Summary: A rights issue under Section 62 of the Companies Act, 2013 allows companies to raise additional capital by offering new shares to existing shareholders. Under Section 62(1)(a)(i) read with Rule 12A of the Companies (Share Capital and Debentures) Rules, 2014, the offer period is generally required to remain open for at least 7 days and up to 30 days, while Section 62(2) requires the letter of offer to be dispatched at least 3 days before the issue opens. For Private Companies and specified IFSC Public Companies, a fast-track exemption is available where at least 90% of members provide explicit written or electronic consent. With such consent, the 3-day dispatch requirement may be reduced or waived and the 7-day minimum offer period may be shortened. The supplied material states that, with 90% shareholder consent, a private company can dispatch the letter of offer, open the rights issue, receive subscriptions, and close the issue on the same day.
Rights Issue: Standard Timelines & 90% Fast-Track Exemption
A rights issue allows a company to raise additional capital by offering new shares to its existing equity holders in proportion to their current holdings. Section 62(1)(a) of the Companies Act, 2013 authorizes this “pre-emptive” offer by a letter of offer to all existing shareholders. Under normal rules (as amended by Rule 12A of the Companies (Share Capital and Debentures) Rules, 2014), the offer period must be open for a minimum of 7 days and up to 30 days, and the offer letter must be dispatched at least 3 days before the issue opens. In other words, shareholders must get a few days’ notice before the rights issue opens, and then have at least one week (and at most one month) to subscribe. These timelines ensure shareholders have a fair opportunity to consider and respond to the offer.
However, a crucial fast-track exemption exists for private companies (and specified IFSC public companies). If at least 90% of the members consent in writing or electronically to the issue on shortened timelines, the statutory minimum periods can be waived. In effect, with 90% shareholder approval, a private company can dispatch the offer letter and open – and even close – the rights issue on the same day. The rest of the company law procedure (board approvals, dispatch, receipt of funds, allotment, filings) must still be followed, but the formal waiting periods (3-day notice and 7-day offer window) can be eliminated or reduced by agreement.
Standard Statutory Timelines: The Offer Window
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Minimum Offer Period (7 Days): Section 62(1)(a)(i) of the Act originally required that shareholders be given at least 15 days to consider a rights offer. However, the Companies (Share Capital and Debentures) Amendment Rules, 2019 (Rule 12A) reduced this floor to 7 days. This means that, once the offer letter is issued, shareholders must have at least one week to apply before the offer closes. (The 15-day reference in Section 62 is now read as “or such lesser number of days as may be prescribed”.)
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Maximum Offer Period (30 Days): Section 62(1)(a)(i) continues to cap the offer window at 30 days. In practice, this means the company must close the offer no later than one month from the opening date. If a shareholder does not respond within this period, the offer is treated as declined. Thus the offer window is legally bounded between 7 and 30 days.
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Advance Dispatch Period (3 Days): Section 62(2) requires that the letter of offer be dispatched to shareholders at least three days before the issue is opened. In other words, the notice announcing the rights offer must reach shareholders (by post, courier, email or any mode with proof of delivery) at least 3 days in advance. This “cooling-off” gap gives shareholders time to receive and review the offer letter. (Note: in 2020 MCA Circulars, listed companies were temporarily allowed to dispatch only electronically due to COVID-19, but the 3-day gap rule remained in force.)
In summary, under the standard rules the rights issue timeline looks like this:
- Board meeting and approval of rights issue terms.
- Dispatch offer letter to all shareholders.
- Wait 3 days.
- Open the offer – allow at least 7 days (and up to 30 days) for acceptance.
- Close the offer (on or before day 30).
- Allot shares and complete filings.
The 3-day dispatch requirement and 7-day minimum offer period are mandatory for normal cases. (Indeed, Rule 12A expressly states the acceptance period “shall be not less than seven days from the date of offer”.) These timelines ensure shareholders are notified and have adequate time.
Fast-Tracking Capital: The 90% Consent Exemption
To accommodate faster fundraising by closely-held companies, the Act includes a proviso: “[N]otwithstanding anything contained in [Section 62(1)(a)(i)] or Section 62(2), in case ninety percent of the members of a private company have given their consent in writing or electronic mode, the periods lesser than those specified… shall apply.”. In plain terms, if at least 90% of shareholders sign off on a shortened schedule, the company can cut or eliminate the usual waiting periods. This is commonly referred to as the “90% consent exemption” for rights issues.
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Streamlining via Shareholder Consent: For a private company (or a “specified IFSC public company”), if 90% of all members (i.e. owners, not just value) explicitly agree in writing or email to waive the timeline, the law allows a shorter notice and offer period. In practice, this means the company is no longer bound by the 3-day or 7-day minimums, provided the near-unanimous consent is obtained in advance. The consent must be explicit (written or electronic) – mere informal agreement is not sufficient.
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Reduction of Dispatch Window: Normally Section 62(2) makes the 3-day gap mandatory, but with 90% consent this period can be reduced or even waived. In other words, a private company can dispatch the offer letter and open the issue on the same day, if the shareholders have pre-approved this shortening. (One must still send the offer letter by an approved mode – email, courier, etc. – and retain proof of dispatch, but there is no need to wait three days.)
