The relaxation will be applicable to entities that have raised funds by issuing securities to more than 49 persons, but up to 200 individuals in a financial year.
Under the Companies Act, 2013 -- whose most provisions came into effect from April 1, 2014 -- any offer or allotment of securities is considered as public issue if the number of allottees exceeds 200 persons in a financial year. This provision replaced the cap of 49 persons in the Companies Act, 1956.
Companies -- that have raised funds through issuance of securities to anywhere between 49 and 200 individuals -- can now avoid penal action subject to certain conditions.
This relaxation will be applicable in case "such firms provided the investors with an option to surrender the securities and get the refund amount at a price not less than the amount of subscription money paid along with 15 per annual interest per annum thereon".
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Such companies will be allowed to adjust the amounts already paid to the allottees either as interest, dividend or otherwise from the amount of refund to be paid to investors.
In the case of transfer of securities by the original allottees, option for refund may be provided to the current holders of the securities, the release said.
The repayment made by the company following the option for refund exercised by investors will have to be certified by independent practising chartered accountants, company secretaries or cost accountants.