Regarding right issue of shares

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 January 2015 please send me the whole procedure of right issue of share under new companies act with format such as letter of offer , list of allotees etc and also the ROC COMPLIANCE STAGE WISE.AND TOTAL COST INCURRED

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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09 January 2015 Procedure for issue of Rights shares
(i) Check whether the rights issue results in increase of authorized capital.
(ii) 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
(iii) Convene the general Meeting and obtain shareholders’ approval through special Resolution.
(iv) The 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 despatched 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.
(v) Check the copy of form SH 7, MGT14 filed with ROC.
(vi) 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.
(vii) Once the allotment is made, the company shall within 30 days of allotment, file with the Registrar a return of allotment in Form PAS.3, along with the fee as specified in Companies (Registration of Offices and Fees) Rules, 2014.
(viii) Deliver the share certificates of allotted shares within a period of 2 months from the date of allotment.
(ix) Intimate the details of allotment of shares to the Depository immediately on allotment of such shares
(x) In case of listed companies, the conditions prescribed under Chapter IV of SEBI (ICDR)Regulations 2009.

Querist : Anonymous

Querist : Anonymous (Querist)

10 January 2015 Here i want to know the procedure of right issue of shares in case of increment in paidup capital, so please clarify and also told THAT FOR WHICH REASON I HAS TO FILE MGT-14(SUBJECT OF MDT-14)

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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20 July 2025 Under the Companies Act, 2013, a rights issue of shares refers to offering existing shareholders the right to purchase additional shares in proportion to their existing holdings. If the rights issue leads to an increase in paid-up capital, certain additional procedural and ROC compliances apply.

Here’s a detailed breakdown of the stage-wise procedure, ROC filings, reasons for filing MGT-14, and sample formats, tailored to Private Limited Companies (assuming it's not a listed company).

✅ Rights Issue of Shares – Procedure (with increase in paid-up capital)

Step-by-Step Process:
📌 1. Check Authorized Capital
Check if the authorized share capital is sufficient.
If not, increase it by passing an Ordinary Resolution in a General Meeting and file Form SH-7 with ROC.
📌 2. Convene a Board Meeting
Approve the rights issue.
Fix the terms:
Number of shares
Price
Record date
Ratio of rights issue
Timeline
📌 3. Send Offer Letter [Section 62(1)(a)]
Draft and issue Letter of Offer to all eligible shareholders.
Send via registered post/speed post/email at least 3 days before opening the issue.
🕒 Validity:

Offer must be kept open for 15–30 days.
No response = deemed decline.
📌 4. Receive Application Money
Collect application money through banking channels.
📌 5. Convene Second Board Meeting
Approve allotment of shares.
Pass Board Resolution for allotment.
📌 6. File Return of Allotment – PAS-3
File Form PAS-3 with:
Board resolution
List of allottees
Valuation report (if applicable)
Letter of offer copy
Due: Within 30 days of allotment.
📌 7. Issue Share Certificates
Within 2 months of allotment (Form SH-1 if physical).
📌 8. Register Shareholders in Register of Members
Update records with details of new allotment.
🧾 Filing of MGT-14 – When & Why

✅ Applicable when:
Special resolution is passed to alter:
Authorized capital (if M/A altered)
AOA provisions
Or Board Resolution under Section 179(3) if the issue is large or involves borrowing.
🔹 Common reasons:

Approval of Rights Issue offer under Section 62(1)(a)
Alteration of capital clause (if required)
Borrowing funds for capital purposes (if applicable)
📄 Form MGT-14 is filed within 30 days of the resolution with:

Certified resolution copy
Notice & explanatory statement
Board minutes
📄 ROC Forms Summary:

Form Purpose When to File
SH-7 Increase in authorized capital Within 30 days of resolution
MGT-14 Filing special resolution/board resolution u/s 179 Within 30 days
PAS-3 Return of Allotment Within 30 days of allotment
💸 Approximate Costs Involved

Item Cost
Stamp paper for resolutions ₹100 – ₹500
ROC Filing Fees (SH-7, PAS-3, MGT-14) ₹1K – ₹5K (based on capital)
Professional Fees (if applicable) ₹5K – ₹25K
Share Certificate Printing ₹500 – ₹2k
📑 Sample Formats Available

I can provide editable sample formats for:

Letter of Offer
Board Resolution for Rights Issue
List of Allottees (Annexure for PAS-3)
MGT-14 resolution format
Share Certificate

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