A rights issue under Section 62(1)(a) of the Companies Act, 2013 allows a company to increase its paid-up share capital by offering new shares to existing shareholders in proportion to their current holdings. The process involves preparing a detailed Letter of Offer specifying entitlement, renunciation rights, timelines, and consequences of non-acceptance, followed by creation of a shareholder list and convening a Board Meeting to approve the issue, fix the record date, and determine pricing. After filing applicable forms (such as MGT-14, where required), the Letter of Offer must be dispatched at least three days before the issue opens. Shareholders may accept, decline, apply for additional shares, or renounce their rights. The Board then allots shares through another meeting, prepares the list of allottees, files PAS-3, issues share certificates, and updates the Register of Members. Strict adherence to statutory timelines ensures a valid and legally compliant rights issue.
INCREASE OF PAID UP SHARE CAPITAL THROUGH RIGHT ISSUE AS PER SECTION 62(1) OF THE COMPANIES ACT, 2013.
A way through which a company raises additional funds, by giving invitation to existing shareholders to purchase new shares in the Company.
| S. No. | Particulars | Additional requirements | Time Limit |
| i. | Prepare draft Letter of Offer | *A statement of right to renounce.
*Offer specifies the no. of shares offered and confirms the duration for which offer is open. *Clause regarding non-acceptance of offer would be deemed to be denial of offer. |
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| ii. | Prepare a list of existing shareholders | *Ascertain their entitlement. | |
| iii. | Conduct Board Meeting for passing BR for Right Issue of Share and approval of LOO | *Board Resolution for Right Issue of Shares.
*For approval of offer letter. *Fixing record date, price of equity shares and the ratio for right issue. |
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| iv. | MGT-14 * | *Private Company is exempt. | Within 30 days of Board Resolution |
| v. | Dispatch LOO | *Along with Share application form and renunciation form.
*Delivery proof is required. |
At least 3 days before opening of issue. |
| vi. | Open offer | Offer can be of less than 15 days in case of private company if consent in writing of 90% or more Shareholders is obtained | For Minimum 7 days (as amended w.e.f. 01.04.2021 insertion of Rule 12A and Maximum 30 days |
| vii. | Acceptance of offer | Receive share application forms and Share application money (before the closure of offer)
* No separate bank account is required, Shareholders can deposit money in company’s’ a/c through e- mode. |
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| viii. | Conduct BM | *Ascertaining the no. of shares to be allotted.
*Pass a BR for allotment of shares. *Giving authority to issue the Share Certificates to allotees. *Giving authority to make necessary entries in the register of members. *Authorizing 2 directors and/or one more person for signature on share certificates. |
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| ix. | List of Allotees | *Containing name, address, occupation, PAN of the allottee and no. of securities allotted to allottee.
*List shall be certified by the signatory of PAS-3. |
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| x. | MGT-14 | *Exemption for private companies. (List of allotees and copy of BR) | Within 30 days of passing BR |
| xi. | Allotment of shares | Within 60 days of
receiving application |
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| xii. | PAS-3 39(4) | Return of allotment List of allotees and Board Resolution Optional (Bank Statement and proof of dispatch) |
Within 30 days of allotment of securities |
| xiii. | Issue of Share Certificates | Within 2 months of allotment | |
| xiv. | Entry in Register of Members as per Section 88(1) | MGT-1 | Within 7 days after BOD approve allotment |
Draft Board Resolution 1
CERTIFIED COPY OF RESOLUTION PASSED IN THE BOARD MEETING OF DIRECTORS
OF_______ LIMITED HELD ON_______ DAY OF_______ , 2023 AT THE REGISTERED OFFICE AT .
“RESOLVED THAT pursuant to the provisions of Section 62 of the Companies Act, 2013 read with the Companies (Share Capital and Debenture) Rules, 2014, consent of the Board be and is hereby accorded to the Company to issue ______ (No. of Shares) equity shares of Rs. 10 each (hereinafter referred to as new shares) of an aggregate nominal value of Rs. (nominal value), for (cash or consideration other than cash) to the shareholders, such issue to be made on the following terms and conditions:-
1) The issue of shares will be made in the proportion of one new share for every one Equity Share held on__ (Date of Board Meeting).
2) The said offer to the members shall be made by an offer letter which shall indicate the number of shares held by each member and the number of shares to which each is entitled as rights shares, the value per share and the total amount due in case the offer of shares is accepted in full.
