A private limited company which is going to allot shares to a non-member in a rights issue.
if the shares are declined (Nobody applied for Rights Issue) the Board of Directors can dispose the rights shares to non-Members, please clarify
Thanks in advance
FIRST OF ALL I WANT TO CELAR HERE THAT RIGHT ISSUE IS ONLY FOR EXISTING SHARE HOLDERS. FOR PERSON OTHER THAN EXISTING SHAREHOLDERS YOU HAVE TO DO PREFERENTAIL ALLOTMENT OR PRIVATE PLACEMENT OF SHARES
Section 62 of the Companies Act, 2013 provides that whenever the further issue of the share is to be made, the same shall be first offered to the existing members of the company as it is the right of the existing members of the company to claim the benefit first. This further issue of shares is called as Right Issue.
In course of issuing shares to existing members, members have right to either subscribe or to renounce the right to existing member or non-member. A pre-announced time limit is given to members to elect any of the above option. Where within the time limit given, members do not subscribe or renounce the right to accept the shares, the board by conducting the Board Meeting, dispose of the shares in the manner which is not dis-advantageous to the shareholders and the company. Also, members may provide a notice for declining the share offered to them.
The provisions also states that the shares can be directly offered to non-members only after the consent of the Existing members, where at least 75% of the consent is to be accorded from the members.
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