Right Issue of Shares

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Relevant Section: 62(1)(a)

To Check:

1.   That the Company is having sufficient Authorised share Capital. If not, first increase authorised share capital.

(Procedure for increase in Authorised Share Capital: http://www.click2compliance.in/2016/05/increase-in-authorised-capital.html)       

2.  Provisions in Articles of Association regarding Right issue of shares.

Process:

1.   To Prepare Letter of Offer and Application Form (no specific format given in Companies Act, 2013).

     Note:

   (a)  To keep Offer is open for Minimum -15 days, Maximum – 30 days.

 

In case of Private Company, if 90% of the Members have given its consent in writing or electronic mode than period less than 15 days shall apply.

Check provision of Articles of Association, if it provides period of not less 30 days, then alter the AOA first if you want restrict offer to 15 days.

    (b)  If offer is not accepted during offer period it is deemed that offer is declined.

    (c)  After expiry of time specified in Letter of offer or a receipt of earlier intimation from the shareholder that he declines to accept the shares offered, the board of Directors may dispose of shares in such manner which is not disadvantageous to the shareholders and the Company.

    (d) Unless, Articles of Association otherwise provide, the offer shall include right of member to renounce Rights offered to him in favour of any other person and letter of offer shall contain a statement of this renunciation.

  

2.   Hold Board meeting, pass Resolutions for:

         (a)  Approval of right issue.

         (b) Fixation of Record date.

         (c) Approval of Letter of Offer.

3.   To file with RoC e-Form MGT-14 for Board Resolution for issue of Securities within 30 days of passing of resolution. Attachment: Board Resolution– Private Company exempt.

4.   To send letter of offer through registered post or speed post or through electronic mode to all existing shareholders at least 3 days before opening of the Issue.

5.   To receive Application Form alongwith application money.

6.   To hold Board meeting (within 60 days of receipt of application money otherwise it will be treated as Deposit) and pass resolution for:

         (a)  Allotmentof Shares and issue of share certificate.

7.   To file e-Form PAS-3 (Return of Allotment) within 30 days of allotment. Attachment: Board Resolution, List of Allottee.

8.   To Issue Share Certificate within two months from date of allotment. (Section 56(4)(b)). 

    

     Share Certificate shall be signed by two directors (if composition of the Board permits, one of the two directors shall be director other than MD or WTD) and Company Secretary /Authorised Signatory.

9.   To make entries in:

         (a)  Register of Share Application and Allotment

         (b)  Register of Members and its Index. 

         (c)  Register of Directors & KMP and their shareholding (if Allotee is a Director of the Company)

10.  If allotment is made to Person who is Director in other Company, he needs to give declaration in Form MBP-1 to other Company in next Board Meeting regarding said Allotment of Shares.