As per section 62 (1) (a) (i) of companies act, 2013 any company having a share capital proposes to increase its subscribed capital by issue of further shares, such shares shall be offered to a person who are the holders of equity shares of the company in proportion to the paid up share capital on those shares by sending a letter of offer made by notice specifying the number of shares offered and limiting a time not being less than fifteen days and not exceeding 30 days from the date of the offer, if not accepted shall be deemed to be declined.

As per Section 62 (2) of companies act, 2013 the notice should be dispatched through registered post or speed post or through electronic mode or courier or any other mode having proof of delivery to all the existing shareholders of the company atleast three days before the opening of the issue.

Due to the threat posed by COVID – 19 the companies are facing difficulties in sending the notice mentioned earlier through postal or courier services. To do all the compliances smoothly the SEBI circular (Number SEBI/HO/CFD/DIL2/CIR/P/2020/78) dated May 06, 2020 MCA has clarified that in case of listed companies who is opening the right issues upto 31st july, 2020 comply with the SEBI circular who is unable to dispatch the notices to their shareholders through registered post or speed post will not be considered as violation of this act.

Relaxation Relating To Procedural Matters – Issues And Listing In view of COVID – 19 pandemic and lockdown the SEBI has decided to given one time relaxation from strict enforcement of some regulations of SEBI related to right issues opening upto 31st July, 2020.

1. Service of the abridged letter of offer, application form and other issue material to shareholders will be dispatched by electronic transmission

Failure to adhere to modes of dispatch through registered post or speed post or courier services due to prevailing Covid-19 related conditions will not be treated as non-compliance during the said period.

However, the issuers shall publish the letter of offer, abridged letter of offer and application forms on the websites of the company, registrar, stock exchanges and the lead manager(s) to the rights issue.

Further, the issuer company along with lead manager(s) will take all relevant steps to reach out its shareholders through other means

2.  The issue related advertisement shall contain additional details as regards the manner in which the shareholders who have not been served notice electronically may apply.

The issuer may have the flexibility to publish the dispatch advertisement in additional newspapers, over and above those required in Regulation 84.

The Issuer shall make use of advertisements in television channels, radio, internet etc. to disseminate information relating to the application process.

Such advertisements can be in the form of crawlers/ tickers as well.

3.  In terms of SEBI circular dated January 22, 2020, SEBI introduced dematerialized rights entitlements (REs). Further, physical shareholders are required to provide their demat account details to Issuer/ Registrar to the Issue for credit of REs.

In view of COVID-19 pandemic and the lockdown measures undertaken by Central and State Governments, in case the physical shareholders who have not been able to open a demat account or are unable to communicate their demat details, in terms of clause 1.3.4 of SEBI circular dated January 22, 2020, to the issuer/ registrar for credit of REs within specified time, such physical shareholders may be allowed to submit their application subject to following conditions:

(a) Issuer along with lead manager(s) and other recognized intermediary shall institute a mechanism to allow physical shareholders to apply in the rights issue. Issuer along with lead manager(s) shall ensure to take adequate steps to communicate such a mechanism to physical shareholders before the opening of the issue.

(b) Such shareholder shall not be eligible to renounce their rights entitlements.

(c) Such physical shareholders shall receive shares, in respect of their application, only in demat mode. The lead managers may also be guided by Para 10 of the Form A Schedule V of the ICDR Regulations..

4.  In terms of Regulation 76 of the ICDR Regulations, an application for a rights issue shall be made only through ASBA facility

In view of the difficulties faced due to COVID-19 pandemic and the lockdown measures, and in order to ensure that all eligible shareholders are able to apply to rights issue during such times, the issuer shall along with lead manager(s) to the issue, the registrar, and other recognized intermediaries institute an optional mechanism (non- cash mode only) to accept the applications of the shareholders subject to ensuring that no third party payments shall be allowed in respect of any application.

5. In respect of mechanisms at point (iii) and (iv) above, the issuer along with Lead Manager shall ensure the following:

(a) The mechanism(s) shall only be an additional option and not a replacement of the existing process. As far as possible, attempts will be made to adhere to the existing prescribed framework.

(b) The mechanism(s) shall be transparent, robust and have adequate checks and balances. It should aim at facilitating subscription in an efficient manner without imposing any additional costs on investors. The issuer along with lead manager(s), and registrar shall satisfy themselves about the transparency, fairness and integrity of such mechanism.

(c) An FAQ, online dedicated investor helpdesk, and helpline shall be created by the issuer company along with lead manager(s) to guide investors in gaining familiarity with the application process and resolve difficulties faced by investors on priority basis.

(d) The issuer along with lead manager(s), registrar, and other recognized intermediaries (as incorporated in the mechanism) shall be responsible for all investor complaints.

DISCLAIMER: This article is for informational purposes only, but not promised or guaranteed, to be correct, complete, and up-to-date. and hereby disclaims any and all liability to any person for any loss or damage caused by errors or omissions, whether such errors or omissions result from negligence, accident or any other cause.

AUTHOR BIOGRAPHY: CS Richa Mittal, a workaholic in nature, is an associate member of the Institute of Company secretaries of India since 2016. She is an independent corporate consultant She possesses good professional experience for more than 4 years in secretarial field. She likes to research over different topics and pen them down. Recently love to post all the upcoming notification and circulars to keep the viewers updated. For any further query free to contact: E – mail: [email protected]

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Qualification: CS
Company: Richa Mittal & Associates
Location: Gurgaon, Haryana, India
Member Since: 18 May 2020 | Total Posts: 4

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April 2021