As per section 62(1) of the Companies Act, 2013: Where at any time, a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares shall be offered, to persons who, at the date of the offer, are holders of equity shares of the company in proportion, as nearly as circumstances admit, to the paid-up share capital on those shares by sending a letter of offer.

In layman language, Right issue is an invitation to the existing shareholders to purchase additional shares of the company in proportion to their existing shareholding of the company by sending the offer letter.

CONDITIONS FOR RIGHT ISSUE OF SHARES:

  • The offer letter shall specify the number of shares offered.
  • The offer period can be open for less than 15 days but not more than 30 days.
  • If the offer letter will not be accepted within given time span, it shall deemed to be the decline on the hand of shareholder.
  • After the expiry of the time specified in the notice aforesaid, or on receipt of earlier intimation from such person whom notice is given that he declines to accept the shares offered, the Board of Directors may dispose them in such manner which is not dis-advantageous to the shareholders and the company
  • Unless the article of the company otherwise provide, the offer letter shall contain the right of renunciation of shares. The shareholder can renounce his offered shares in favour of other person whether he is a shareholder of company or not.PROCEDURE FOR ISSUANCE OF SHARES:
STEPS PARTICULARS TIMELINE FORM TO BE FILED

1.

Prepare the draft offer of letter along with application form and renunciation letter. Also made the list of existing shareholders.

2.

Convene a Board Meeting with two Directors or by a majority of Directors:

  • To pass the Board Resolution for issuance of Right Issue of shares.
  • Fixation of Cut-off-date.
  • Finalize the price of shares
  • Finalize the draft offer letter.

Notice of BM- 7 days before

3.

Offer letter can be send through registered post or speed post or through electronic mode to the existing shareholders.

4.

Offer period shall be open after sending the offer letter.

At least 3 days before the opening of issue.

5.

Offer period is not being less than 15 days and not more than 30 days. However the limit of 15 days is now omitted, it can also remain open for less than 15 days.

Offer period can be less than 15 days but not more than 30 days

6.

File Form MGT 14 (Not applicable on Private Limited Company)

Within 30 days of Board resolution

MGT 14

7.

Receive the money from the shareholders

8.

Convene Board meeting after receiving money for passing the resolution for allotment of shares

Within 60 days from the date of receipt of application money

9.

File Form PAS 3 for allotment of shares.

Attachment:

  • Board Resolution
  • List of Allottee:

 

Within 30 days of Board resolution

PAS-3

10.

Make necessary entries in the register of members

Within 7 days from the date of allotment

MGT-1

11.

Issue Share Certificate in Form- SH-1

Within 2 months from the date of allotment

SH-1

Disclaimer: –The above mentioned article has been based on relevant provisions of Companies Act, 2013. Under no circumstance, the author shall not liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information.

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