prpri Issue of shares to outsiders through Right Issue Issue of shares to outsiders through Right Issue

Relevant Provisions

-Section 62(1) (a) of the Companies Act, 2013

-Rule 12 and Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014

Right Issue

-Offering shares to existing members in proportion to their existing share holding.

-It is an easy and simple way to raise funds by Company.

Pre-emptive rights:

  • Rights given to existing shareholders.
  • In this rights issue, the offer is required to be made to the existing shareholders on pro-rata to their existing holdings. The shareholders who are offered may or may not subscribe to the same.
  • They may subscribe partly or fully the offer.
  • They have a power to renounce the shares offered to any other person who need not be an existing shareholder of the company.

Who can apply for rights issue?

1. The existing shareholders and

2. Renouncees can apply for the rights issue.

The rights are offered to the existing shareholders who are on the records of the company as on a cut-off date known as a record date fixed by the company. 

In case, the existing shareholders are not willing to subscribe to the rights, he/she can transfer or sell to outsiders. The buyers are known as renounces who are then eligible to apply for a rights issue.

Giving of such right of renunciation is mandatory: unless the Article of the company provide otherwise. The right must be specified in Letter of offer given to the Shareholder

STEP-WISE PROCEDURE OF RIGHT ISSUE OF SHARES TO OUTSIDERS

1. Company will decide the cutoff date. Companies will Prepare Draft Offer of Letter.

Issue Notice of Board Meeting to all the directors of company at least 7 days before the date of Board Meeting.

2. STEP-III Hold the Board Meeting: Pass Board Resolution for approval of offer letter. Authorize a director of company to issue Letter of Offer.

Company will give offer to existing shareholders under Right Issue of Shares. Offer will be open for minimum 15 days or maximum for 30 days. Company will give offer to existing shareholders under Right Issue of Shares. Shareholder will renounce the same in favour of any other person, who may not be member or director of the Company.

Shareholder will give a letter of renunciation in favour of renounce to Company.

3. File e-form MGT-14 with ROC; within 30 days from the date of passing of Resolution.(For private Company there is no requirement to file this form).

Attachments: CTC of Board Resolution.

4. Company will receive an acceptance letter and share application money from the Renounce

5. Call Board Meeting after receiving of Share application money. Issue Notice of Board Meeting to all the directors of company at least 7 days before the date of Board Meeting.

6. Hold the Board Meeting: Pass Board Resolution for allotment of shares (within 60 days of receiving of money).

7. File form with ROC: File PAS-3 with Registrar of Company.

Attachments:  List of Allottes, Board Resolution for allotment of Shares.

8. Issue Share Certificate: Pass Resolution for issue of Share Certificate in 2  months from the date of allotment of shares

FAQ’S 

Question-1 What happens if shares are not fully subscribed of the Private Company?

Answer- The unsubscribed portion of shares may be disposed of by the Board of directors of the Private Company.

Question-2 Is Valuation Report Required for the shares issued at Premium?

Answer- No

******

FORMAT OF FORM OF RENUNCIATION

PART-A (To be filled by Applicant)

To,

The Board of Directors,

NO. OF EQUITY SHARES RENOUNCED
IN FIGURES IN WORDS

Dear Sir/Ma’am,

  • Pursuant to your Letter of Offer, I hereby renounce my rights to the Equity Shares indicated above in favour of the person(s) accepting the same and signing below with respect to such Equity Shares [Form of Application by Renouncee(s)].
  • I have not made any application to the Company for the allotment of these Equity Shares in my/ name.

PART-B

(To be filled by Renouncee)

NUMBER OF EQUITY SHARES ACCEPTED AMOUNT PAYABLE ON APPLICATION RS.10/- PER EQUITY SHARE
Rs. in Figures Rs. in Words

In terms of your Letter of Offer , and pursuant to the Form of Renunciation signed by the above mentioned shareholder, I apply for allotment of Equity shares as indicated in above. In respect of these “Equity Shares”, I  enclose the amount specified above being the amount payable on application.

I agree to accept the “Equity Shares” allotted to me/us and to hold such “Equity Share” upon the terms and conditions of the said Letter of Offer and subject to the provisions of the Companies Act, 2013, as may be applicable, the Memorandum and Articles of Association of the Company and the Equity Shares to be issued in this regard. I authorise you to place my name(s) on the Register of Members.

I undertake that I will sign all such other documents and do all such acts, if any, necessary on my/ our part to enable me/us to be registered as the holders of the Equity Shares in respect of which this application may be accepted.

I also agree to accept the shares subject to laws, applicable guidelines, notifications and regulations relating to the issue of capital.

Details of Nominee : NOT APPLICABLE

Name: …………………………………………………………………………………………….………

Address: ……………………………………………………………………………………………….

If minor, Date of Birth: …………………………………………………………… …..

Name of the Guardian: ……………………………………………………………

TO BE FILLED BY THE RENOUNCEE(S) IN BLOCK LETTERS SIGNATURE(S)
Applicant

 

 

Full Name:  

 

 

Father’s/Husband’s Name:
Address:
Phone/Mobile No:
Email Address:
PAN:

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