Rights issue

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Querist : Anonymous

Querist : Anonymous (Querist)

27 February 2015 Company has passed the Board Resolution for Rights issue on 30th october, 2013. till now company has not filed its Draft Letter of Offer to SEBI. but Company is planning to file Draft Letter of Offer in March 2015. so whether the resolution passed in 2013 stands invalid due to more than one year??

CS Divesh Goyal

CS Divesh Goyal (Expert)
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03 March 2015 Ypu have to file br also in mgt 14 with in 30 days

Querist : Anonymous

Querist : Anonymous (Querist)

03 March 2015 we have passed Board Resolution in October,2013, whether that stands invalid because of more than 1 year??

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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22 July 2025 Here’s a clear and precise answer to your question on the validity of a Board Resolution for a Rights Issue passed in October 2013, and whether it remains valid in March 2015.

❓ Question:
A Board Resolution approving a Rights Issue was passed on 30th October 2013, but the Draft Letter of Offer is planned to be filed only in March 2015 (i.e., after ~1.5 years). Does the resolution passed in 2013 become invalid after 1 year?

✅ Answer:
1. Board Resolution Validity Period:
There is no specific provision under the Companies Act, 1956 or 2013 that automatically invalidates a Board Resolution purely due to passage of time (like after one year), unless:

The resolution itself states a validity period, or

The delay makes the resolution irrelevant, outdated, or non-implementable due to changes in law or circumstances.

So, technically, the Board Resolution passed on 30th October 2013 does not automatically become invalid just because more than a year has passed.

However...

⚠️ Key Compliance Considerations:
a. Timeliness & Implementation
In general, regulatory and governance best practices expect that rights issue implementation should follow shortly after Board approval, especially if the resolution was passed with a specific timeline in mind (e.g., within the financial year).

A delay of 1.5 years may raise questions on:

Commercial validity of the proposal.

Whether the financial data and offer terms approved in 2013 still apply in 2015.

b. SEBI Regulations (for Listed Companies):
Under SEBI (ICDR) Regulations, the Draft Letter of Offer (DLOF) must be filed promptly after the Board approves the rights issue.

If delayed significantly, SEBI may require updated financials and re-validation by the Board.

In practice, such a long delay often requires fresh approval to avoid regulatory objections.

c. Filing of Board Resolution – MGT-14:
If the company is a public limited company, the resolution for issuing securities under Section 62(1)(a) must be filed in Form MGT-14 within 30 days under the Companies Act, 2013.

If this was not filed, there is non-compliance, and the company may be liable for penalty.

✅ Practical Recommendation:
Check if MGT-14 was filed within 30 days of the October 2013 resolution.

If not filed, file it with additional fees (if allowed) or pass a fresh Board Resolution.

Even if it was filed, considering the time elapsed, it is prudent to pass a new Board Resolution in March 2015:

This avoids compliance ambiguity.

Aligns the offer with updated financials and terms.

Prevents regulatory or legal challenges.

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