When a firm issues new stock, it cannot simply issue it to shareholders. All companies are expected to declare these allotments to the Registrar of Companies (ROC) to comply and be transparent in line with the Companies Act, 2013. Reporting is carried out under Form PAS-3, also known as the Return of Allotment. Filing of PAS-3 is a compulsory process that validates the issuance of shares, whether through a private placement, rights issue, ESOPs, or bonus shares.
The blog post provides information on the Return of Allotment (PAS-3), including its usage, filing process, deadline, required documents, fines, and other legal considerations under the Companies Act, 2013.
What is Form PAS-3?
Form PAS-3 is an electronic form that is submitted to the Ministry of Corporate Affairs (MCA) to report allotment of shares by a company. It is a formal statement to the ROC that new shares have been issued to investors or stockholders, and that the company’s paid-up share capital has increased or decreased as a result.
The filing makes sure that the Registrar keeps the shareholding pattern and capital structure of the company in proper record.
Legal Provision
The Companies Act, 2013, Section 39(4) states that all companies allotting shares should submit a return of allotment within the stipulated time. Rule 12 of the Companies (Prospectus and Allotment of Securities) Rules, 2014 continues to state that such returns should be disclosed in Form PAS-3 within 30 days of allotment.
Missing PAS-3 within the required time can be penalised and subject to non-compliance.
When is PAS-3 needed to be filed?
Form PAS-3 shall be submitted in the event of allotment of shares by any company, regardless of the method of allotment. Common situations include:
- Private Placement: In case of the issue of shares by the company to a particular group of investors, under Section 42.
- Rights Issue: An issue of shares is made to existing shareholders under Section 62(1)(a).
- Preferential Allotment: In cases where shares are sold to certain investors in accordance with section 62(1)(c).
- Employee Stock Option Plans (ESOPs): Employees who get shares allocated to them through an ESOP.
- Bonus Shares: This is where the existing shareholders are given shares without any payment.
- Conversion of Debentures or Loans: When convertible instruments are converted to equity shares.
In both of these situations, PAS-3 can be used to show that shares have been issued and the capital structure of the company is also revised.
Timeline for Filing PAS-3
Form PAS-3 should be filed by the company not later than 30 days after allotment of shares.
For example, when shares are allotted on 1st October, PAS-3 must be filed on or before 31st October.
This means that failure by the company to submit the form within this time will result in the company paying extra fees based on the delay, and failure to do so consistently will attract penalties under the Companies Act.
Information Required in Form PAS-3
When filing PAS-3, the company must give information on the allotment in detail. Key fields include:
- Corporate Identification Number (CIN) of the company.
- Type and number of securities to be allotted.
- Date of allotment and reception of consideration.
- Information of allottees, such as name, address, and number of shares allotted.
- Professional issues of shares.
- The allotment method is against or in consideration other than cash.
- Prerequisite: Capital structure before and after allotment.
Such information makes sure that the ROC possesses full and current information regarding the shareholding pattern of the company.
Documents Required to File PAS-3
The documents to be submitted with Form PAS-3 to access Form PAS-3 online on the MCA portal include the following:
- Board Resolution accepting the allotment of shares.
- List of Allottees’ names, addresses, allotted share numbers and consideration.
- Copy of PAS-5 (where it is privately placed only)
- Valuation Report by a registered valuer (where shares are issued on a preferential basis).
- Special Resolution (copy (where necessary)
- Share Application Money Receipt Proof.
- Articles of Association and Memorandum of Association (unless the capital clause has been altered)
It is necessary to upload the correct and full documents to prevent rejection of the filing.
Stepwise Process for PAS-3 Online Filing
Step 1: Hold a Board Meeting
The company should hold a Board Meeting where it is to decide on allotment of shares and to have a director or company secretary to file PAS-3.
Step 2: Allot Shares
Investors are allotted shares, and share certificates are issued in accordance with Section 56 of the Companies Act 2013.
Step 3: Prepare the List of Allottees
All the allottees should be listed with the amount of shares allotted and the consideration to be received.
Step 4: File Form PAS-3
Create an account in the MCA portal, complete the Form PAS-3 using the correct information, upload the required documents, and pay the required filing fees depending on the authorised capital of the company.
Step 5: Document and Amend Statutory Registers
After the approval of PAS-3, the company is to revise its Register of Members and provide share certificates within two months of allotment.
Sanctions against Non-Compliance
The penalty that may occur due to the failure to file PAS-3 within the stipulated time may be massive:
- The company and each defaulting officer shall be subject to a penalty of Rs. 1,000 per day of default, with a maximum of Rs. 1 00,000.
- Rule 12 of the Companies (Registration Offices and Fees) Rules, 2014 would also impose further fees for delays in filing.
- The recurring lack of compliance can invite regulatory attention and compromise the reputation of the company in the eyes of the investors and the government.
Therefore, PAS-3 should be submitted on time to ensure the statutory compliance and the absence of unwarranted sanctions.
Conclusion
The PAS-3 form is an important part of post-allocation compliance in companies in India. It verifies that the shares issued have been duly distributed and confirms that the company’s capital structure is duly registered. The timely submission of the Return of Allotment demonstrates corporate discipline, transparency, and compliance with the statutory norms under the Companies Act, 2013.
All companies (public and private) should ensure PAS-3s are filed on time within the established time frame to remain fully compliant and avoid fines.
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