Procedure For Rights Issue of Shares Under Companies Act 2013

     

Procedure For Rights Issue of Shares Under Companies Act 2013

Conditions for Rights Issue Rights Issue of Shares Under Companies Act 2013

The offer must be made by notification:

·        an indication of the number of outstanding shares and

·    a time limit of at least 15 and not more than 30 days from the date of the offer, during which the offer, if not accepted, will be deemed to have been declined

·    The offer is intended to include a right of renunciation, unless otherwise provided in the company articles; and

the above notice must contain a statement of this right;

•         If the offer is rejected by the shareholders

•        after the expiry of the period specified in the above referred notice, or

•      after receiving prior notice from the person to whom such notice has been sent that he declines to accept the offered shares,

•     The board of directors has the right to dispose of them in such manner which is not dis-advantageous to the shareholders and the company.

This notice must be sent by registered mail or express mail, by electronic means, by courier or by any other means, with confirmation of delivery to all existing shareholders at least three days before the opening of the issue.

Unless otherwise stated in the company's articles of association, directors must indicate in the notice of the offer of rights to shares that the shareholder also has the right to renounce the offer in whole or in part in favor of others. However, in the case of a private company, ninety per cent of the members of the private company have given their consent in writing or electronically, periods shorter than those specified in the said sub-clause or sub-section will apply.

Accordingly, the time limit for acceptance of the offer by the existing shareholders may be less than 15 days if 90% of the members of the private limited liability company have given their consent in writing or electronically.

If a shareholder has not withdrawn from the participation in favor of another person and has not accepted the shares, the Board of Directors may dispose of the shares so declined in a manner that would not be disadvantageous to shareholders and the company. Section 62 applies to all types of companies other than Nidhi companies.

Procedure For Rights Issue of Shares Under Companies Act 2013

1.  Check "Authorized Share Capital" and "Increase" if necessary:

Take the necessary measures to increase the authorized share capital of the company if the issue of rights is not within the total authorized share capital of the Company.

 

2. Convene a meeting of the Board of Directors [Pursuant to Section 173 and Secretary Standard-1]:

a. Send a notice of the meeting of the board of directors to all directors of the company at their addresses registered with the company at least 7 days before the date of the meeting of the board of directors. In case of urgent matters, a shorter notice may be sent.

b.  In the case of a listed company, notify the stock exchange at least two business days in advance of the board meeting.

c.   Attach the agenda, agenda notes, and draft resolution to the notification.

d. Conduct a meeting of the Board of Directors of the Company to consider the proposal to issue equity shares on rights basis .

e. Take the necessary decision of the Board of Directors on the issue of equity shares.

f.  Instruct the company secretary or any director to sign and file the appropriate form with the Registrar of Companies and take such actions as may be required to comply with the decisions of the Board.

g.  Prepare and send the draft minutes within 15 days from the end of the meeting of the Board of Directors to all the directors for comments.

3. Disclosure of information about the meeting of the Board  

In the case of a listed company, it must first disclose to the stock exchange (s) (where the shares are listed) of the Board meeting as soon as possible, but not later than 24 hours after the end of the Board meeting & update the same on the website of company within two working days.

4. Submit your letter of offer

The letter of offer is required be sent to all the existing equity shareholders through registered post/speed post/through electronic mode/courier or any other mode having proof of delivery to all the existing shareholders at least 3 days before the opening of the offer.

5. Submission of MGT-14 to ROC

For public companies, file Form MGT-14 with the Registrar of Companies within 30 days of the Board's decision , however, in the case of private companies, filing an MGT-14 is optional.

6. Obtaining consent/rejection from shareholders [Section 62 (1) (a) (iii)]

After the expiration of the period specified in the notice, or upon receipt of an earlier notice from the person to whom such notice has been sent that he refuses to accept the proposed shares, the Board of Directors may dispose of them in the way it deems appropriate, but not dis-advantageous to shareholders and the company

7. Convene a second Board of Directors meeting

Convene another board meeting following the procedure as mentioned in point no.2 to allot the shares.

8. Filing Form PAS-3 with ROC

Submit Form PAS-3 to the Registrar of Companies within 30 days of the allotment of shares, along with the fee and the following documents as an attachment:

9. Notice to the Depositary

In case allotted shares are dealt with in a depository, on allotment of such securities, the company is required to intimate the details of allotment of securities to depository immediately.

10. If the Certificate of Share is in physical form

Each share certificate must be in or as close to form no. SH.1 and must be issued within a period of two months from the date of allotment shares.

11. Application of stamp duty

Stamp duty is to be paid for every share certificate at the rates applicable in accordance with the provisions of the Indian Stamp Duty Act.

12. Keeping a register of shares

Details of each issued share certificate must be entered in the Register of Shareholders, together with the name (s) of the persons to whom it was issued, indicating the date of issue.

Related Posts :

Draft Letter of Offer For Rights Issue

Draft Board Resolution for Rights Issue of Shares

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