Right issue of shares by listed company

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Jyothi Gangadhar Shetty (Querist)
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10 February 2017 I would like to understand Right Issue by a listed company under Companies Act 2013 with a step-by-step timeline for right issue including newspaper advertisement, opening of separate bank account with ASBA facility etc.

Rupesh Maheshwari

Rupesh Maheshwari (Expert)
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12 February 2017 Background- As per Section 62(1) of the Companies act, 2013 if the Company decides to issue fresh shares, these should be offered to existing shareholders in proportion to existing persons who are holders of equity shares.

‘Right Issue’ means offering shares to existing members in proportion to their existing share holding. The object is, of course, to ensure equitable distribution of Shares and the proportion of voting rights is not affected by issue of Fresh shares.

Only one pre-emptive right is to be given: It is now well settled that only one pre-emptive offer is to be made which is otherwise (should be ‘either’) to be acceptable or not at all. The existing shareholders are not to be given further pre-emptive rights in respect of those unaccepted shares. Even such first right can be waived or modified.

A private Company was not required to make right offer under the Companies Act, 1956. Even though earlier there was not provision, it was held that the issue must be bona fide and can’t be made with oblique motives.

STEP PROCEDURE OF RIGHT ISSUE OF SHARES

STEP-1

Company will decide the cutoff date.
Company wills Prepare Draft Offer of Letter.
STEP-II

Call Meeting of Board Director:

Issue Notice of Board Meeting to all the directors of company at least 7 days before the date of Board Meeting.
Attach Agenda of Board Meeting along with Notice.
Attach Notes of Agenda along with Agenda.
STEP-III

Hold the Board Meeting:

Check the quorum of Board Meeting.
Identify the Shareholders to whom you will issue shares.
Pass Board Resolution for approval of offer letter.
Authorize a director of company to issue Letter of Offer.
Letter of offer shall be dispatched through registered post or speed post or through electronic mode to all the existing share holders.
STEP-IV

Offer will be open at least after 3 days of issue of letter of offer.
Offer will be open for minimum 15 days or maximum for 30 days.
STEP-V

File Form with Registrar:

File MGT-14 with Registrar within 30 days of passing of Board Resolution.
Attachments:

CTC of Board Resolution for issue of letter of offer.
STEP-VI

Receive the Money from the Shareholders.
STEP-VII

Call Board Meeting after receiving of Share application money.

Issue Notice of Board Meeting to all the directors of company at least 7 days before the date of Board Meeting. [Section-173(3)]
Attach Agenda of Board Meeting along with Notice.
Attach Notes of Agenda along with Agenda.
STEP-VIII

Hold the Board Meeting:

Check the quorum of Board Meeting.
Present List of Allottes before the Meeting.
Pass Board Resolution for allotment of shares (within 60 days of receiving of money).
STEP-IX

File form with ROC:

File PAS-3 with Registrar of Company.
ATTACHMENTS:

List of Allottes.
Board Resolution for allotment of Shares.
STEP-XI

Issue Share Certificate:

Pass Resolution for issue of Share Certificate in Board Meeting.
Authorize to two directors and a authorize person to sign share certificate.
Issue Share Certificate in Form- SH-1 (As per Section-56 with in 2 (two) months from the date of allotment of shares.