What if your company requires funds/capital to transact any business activity?
The best and simplest way to introduced capital in the Company is by way of right issue of shares.
In simple language, Right issue is a right or a preference given to existing shareholders while issuing shares of the Company as compared to others.
Under this article, let’s go through the provisions related to Right issue of shares under Companies Act, 2013.
Applicable Section: Section 62 of the Companies Act, 2013.
♦ Decide on the following:
> Record Date: List of shareholders to whom such offer shall be made
> Draft letter of offer
> Period of offer
> Date of offer
♦ Issue notice of board meeting, as per Secretarial Standards-I (SS-I), to the Board of Directors along with agenda at least seven days before such meeting.
♦ Convene Board Meeting as scheduled to pass the resolution.
♦ Issue Letter of offer to shareholders, which shall contain the following:
> Number of shares offered
> Period of offer*
> Condition to consider declined, if not accepted within the time period
> Right to renounce
The letter of offer shall be sent, at least three days before the opening of the issue, through any of the following:
> Registered Post
> Speed Post
> Electronic Mode
*Limitation on period of offer- The offer shall remain open for a minimum period of 15 days and maximum for 30 days.
However in case of private company, the offer can be open for less than 15 days only if ninety percent of the members have given their consent in writing or in electronic mode.
♦ Receive money from shareholders on issuance of shares.
♦ Issue notice of board meeting for allotment of shares
♦ Convene board meeting for allotment of shares.
Allotment shall be made within 60 days of receipt of money.
♦ File Form PAS-3 within 30 days of the allotment of shares, pursuant to section 39(4) of the Companies Act, 2013 along with the attachments below:
> Certified True Copy of Board Resolution passed for allotment of shares;
> List of allottees;
> Optional attachment, if any.
♦ Issue share certificate to the allottees within 2 months from the date of allotment.
Note: Nidhi Companies are being exempted from complying with the provisions of Section 62.
What if shareholder chose to renounce?
The shareholder who chose to renounce shall intimate the Company about the same and mention the details of the person in whose favour the renunciation has been made.
The latter shall now follow the procedure to subscribe the shares and make payment for the same.
The Company then take note of the same and issue such shares to the person.