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Right issue for consideration other than cash

Yogina (PCS) (677 Points)

05 September 2016

Dear All, Can right issue be done for consideration other than cash for unlisted public companies? Thanks & Regards CS Yogina Kochar

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6 Replies

P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 06 September 2016

Issue for consideration other than cash is normally made at the request of a particular shareholder who either does not have sufficient cash or does not want to part with cash.

In the offer letter for rights issue what consideration would you ask for from all the shareholders? What about valuation? Can a company ask all shareholders to give consideration other than cash? What could be objective of such issue?

Yogina (PCS) (677 Points)
Replied 07 September 2016

Valuation is required for preferential issue. In right issue membes can renounce their right to others and final applicant can request for consideration other than cash, as they have given unsecured loan to company.Is there any restriction for this? I would also like to know if anyone has done it?

Thanks & Regards.

CS Yogina Kochar

P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 07 September 2016

Whether issuing shares against old unsecured loan will amount to consideration other than cash? I think erstwhile DCA in its old circular had clarified that it will amount to consideration in cash. In any case, to have clarity and avoid dispute, can you not exchange cheques for refund of loan by company and share application money by the applicant?

Yogina (PCS) (677 Points)
Replied 11 October 2016

Yes, I can be done. Thanks for valuable input.

Regards, Yogina.

CS Dhruv Swami (Student) (157 Points)
Replied 03 January 2018

Sir,

In case consideration is to be paid by way of transfer of Immovable Property. Can the company still go for a right issue?

Thanks & Regards

anshuman jain (student(CA IPCC)) (36 Points)
Replied 29 August 2020

In Right issue, valuation of shares to be issued is not required, but the valuation of consideration other than cash is definately required. please recheck