UNLISTED FIRMS CANNOT RAISE FUNDS FROM MORE THAN 49 PERSONS

The Ministry of Corporate Affairs (MCA) has tightened the norms contained in unlisted public companies (Preferential Allotment) Rules, 2003. Accordingly, hereafter no equity or quasi-equity or hybrid instruments such as convertible debentures can be issued without complying with the stringent norms prescribed. The Issue and Allotment is restricted to not more than 49 persons, special resolution at a general body meeting in favour of such allotment in terms of a specific provision to that effect in the Articles of Association (AOA) and mandatory payment for these instruments by cheque or Demand Draft (DD) by investors.