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Reduction of Offer Period: Likewise, the minimum offer window of 7 days can be curtailed under the 90% rule. Although Section 62 ordinarily fixes a floor of 7 days (after the 2019 amendment), the proviso effectively nullifies that floor when 90% consent is present. Private companies have indeed relied on this to open a rights issue for just a couple of days (or even one day). The 30-day maximum still applies, but in practice the issue can close far sooner.
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Practical Impact: With the 90% consent path, a rights issue can be extremely fast. For example, if 90% of shareholders agree, a private company can legally dispatch, open, accept subscriptions, and close the rights offer all on the same day. The law does not force the standard 3-day or 7-day gaps in such a case. Of course, the company must still ensure compliance with the procedure: obtaining board approval, sending the offer to all shareholders, receiving applications and funds, and allotting shares. The exemption only relaxes the timing – not the underlying process.
In practice, the 90% exemption is most useful where the shareholders are few and aligned (e.g. a family-owned private company) and need quick funding. As one corporate note observes: “if 90% of the members give their consent… a shorter notice period can be adopted [and] the offer period can also be reduced,” enabling closings within a day or two. (The same author cautions that board resolutions, dispatch of the letter, and all compliance steps must still be done properly.)
Practical Steps for a Same-Day Rights Issue
When using the 90% fast-track, the company should follow these steps (at each stage retaining usual documentation):
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Obtain Shareholder Consent: Circulate and record written/electronic consents from at least 90% of all members approving the shorter timeline. This can be done by signed letters or email confirmations, or by a written resolution, before the rights issue is launched.
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Board Approval: Call a Board meeting (or pass a written resolution) to fix the rights issue terms: entitlement ratio, issue price, record date, etc., and to authorize the dispatch of the letter of offer. Note that private companies need only an ordinary resolution and do not require a special resolution or filing Form MGT-14 for this purpose.
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Dispatch Offer Letter & Open Issue: On the planned issue date (T), send the letter of offer to all shareholders by email/courier simultaneously. Since 90% consent is already obtained, the company may declare the issue open the same day (skipping the 3-day wait). The offer letter should specify how long the offer will remain open (e.g. “until [time] on [date]”). If the company chooses, this opening and closing could even occur on date T itself.
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Accept Applications and Funds: On day T (or next day T+1), allow shareholders to submit their subscription (or renunciation) forms and to pay the application money (typically by wire transfer). In a typical same-day issue, accepting shareholders may have received their letters concurrently or rely on the pre-consent, so applications and payments are collected immediately.
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Close Offer & Allot Shares: Once subscriptions are in, the Board (in the same or a quick-following meeting) passes a resolution to allot the new shares to the subscribing shareholders. Because the short timelines are allowed, the Board can close the issue as soon as all formalities are done, even on day T or T+1.
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Post-Issue Compliance: File the return of allotment (Form PAS-3) with the ROC within 30 days of allotment. Record the allotment in the Register of Members and issue share certificates. (In a private company, no MGT-14 is required for the allotment resolution.) Importantly, proof of dispatch of the offer (courier receipts, emails sent) and proof of receipt of funds should be preserved.
Throughout, the normal procedural safeguards apply – proof of dispatch to each shareholder, clear offer terms, valid board minutes, etc. The “90% exemption” does not allow bypassing any formality (proof of delivery or payment is still needed). It merely removes the mandatory waiting periods. As a practical takeaway: with 90% shareholder alignment and all documentation in order, a private company can complete its entire rights issue in 1–2 days instead of the usual week or more.
Key Takeaways and Compliance Tips
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Use the 90% route only if truly needed: The 90% consent fast-track is available only to private companies (and specified IFSC public companies) that have all their filings up-to-date. MCA’s 2017 notification makes these relaxations applicable only if the private company has no defaults in ROC filings (annual return or financial statements).
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Document everything: Even if timelines are compressed, ensure board resolutions specifically note the 90% written consents and authorize the shorter offer. Dispatch the offer letter in the usual manner (email or courier) and keep delivery proofs. Collect subscription money in a bank account and record each payment.
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Observe the basics: Although the gap days can be removed, the rights offer must still be fair. The price and ratio should be correctly fixed; the rights should be offered pro rata to all equity shareholders; and renunciation rights (if any) should be available as per the Articles or Section 62(1)(a)(ii).
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File required forms: After allotment, file Form PAS-3 within 30 days, and update the share register. In private companies, no separate filing (MGT-14) is needed for the rights issue resolution.
In conclusion, the Companies Act provides a safe, statutory shortcut for private companies to expedite rights issues. By gathering near-unanimous shareholder consent upfront, a company can lawfully waive the normal 3‑day and 7‑day waits. This flexibility can dramatically shorten the funding cycle – but only if used carefully with full compliance. When done correctly, founders and boards gain the practical benefit of raising capital “faster, cleaner, and without avoidable compliance anxiety”, while still providing all shareholders a fair chance to participate.
