Section 13: Issue of shares on preferential basis

Q: What does Section 13 of The Companies (Share Capital and Debentures) Rules, 2014 (TCSCDR) deal with?

Section 13 TCSCDR pertains to "Issue of shares on preferential basis". It is part of the The Companies (Share Capital and Debentures) Rules, 2014, a legislation enacted by the Parliament of India. Section 13 of The Companies (Share Capital and Debentures) Rules, 2014 (TCSCDR) governs issue of shares on preferential basis. As verified on 19 May 2026.

Q: Is Section 13 TCSCDR still in force?

Yes, Section 13 of the The Companies (Share Capital and Debentures) Rules, 2014 is currently in force across the Republic of India.

Q: What is धारा 13 TCSCDR?

धारा 13 TCSCDR is the Devanagari Hindi reference for Section 13 of the The Companies (Share Capital and Debentures) Rules, 2014. Section 13 of The Companies (Share Capital and Debentures) Rules, 2014 (TCSCDR) governs issue of shares on preferential basis. As verified on 19 May 2026.

Q: What is Dhara 13 TCSCDR?

Dhara 13 TCSCDR is the Roman Hindi reference for Section 13 of the The Companies (Share Capital and Debentures) Rules, 2014. "Dhara" means "Section" in Hindi. Section 13 of The Companies (Share Capital and Debentures) Rules, 2014 (TCSCDR) governs issue of shares on preferential basis. As verified on 19 May 2026.

Q: How to cite Section 13 of The Companies (Share Capital and Debentures) Rules, 2014?

Cite as: "Section 13, The Companies (Share Capital and Debentures) Rules, 2014 (TCSCDR)" in legal briefs. For academic writing, use the BlueBook format: The Companies (Share Capital and Debentures) Rules, 2014, § 13 (India).

Law on Tips Editorial Board

(1)

For the purposes of clause (c) of sub-section (1) of section 62, If authorised by a special resolution passed in a general meeting, shares may be issued by any company in any manner whatsoever including by way of a preferential offer, to any persons whether or not those persons include the persons referred to in clause (a) or clause (b) of sub-section (1) of section 62 and such issue on preferential basis should also comply with conditions laid down in section 42 of the Act:

[Provided that in case of any preferential offer made by a company to one or more existing members only, the provisions of sub-rule (1) and proviso to sub-rule (1) and proviso to sub-rule (3) of rule 14 of Companies (Prospectus and Allotment of Securities) Rules, 2014 shall not apply.] [Inserted by Notification No. 210(E), dated 18.3.2015 (w.e.f. 31.3.2014).]

[Provided further that] [Substituted by Notification No. 210(E), dated 18.3.2015 (w.e.f. 31.3.2014).] the price of shares to be issued on a preferential basis by a listed company shall not be required to be determined by the valuation report of a registered valuer.

Explanation.- For the purposes of this rule, (i) the expression 'Preferential Offer' means an issue of shares or other securities, by a company to any select person or group of persons on a preferential basis and does not include shares or other securities offered through a public issue, rights issue, employee stock option scheme, employee stock purchase scheme or an issue of sweat equity shares or bonus shares or depository receipts issued in a country outside India or foreign securities;

(ii) the expression, "shares or other securities " means equity shares, fully convertible debentures, partly convertible debentures or any other securities, which would be convertible into or exchanged with equity shares at a later date.

(2)

Where the preferential offer of shares or other securities is made by a company whose share or other securities are listed on a recognized stock exchange, such preferential offer shall be made in accordance with the provisions of the Act and regulations made by the Securities and Exchange Board, and if they are not listed, the preferential offer shall be made in accordance with the provisions of the Act and rules made hereunder and subject to compliance with the following requirements, namely:-

(a) the issue is authorised by its articles of association;

(b) the issue has been authorised by a special resolution of the members;

(d) The company shall make the following disclosures in the explanatory statement to be annexed to the notice of the general meeting pursuant to section 102 of the Act:

(e) the allotment of securities on a preferential basis made pursuant to the special resolution passed pursuant to sub-rule (2)(b) shall be completed within a period of twelve months from the date of passing of the special resolution.

(f) if the allotment of securities is not completed within twelve months from the date of passing of the special resolution, another special resolution shall be passed for the company to complete such allotment thereafter.

(g) the price of the shares or other securities to be issued on a preferential basis, either for cash or for consideration other than cash, shall be determined on the basis of valuation report of a registered valuer;

(h) [ where convertible securities are offered on a preferential basis with an option to apply for and get equity shares allotted, the price of the resultant shares pursuant to conversion shall be determined- [Substituted by Notification No. G.S.R. 704 (E), dated 19.7.2016 (w.e.f. 31.3.2014).]

(i) where shares or other securities are to be allotted for consideration other than cash, the valuation of such consideration shall be done by a registered valuer who shall submit a valuation report to the company giving justification for the valuation;

(j) where the preferential offer of shares is made for a non-cash consideration, such non-cash consideration shall be treated in the following manner in the books of account of the company -

(i) where the non-cash consideration takes the form of a depreciable or amortizable asset, it shall be carried to the balance sheet of the company in accordance with the accounting standards; or

(ii) where clause (i) is not applicable, it shall be expensed as provided in the accounting standards.