Board of directors of Clever Ltd., listed at Madras Stock Exchange, decides to issue equity shares to persons who are neither the existing shareholders nor the employees of the company. The articles of association of the

Section 62(1)(C) read with Rule 13 of Companies (Share capital and debentures) Rules 2014 deals with the issue of shares on preferential basis and provides that where at any time, a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares shall be offered to any persons, if it is authorised by a special resolution, whether or not those persons include the persons who are existing shareholders or employees, either for cash or for a consideration other than cash, if the price of such shares is determined by the valuation report of a registered valuer subject to such conditions as may be prescribed. Rule 13(2) provides that the issue should be authorized by Articles of Association. In the given case since the Articles are silent on the issue, first, the Article will have to be amended to confer upon the company power to carry out the Board's decision. Accordingly, the company has to pass a special resolution at a general meeting and file Form MGT-14 with the Registrar of Companies within 30 days of passing the Resolution. The issue on preferential basis should also comply with conditions laid down in section 42 of the Act. 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. As per Rule 13(2), where the preferential offer of shares 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 requirements therein. Regulation 73 of chapter VII of SEBI (ICDR) Regulations, 2009 provides that where specified securities are issued on a preferential basis to promoters, their relatives, associates and related entities for consideration other than cash, the valuation of the assets in consideration for which the equity shares are issued shall be done by an independent qualified valuer, which shall be submitted to the recognised stock exchanges where the equity shares of the issuer are listed.