3) The aforesaid offer shall be valid upto the MAXIMUM 30 DAYS , and includes a right exercisable by the person to whom the aforesaid offer being made to renounce the new shares offered to him in favour of any other person.
4) The offer after the expiry of the MAXIMUM 30 DAYS FROM MEETING or on receipt of earlier intimation from the person(s) to whom such notice was given that he declines to accept the new shares offered, the Board of Directors of the company be authorized to dispose of unsubscribed part of the new shares in such manner as they think most beneficial to the company.
5) The Equity Shares so issued shall upon allotment have the same rights of voting as the existing equity shares and be treated for all other purposes pari-passu with the existing equity shares of the Company and that the equity shares so allotted during the financial year shall be entitled to dividend, if any, proportionately in the year of the allotment of these shares.
6) Non-acceptance of offer would be deemed as denial of offer.
7) Share Certificates shall be issued to those to whom the further new shares are allotted within the time prescribed in the Companies Act, 2013.
RESOLVED FURTHER THAT the Board of Directors be and is hereby authorized to take all steps to implement the above resolutions, finalize and issue the letter of offer of rights and take all actions in connections with the further issue and allotment of shares to the members and others where applicable.”
Certified to be True Copy
For________ Limited
_________(Name of Director)
DIN:_________
Draft Board Resolution 2
CERTIFIED COPY OF RESOLUTION PASSED IN THE BOARD MEETING OF DIRECTORS OF______ LIMITED HELD ON DAY OF ____, 2023 AT THE REGISTERED OFFICE AT
“RESOLVED THAT in terms of authority given to the Board by the Articles of Association of the Company, Mr._______ (Name of shareholder) be and is hereby allotted and issued________ (No. of Equity Shares) equity shares each having a nominal value of Rs______ at a price of Rs. /- (Rupees______________ Only) per share, -in lieu of subscription monies of Rs. received from it as per the details given below:
| Name of Subscribers | No. of shares |
Dist. Nos. | Nominal Value |
Certificate No. | Folio No | |
| From | To | Rs. | ||||
| …………………………. | …………. | ……….. | …………. | ………… | ……………. | ……… |
RESOLVED FURTHER THAT the above equity shares so issued and allotted shall be subject to the provisions of the Memorandum and Articles of Association of the Company.
RESOLVED FURTHER THAT, a letter of allotment in relation to the above equity shares issued and allotted as aforesaid is issued in the name of shareholder by the Company.
RESOLVED FURTHER THAT name of directors of company or any other Director of the Company be and is hereby authorized to do all such acts, deeds and things as may be required to give effect to the above resolution, including issuance of duly stamped share certificates in relation to the above equity shares issued and allotted and do all other acts consequent to the issuance and allotment, including, in particular the payment of the requisite stamp duty, for issuing duly stamped share certificates, evidencing the allotment of equity shares and give such directions as may be necessary for giving effect to the aforesaid resolutions.”
Certified to be True Copy
For_________ Limited
_______(Name of Director)
DIN:__________________
LETTER OF OFFER
To,
Mr.__________(Name of shareholder)
________(Address of Shareholder)
Dear Shareholder,
Subject:To Offer and Issue _______(No. of equity shares) Equity Shares of Rs.10/- (Rupees Ten Only) each fully paid up at price of Rs. 10/- (Rupees Ten Only) per share aggregating to Rs. ______(nominal value) on right issue basis.
The Board of Directors at their meeting held on (Date of BM) have decided to issue _____ (No of shares) Equity Shares of Rs.10/- (Rupees Ten Only) each fully paid up at price of Rs. 10/- (Rupees Ten Only) per share aggregating to Rs.________ (nominal value) on right issue basis to the existing Shareholders of the Company on terms and conditions as stated below:
The new Equity Shares being offered, are subject to the terms and conditions of this ‘Offer Letter’ and the enclosed application form, share certificates to be issued and the applicable provisions of the Companies Act, 2013 and Rules made there under (including any modifications or re-enactments thereof for time being in force).
1. Entitlement Ratio: The new Equity Shares are being offered, at par of Rs. 10 per share, to the existing shareholders on rights basis in the proportion of their existing shareholding in the Company. The said shares are being offered to those shareholders whose name appears in the Register of Members of the Company on …… 2023 being the ‘Record Date’ fixed by the Board.
