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Can multiple rights issue of preference shares be carried out with one resolution?

Geronimo (Student) (22 Points)

08 February 2024

Interesting conundrum. Can multiple rights issue of preference shares be issued, with only one resolution being passed?

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2 Replies

sabyasachi mukherjee (27574 Points)
Replied 11 February 2024

Pls explain in more detail

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Yasaswi Gomes new (Finance ) (4514 Points)
Replied 23 February 2024

Certainly! Let’s explore the possibility of issuing multiple rights issues of preference shares with only one resolution being passed:

Rights Issue of Preference Shares:
- A rights issue allows existing shareholders to purchase additional shares at a predetermined price.
- Preference shares are a type of equity capital that provides certain preferential rights over ordinary shares.
Multiple Rights Issues:
- It is possible to issue multiple rights issues of preference shares using a single resolution.
- The key lies in the flexibility of the resolution and the specific details mentioned in it.
Special Resolution:
- The Companies Act, 2013, requires a special resolution for certain matters, including issuing preference shares.
- A special resolution is passed by a majority of not less than three-fourths of the shareholders present and voting.
Variation of Rights:
- If you plan to vary the rights for different classes of preference shareholders (e.g., different dividend rates or redemption terms), a separate special resolution is needed for each class.
- Each class of preference shareholders must approve the variation of rights.
Example:
- Suppose a company wants to issue two series of preference shares: Series A and Series B.
- The company can pass a single special resolution authorizing the issuance of both series.
- However, if the rights (dividend rates, redemption terms) differ between Series A and Series B, separate resolutions are required for each series.
Legal Compliance:
- Ensure that the resolution clearly specifies the details of each rights issue (including the series, terms, and conditions).
- Comply with all legal requirements, including shareholder approval and filing with the Registrar of Companies.