18 July 2024
Under CARO 2016 (Companies Auditor's Report Order), the reporting requirements for rights issue of shares by unlisted public companies are not explicitly covered under Clause 3(ix), which specifically mentions Initial Public Offerings (IPOs) and Further Public Offerings (FPOs).
Rights issue typically involves the issuance of shares to existing shareholders in proportion to their current holdings. Since CARO 2016 primarily focuses on reporting requirements related to financial statements, internal controls, and compliance with legal and regulatory requirements, the specific reporting of rights issue under IPOs and FPOs in Clause 3(ix) may not directly apply to unlisted public companies.
For rights issue by unlisted public companies, the reporting aspect in the auditor's report would generally be covered under other relevant clauses of CARO 2016, such as those pertaining to share capital, loans, deposits, etc. The key aspects auditors would typically review and report on include:
1. **Share Capital**: Any changes in the share capital structure due to rights issue should be appropriately disclosed and verified.
2. **Utilization of Funds**: If the rights issue proceeds are utilized, the auditor may need to verify if they are used for the stated purpose or if there are any deviations.
3. **Compliance with Company Law**: Ensuring that the rights issue complies with the provisions of the Companies Act, 2013, and other applicable laws.
Since rights issue is a significant corporate action that affects the financial structure of the company, auditors generally report on these matters under the broader scope of financial reporting and compliance. However, for specific reporting requirements under CARO 2016, auditors should consider the nature and materiality of the rights issue and report any relevant findings or deviations accordingly, even if it may not be directly mentioned under Clause 3(ix).
For precise guidance, it's advisable to consult with a qualified auditor or legal expert who can provide specific interpretation of CARO 2016 in relation to rights issues by unlisted public companies.
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