Shares allotment

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ARTHI (Querist)
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13 October 2015 Dear Friends / Experts,

Please guide me on the following, IF POSSIBLE:

A Private Limited Company has Two Directors and they are the Shareholders.

Company allotted Equity Shares at a face value of Rs.10/- per share to one of it’s Existing Shareholders.

Query

Is this Allotment called RIGHTS ISSUE or PRIVATE PLACEMENT?

Your reply, please..............

Thanks in advance for possible replies from all concerned.

Swati Sethi

Swati Sethi (Expert)
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14 October 2015 Dear Arthi,

You can consider it right issue or preferential issue. Procedure for both of these are different. You need to check the procedure to see whether it is a right issue or preferential allotment.

In Right issue, Only Board Resolution is required. As per Companies Act, existing shareholders have the first right on company and company can allot further shares to them by way of right issue. If existing shareholders are not interested or company wants to allot new shares to select group of persons (they may be existing shareholders too) then company can issue shares through preferential allotment.

Regards,
Swati Sethi
swati.sethi05@gmail.com

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