Rights Issue of Shares

Meaning of Right Issue of Shares:

‘Right Issue’ refers to the act of giving shares to the existing shareholder or members of the company in proportion to their current shareholding via a letter of offer.

Section under its covers:

SECTION 62 of Companies Act 2013

The Provisions of Section 62 of Companies Act, 2013 bind all Private companies, public companies, listed and unlisted companies.

Procedure for Right Issue of Shares:

FOR PRIVATE COMPANY

Step 1: Issuance of the notice of Board Meeting at least seven days prior to the meeting as per the norms.

Step 2: Summon the Board meeting as Per SS 1 to pass a board resolution for approving “Letter of the offer” which should encompass the right of renunciation also.

Step 3: Send the Letter of the proposal to all the existing shareholders or members via registered post or speed post or electronic mode.

Step 4: Section 62 (2) states that the Letter of Offer/proposal must be posted at least 3 days earlier than the date of opening of the issue but after Notification dated 05.06.2015 Condition given that notice can be sent even lesser than three days before the issue opens when 90% of the members give their consent in writing or even by electronic mode.

The time period of Opening of subscription:  The offer shall remain valid for the subscription for at least fifteen days and at most thirty days but Notification date 05.06.2015 approves the offers to be kept open for less than fifteen days when 90% of the members give consent in writing or even by electronic mode.

Step 5: Accept Application Money (cash money is permitted here)

Step 6: Gather the Second Board Meeting after receiving application money.

1. Send Notice of Board Meeting minimum 7 days before the date of Board Meeting, attest Agenda and notes with Notice.

Step 7: File Pass within a 30 days’ period from the date of Allotment with CTC of Board Resolution for Allotment of Shares and List of Allottee.

Step 8: Issue Share Certificate

In the period of 2 Month from the date of Allotment

Allow two Directors in addition to One Authorized representative to Sign Share and Issue Share Certificate in SH-1.

Step 9: Obtain the Share stamp from the SDM Department within 30 days from the date of ISSUE.

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