Section 93 of Companies Act. Return to be filed with Registrar in case promoters ‘stake changes.

“ —Every listed company shall file a return in the prescribed form with the Registrar with respect to change in the number of shares held by promoters and top ten shareholders of such company, within fifteen days of such change.”

Can a company change the number of shares?

Yes, that a company who’s the listed company can make the changes in the number of shares hold by the promoters and top ten shareholder, if it required or the company boards decide to increase the number of the shares then, the such changes made by the company shall file a return for the changes in the number of shares hold by the promoters and top ten shareholders in the prescribed form for validating the such changes. Rule 13 of Companies (Management & Administration) Rules, 2014, which states the procedure for filing the return for such changes.

Rule 13 of Companies (Management & Administration) Rules with Section 93 of Companies Act

Every listed company must submit a return in Form No.MGT.10 to the Registrar within fifteen days of any change in the value or volume of shares, as well as any changes pertaining to a two percent or greater increase or decrease in the shareholding positions of the company’s promoters and top ten shareholders.

The word ‘change’ means that varying the change in the existing numbers of shares i.e. shareholding of each promoter or the change can be in top ten shareholders only. Here the change is not only increase else it can also decrease as per the requirements, the change can be made by 2% that 2% can be in increasing the existing value or else decreasing the existing value or adding more to the already holding shares by the promoters or in the top ten shareholders.

That from the date of making the such changes in the number of shares holds by the promoters or change in the top ten shareholders form that the within 15 days a return shall be filed in the prescribed form no. as per the Rule 13 of Companies (Management & Administration) Rules, 2014 to the Registrar for validating the such changes. If such changes made but no return has been filed to the Registrar then the changes made will not be valid and it’ll be count as inappropriate practise by the company. 

According to Section 93 of the Companies Act of 2013, any changes in the promoters’ and top ten shareholder categories’ aggregate ownership that rise or decrease by more than 2% must be reported to the ROC in Form MGT-10 within 15 days of the date of the change. However, on submitting such information in Form No. MGT-10, the following questions have shown up:- 

1. The following situations require the filing of this form (MGT-10): a) Any change of 2% or more in the promoters’ or top ten shareholders’ aggregate total shareholding, taking into account the company’s total share capital; OR b) Any change of 2% or more in the promoters’ and top ten shareholders’ individual holdings, taking into account the company’s total share capital.
2. The phrase “details of change in shareholding pattern” appears in Senior No. 5 requirements. Which specifics of the transformation will manifest is unclear. If there have been changes in the aggregate increase or decrease 2% or more among the top 10 shareholders and promoters.
3. “Details of shareholding position of promoters and top ten shareholders” is the criterion at Sr. No. 6. Which information needs to be submitted is unclear. It makes no sense to provide the identical information as needed under Sr. No. 5 again under this heading because it comprises the column of change of shareholding. on the information to be filled out on Form MGT10 on the adjustments that are being considered under Section 93 of the Companies Act of 2013, advice is requested.

Scrutinizing Section 93 of Companies Act

Additionally, in accordance with the Companies Management Rules of 2014, the MGT 10 format includes columns that support the percentage of share capital. The format specified by the rules includes columns for the percentage of shares both before and after the change. Nevertheless, these columns are absent in electronic form. Furthermore, Rule 13’s explanation was left out of the Amendment of July 24, 2014. The MCA toolbox still lists it as a Rule, though.

In the event of individual shareholding, MGT-10 has to be filed. Where there is a change, the specifics will be disclosed to shareholders.

Understanding the purpose behind making the ‘Change’

Assume that ABC Limited has a promoter ownership of 25%, which is less than the majority of businesses in its industry. That being said, the shareholding was 20% in the previous quarter and 23% in the most recent one. As a result, there is evidence of increasing promoter interest in the business. The viewpoint has now shifted. Even when the promoter holdings are small, the tendency toward growth may be a positive indicator for the business and a smart investment.

Conversely, suppose that a company’s promoter ownership now stands at 75%. For the aforementioned company, this is greater than the industry average. But it was 80% in the quarter before last and 85% in the one before that. This can be a hint of an impending issue.

Consequently, a complete picture of the company’s anticipated performance may not be provided by simply examining the promoter stake percentages. A more accurate picture can be obtained by quickly examining the trajectory of holdings’ growth or decline.

After the Companies Act, 2017 Amendment the section 93 of Companies Act, 2013 was omitted i.e. to file a return to the Registrar with respect of the change in the stake of the ownership in the company’s existing numbers.

FAQs

Q. MGT-10 to be filed in case of single transaction or cumulative in series of transaction?

Yes, even if the single transaction is made in lieu of either increase or decrease by 2% in existing shareholder scenario then Form MGT-10 is to be filed.

Q. What’s section 93 of Companies Act, 2013?

When any listed company make any changes in number of shares hold by promoters or top ten shareholder requires to file return.

Q. Whom to file the return for the ‘change’ in number of shares hold by promoter?

The return shall be filed to the company’s Registrar regarding such changes if made.

Q. What’s the time period for filing the return?

Within 15 days from the date of making such changes a return shall be filed to the Registrar.

Q. In which prescribe manner the return shall be filed?

According to the Rule 13 of Companies (Management & Administration) Rule, 2014 the return shall be filed in Form MGT-10.