution. 8) Distribution of private placement cum offer letter A letter of request for a private placement offer shall be in the form of an application in Form PAS-4, serially numbered and specifically addressed to the person to whom the offer is made, and shall be sent to him either in writing or electronically; Section 42 (3) Companies Act, 2013 and Rule 14 (3) Companies (Prospectus and Allotment of Securities) Rules, 2014 Within thirty days after registration of the name of the PROI. 9) Subscription request

• The PROI returns the PAS-4 together with the subscription fee for the CCPS.
• Such subscription money must be received in the separate bank account by cheque/draft or other banking means but not in cash.
• The PROI will make the deposits through banking channels or through its NRE/FCNR (B) accounts

• Section 42 (3) Companies Act, 2013
• Rule 6 and Schedule 7 Currency Management (Deposits) Regulations, 2016
• Currency Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019

10) Maintenance of the offers. The company maintains a complete record of the offers made to the PROI in form PAS-5 Rules 9 B and 14 (4) Companies (Prospectus and Allotment of Securities), 2014 11) CCPS allocation board meeting The Council approves the following:

• Assignment of CCPS: The Board assigns the CCPS to the PROI.
• The board is required to inform depot and RTA for crediting shares to the respective demat accounts of PROI.⁽⁴⁾

The meeting of the Board of Directors requires the following compliance:

1. Sending a notice of meeting stating the date and time of the meeting, together with the agenda of the meeting, together with not less than seven days before the date of such meeting.

2. The meeting of the Board of Directors must be held in compliance with the provisions of the Companies Act, 2013 and Secretarial Standards -1 (SS-1).

3. The quorum of the board meeting shall be 1/3 of the total strength of the board of directors or two directors, whichever is higher.

Board meeting:

Section 173 and 174 and Secretarial Standards -1 (SS-1).

CCPS

• Section 42 Companies Act, 2013
• Rule 9, Companies (Share Capital and Debentures) Rules, 2014
• Custodians Act, 1966

Within sixty days of receipt of the allocation money. 12) Implementation of the Private placement at the ROC – The return of allotment in Form PAS-3 must be filed with the Registrar of Companies along with the fees as provided in the Companies (Registration Offices and Fees) Rules, 2014 along with a complete list of all allottees with:

– the full name, address, permanent account number and email address of the relevant security holder;

– the class of securities held;

– the date of granting of the security;

-the number of securities held, the nominal value and the amount paid on such securities;

-The company cannot use the funds raised until they complete this step.

Section 42 Companies Act, 2013 and Rule 14 (6) Companies (Prospectus and Allotment of Securities) Rules, 2014 Within 15 days after allocation.

The entire appropriation process must be completed within twelve months of the adoption of the special resolution

13) Foreign Currency Gross Preliminary Return (FC-GPR) Form: The company has to fill the form FC-GPR as per its obligations under FEMA for issuance of equity securities (CCPS) to a person resident outside India, which will be treated as FDI. Currency Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 Not later than thirty days from the date of issuance of CCPS. 14) Maintaining a register of preference shares The Company will maintain and enter the details of the PROI to whom the preference shares have been allocated. Section 88, Companies Act 2013 and Rule 9 Companies (Shares and Debentures) Rule, 2014 15) Annual Return on Foreign Liabilities and Assets (FLA) Since the company will receive investment in the form of capital infusion, they have to file the FLA form with the Reserve Bank of India. Currency Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 On or before the 15th day of July each year.