2. Face Value: Each such new Equity Share will have the face value of Rs. 10/-.
3. Issue Price: Each share shall be offered at an Issue Price of Rs. 10/-.
4. Terms of Payment: The full amount of Rs. 10/- per Equity Share is payable on application form.
5. Entitled shares: As Equity shareholder, you are entitled to Equity Shares.
6. Rights of Shareholders: The Equity Shares allotted as mentioned above shall carry voting rights.
7. Option available to the Equity Shareholders: If the Shareholder applies for an investment in this Rights Issue of Equity Shares, then he can:
-
-
- Apply for his Rights Entitlement of shares in full; or
- Apply for his Rights Entitlement of shares in part; or
- Apply for his Rights Entitlement of shares in part and renounce the other part of the Rights Issue of Equity Shares; or
- Apply for his Rights Entitlement in full and further apply for additional Equity Shares; or
- Renounce his Rights Entitlement in full;
-
8. Additional Rights Issue Equity Shares: You are eligible to apply for additional Equity Shares over and above your rights entitlement, provided that you are eligible to apply under applicable law and have applied for all the Equity Shares offered on rights basis, without renouncing them in whole or in part in favor of any other person(s). Applications for additional shares applied for shall be considered and allotment shall be made at the sole discretion of the Board.
The renouncee applying for all the Equity shares renounced in their favor may also apply for additional shares.
Where the number of additional Equity shares applied for exceeds the number available for allotment, the allotment would be made on a fair and equitable basis.
9. Renunciation: This issue includes a right exercisable by you to renounce the Equity Shares offered to you either in full or in part in favor of any other person(s).
10. Issue Schedule: The said offer shall remain open for a period of……. (…days in words) days as mentioned below (both the days inclusive):
| Issue opening date: | ………………………..,,2023 |
| Issue closing date: | ………………………..,, 2023 |
11. Last date for Application: The last date for submission to accept the offer is ,……… 2023 Mode of payment for Equity Shareholders / Applicants: Online fund transfer / cheque / demand draft, accompanying the application form should be crossed ‘A/c Payee only’ and drawn in favor of__________“ Limited”.
12. Share Certificates: The relative Share Certificates will be dispatched within 60 days from the date of allotment.
The Company is hereby pleased to offer the Equity Shares on right basis as per aforesaid terms and the form of acceptance/renunciation of the said offer is enclosed herewith.
Thanking you,
For__________ Limited
____________________
Director
DIN:___________
Date: …… 2023
Place:_______________
Enclosure:
1) Application Form
2) Renunciation Form
APPLICATION FORM
Last date for receipt of application: ………….., 2023
Date:___________
To,
The Directors
_______________Limited
Dear Sir,
Reference: Offer letter dated …………………., 2023, regarding the decision of Board of Directors in its meeting held on ……………….,2023 to issue______ (No. of Shares) Equity Shares of Rs.10/- (Rupees Ten Only) each fully paid up at price of Rs. 10/- (Rupees Ten Only) per share aggregating to Rs._________ (nominal value) on right issue basis in the ratio of paid-up equity share capital held by the existing shareholders on………… ,2023.
1. I/We agree to accept and apply for the “Equity Shares” allotted to me and to hold such shares upon the terms and conditions as laid down by the Board of Directors and subject to the provisions of the Companies Act, 2013 (to the extent notified), Memorandum & Articles of Association of the Company, and all the applicable laws, rules, and guidelines.
2. I/We agree to accept and apply for the “Equity Shares” issued to us and to hold such shares upon the terms and conditions as laid down by the Board of Directors and subject to the provisions of the Companies Act, 2013 (to the extent notified) Memorandum & Articles of Association of the Company, and all the applicable laws, rules, and guidelines.
3. I/We authorize you to place my name(s) on the register of members.
| 1. | Name of the Shareholder(s) | |
| 2. | Number of Share(s) held | |
| 3. | Number of Right Share(s) entitled | |
| 4. | Number of Share(s) applied for | |
| 5. | Amount payable with application by A/c payee cheque / DD in favor of the company /online bank transfer/cash |
FORM OF RENUNCIATION
Last date for receipt of application: ……… , 2023
Date:…………
To,
The Board of Directors
_______________Limited
I/We,__________ hereby renounce my right to acquire the equity shares offered by the company vide Letter of Offer dated …………., 2023, in favor of _____________.
Further, I have not made any application to the company for allotment of these equity shares in the name of company.
| 6. | Name of the Shareholder(s): | |
| 7. | Number of Share(s) held | |
| 8. | Number of Right Share(s) entitled | |
| 9. | Number of Share(s) renounced | |
| 10. | Name of Renouncee |
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