Procedure for issue of rights share

CS CHARU VINAYAK 
on 11 September 2019


The offer shall be made by notice:

  • specifying the number of shares offered and
  • limiting a time not being less than 15 days and not more than 30 days from the date of the offer within which the offer, if not accepted, shall be deemed to have been declined
  • The offer shall be deemed to include right of renunciation unless the articles of the company otherwise provide; and the notice referred above shall contain a statement of this right;
  • If the offer is rejected by the equity shareholders after the expiry of the time specified in the notice aforesaid, or
  • On receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered,
  • The Board of Directors may dispose of them in such manner which is not dis-advantageous to the shareholders and the company.
  • The said notice shall be dispatched through registered post or speed post or through electronic mode or courier or any other mode having proof of delivery to all the existing shareholders at least three days before the opening of the issue.
  • Unless the articles of the company otherwise provide, the directors must state in the notice of offer of rights shares the fact that the shareholder has also the right to renounce the offer in whole or in part, in favour of some other persons. However in case of a private company case ninety per cent of the members of a private company have given their consent in writing or in electronic mode, the periods lesser than those specified in the said sub-clause or subsection shall apply.

Accordingly, time limit for acceptance of offer by existing shareholders may be less than 15 days, if 90% of the members of a private limited company have given their consent either in writing or through electronic mode. If a shareholder has neither renounced in favour of another person nor accepted the shares, the Board of directors may dispose of the shares so declined in such manner which is not dis-advantageous to the shareholders and the company.

The provisions of section 62 are applicable to all types of companies except the Nidhi companies.

Procedure for issue of Right Shares

  • Check whether the rights issue results in increase of authorized capital.
  • If so call a board meeting to approve the notice of General meeting to pass necessary special resolutions at the general meeting to amend Memorandum/Articles of Association
  • Convene the general Meeting and obtain shareholders' approval through special Resolution.
  • he offer should be made by notice, specifying the number of shares offered and limiting a time not being less than fifteen days and not exceeding thirty days from the date of the offer within which the offer, if not accepted, shall be deemed to have been declined. This notice shall be dispatched through Registered post or speed post or through electronic mode to all the existing shareholders at least three days before the opening of the issue. However, in case of private companies in case 90% of members have given their consent in writing or in electronic mode, the lesser period than the specified period shall apply.
  • Check the copy of form SH7, MGT14 filed with ROC.
  • The shares declined by the existing shareholder can be disposed off by the company in manner which is not disadvantageous to the shareholders and the company.
  • Once the allotment is made, the company shall within 30 days of allotment, file with the Registrar are turn of allotment in Form PAS.3, along with the fee as specified in Companies (Registration of Offices and Fees) Rules, 2014.
  • Deliver the share certificates of allotted shares within a period of 2 months from the date of allotment.
  • Intimate the details of allotment of shares to the Depository immediately on allotment of such shares

DISCLAIMER: The article is based on the relevant provisions and as per the information existing at the time of the preparation. In no event I shall be liable for any direct and indirect result from this article. This is only a knowledge sharing initiative.

The author can be reached at vinayak.charu@gmail.com 


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