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Things to remember for rights issue - Shortest note

FURTHER ISSUE OF SHARES- RIGHT ISSUE


What is Right Issue

A Right issue is an invitation to existing members to purchase additional shares of the Company.The shares are offered in proportion of their existing shareholding through letter of offer.The Company sets the time limit for the shareholder to buy the shares. 

Section 62 of Companies Act, 2013 contains provisions on “further issue of capital”, and enacts the principle of pre-emptive rights of members of a company to subscribe to new shares of the company.

PROCEDURE FOR ALLOTMENT OF RIGHT ISSUE OF SHARES- PRIVATE COMPANY:
a.Call a Board meeting by issue 7 days prior notice of meeting.
b.Approve right issue including “letter of offer” which shall include right of renunciation also.
c.Send offer letter to all existing members as on the date of offer (Through registered post or speed post or through electronic mode to all the existing share -holders .)
d.Receive acceptance/ renunciation/rejection of rights from members to whom offer has been sent and from persons in whose favour right is renounced.
e. Allotment  should be made within 60 days of receiving of application money, otherwise it will be  treated as deposits as per deposits rules of Companies Act 2013.
f.Call a Board meeting by issue of 7 days  prior  notice.
g.Approve allotment of shares by passing of Board Resolution along with issue of share certificates and authorize any two directors  for signing the share certificates.
h.Attach list of allottees in form PAS-3 mentioning Name, Address, Email id, PAN and number of securities allotted to each of the allottees and the list shall be certified by the Director authorised for the same.
i.Authorize any Director to file E-form PAS 3(Return of Allotment) to ROC within 15 days of passing of Resolution.
j.Issue share certificate.

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