Right Issue – One of the method to further issue of share Capital in the Company.

Right issue is described under Section 62(1)(a) of Companies Act 2013 & it is one of the method to further issue of Share Capital in the Company.

In right issue the right is given to the existing equity shareholders of the Company to invest in further issue of Capital in the proportion of their existing holding. The Shareholders have the exclusive rights to either accept the offer, renounce the offer in favor of any other person or reject the offer.

PROCESS INVOLVED IN RIGHT ISSUE: – 

1. Rather Articles of Association authorize further issue of share capital through Right Issue if not alter the articles.

2. Rather Company has the adequate Authorized Share Capital if not file SH-7 and increase the same.

3. Issuance of Notice for Conducting Board meetings.

4. Conduct Board Meeting for issue of Share on Right Basis.

5. Issuance of offer Letter to the existing shareholders of the Company in the proportion of existing Shareholding. (Date of offer must be min 15 days & Maximum 30 days).

6. Existing Shareholder will either give Acceptance Letter along with application money or Renunciation letters within the period of offer letter.

7. File Form MGT-14 (within 30 days of passing the Resolution in Board Meeting of issue of shares on right basis) – (Exemption for Private Companies).

8. Issue of Notice for the next Board Meeting along with agenda regarding the allotment of shares to the shareholders who accepted the offer and have deposited the application money.

9. Whenever a company makes any allotment of shares or securities, it is required to file a return of allotment in e-Form PAS-3 to Registrar of Companies within (30) thirty days of such allotment including the complete list of allottees to whom the securities have been issued along with the Extract of the Board Meeting held for allotment of shares.

10. Filing of FC-GPR: The Company shall file the Form FC-GPR within the 30 days of the allotment of shares to the foreign investor.

11. Pass Resolution for issue of Share Certificate in Board Meeting & Authorize any two directors to sign share certificate.

12. Issue Share Certificate in Form- SH-1 (As per Section-56 with in 2 (two) months from the date of allotment of shares.

FREQUENTLY ASKED QUESTIONS 

Q.1 Rather the Existing Share holder can renounce its share in favor of any other person?

Yes, a shareholder can renounce his shares in favor of any other person.

Q.2 Before issue of share on right basis is valuation of Share is necessary?

Company have the right to issue the shares on par or premium as per the sole discretion of the Board. Therefore, no valuation is required.

Q.3 If the Shares are not accepted, renounced or rejected by the Shareholders, then what will the Company do in that case?

The Company can allot the same to any other person.

Q.4 Separate bank account of the Company is to be opened for receiving money of right issue?

There is no need of Opening a Separate Bank Account in case of Right Issue.

Author Bio

Qualification: CS
Company: Practising Company Secretary
Location: Delhi, New Delhi, IN
Member Since: 09 May 2020 | Total Posts: 2
The Author is a Company Secretary in practice dealing in Corporate, taxation & various registrations. He can be reached at Email- Csrohitkhatri@gmail.com or (M)+91-9716661654 View Full Profile

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