The aforesaid provisions of Sec. 81 shall not apply, that is, the further shares issued bv the company may be offered to persbns other than the existing equity shareholders, fit manner whatsoever.: (a) if a special resolution to that effect is passed by the company in general melting; or (6) where r o such special resolution is passed, if tl.epropasal to waive these pravisians is passed by a simple majority and the Central Gavernment approves it, on an application made by the Board of directors aforesaid'provisions of Sec.g I also shall not apply (a) to a pm ate company; or (6) to the mcrease of the subscribed capital of a company caused by the exercise of an option by the holder of debentures or maker of loans to convert such debentures or loans into shares in the company or to subscribe for shares in the company [Sec. 81 (3)].
that means, when a company issues debentures or raises loans on the express term that these debentures or loans may be converted into shares in the cdmpany at the option of the holder of debentures or maker of loan, then increase blithe subscribed capital of the company due to -such conversion will riot be deemed to be Further issue of Capital or Rights issue. However, this provision of Sac. 81 (3) will be valid provided i) the terms of issue of such tenns of such loans a provision for exercising such option and this has been approved by the Central Governnient pnor to the I ss such loams; amd (ii) where suchdebentures have not been issued or such loans have not been raised from the Govenunent opt any financial institution specified by the Govermrient, it has been approved by a special resolution passed by the company in General Meehng.
However, under We Public Companies (farms of issue of Debentures and Ra.sfilg of Loans with Option to Convert such Debentures or Loans into: Shales) Rnles, 1977, as modified by the Amcndment Rule, 1978, issue of such debentures or ra sing of such loans with option to cow ert into shares m the company shall not require the prior approval of the Central Government, if the terms of issue of such debentures or raising of such loans conforin to -he-folio MU: rig requlrCmeuts
(a) the debentures are issued or loans wised either tl2rougl2 private Proscription or through issue of prospectus to the public,
(by a financial institution either underwrites or subscnbes or sanctions issue in whole or1n part, and -
(c) tile terms provide for option to conmert such debentures or loans
shares in the comparty or to subscribe for shares therein, either at par or -remium not, exceeding 25 per cent of the face value of the shares.
INCORPORATION OF A COMPANY I 179