Mitali Agarwal (Company Secretary) (638 Points)
23 January 2010A public ltd. unlisted co. is proposing to further issue share capital to the existing shareholders of the co. in the same proportion. Thus, the % holding of all the shareholders will remain the same.
Now plz tell me the procedure for the same? I think only sub-section 1 of Section 81 will be applicable and not sub-section 1A?
CS Ankur Srivastava
(Company Secretary & Compliance Officer)
(17853 Points)
Replied 23 January 2010
Yes Mitali, you are right Sectino 81(IA) would not apply in your case as you are allotting shares to the existing shareholders in proportion to the paid up capital. Thus section 81(1)(a) would apply and only Ordinary resolution is required to be passed.
Mitali Agarwal
(Company Secretary)
(638 Points)
Replied 23 January 2010
only passing OR is sufficient.
Are there any other formalities to be observed besides conducting GM, passing OR and filing Form 2?
Like any advertisement is reqd. to be given etc.?
CourseCart.in
(Mentor at SHAYVIDZ Academy)
(3756 Points)
Replied 23 January 2010
PROCEDURE FOR ISSUE OF RIGHT SHARES BY UNLISTED COMPANY
1. When the Board of directors decides to make a right issue, the Board will accord
approval to convene a general meeting to take the approval of members for
following matters:—
(a) for increasing the authorised capital of the company wherever necessary;
(b) for obtaining the approval of members to increase the issued capital by such
amount as has been proposed;
(c) to authorise the Board to offer the further shares to the members in such
proportion and at such price as the Board may decide;
(d) to authorize directors/officers of the company to comply with the various
formalities relating to the rights issue and to take all such further action in
the matter as are considered necessary and expedient.
2. If the broad object of issuing further shares was to transform the respondent into
minority, the issue was held to be violative of section 81(1)(a). [Jadabpore Tea
Co. Ltd. v Bengal Dooars National Tea Co. Ltd. (1984) 55 Comp Cas 160 (Cal)
(DB)]
3. If the company is in no need of further capital, directors are not entitled to use
their power of issuing shares merely for the purpose of maintaining their or their
friends, relatives control over the affairs of the company. [Nanalal Zaver v
Bombay Life Assurance Co. Ltd. AIR 1950 SC 179: (1950) 29 Comp Cas 179
(SC)]
4. Ensure that there are no calls in arrears. If calls in arrears are not received, take
steps for forfeiture of shares and to make those shares fully paid up by issuing
forfeited shares to other persons.
5. If the capital is to be utilised for new project or substantial expansion of the
existing project, make necessary application(s) for licence(s)/permission(s).
6. The Board shall take decision in respect of the following:—
♦ Quantum of right issue
♦ Ratio in which the shares are to be offered
♦ Record date
♦ Reservation for employees, etc.
7. Convene a general meeting for obtaining necessary approvals of the
shareholders.
8. File a special resolution passed by the company in e-Form 23 electronically
along with a certified copy of the special resolution and explanatory statement
sent to the members within 30 days from the date of such resolution, with the
ROC.
9. The Board of directors would accord approval to close the Register of Members
pursuant to section 154 of the Companies Act, 1956 or fix a "Record date" for
the purpose of determining the number of right shares to which every member is
entitled on the basis of the shares in the company held by the member on the
specified date.
10. The record date shall be fixed for taking record of those members who would be
entitled to receive offer of right and shall be published in the newspaper. Ensure
that the date of closing of Register of members and share transfer books is
atleast three weeks after the company has obtained the sanction of the
shareholders.
11. After the record date is over, draw up a list of members to ascertain members
eligible to subscribe to the right shares.
12. Where the shares are to be offered to NRI shareholders also, make an
application to the Reserve Bank of India for its approval.
13. Make arrangements with bankers for acceptance of the application money. Open
a specific bank account for keeping subscripttion received against right issues.
14. Letter of Offer shall be drafted to offer the shares on a right basis to the
shareholders. It should contain the following information:
♦ Brief history of the company;
♦ Nature of business carried on by the company;
♦ Highlights of the financial performance for 3 to 5 years;
♦ Management perception about the future prospects of the company;
♦ Particulars of directors;
♦ Details of proposed rights issue;
♦ Number of shares held by a shareholder and number of right shares;
♦ Terms & conditions of the present issue and mode of payment.
15. The draft letter of offer will be approved at the Board meeting and thereafter
will be dispatched to the members eligible to subscribe the right issue as per the
list of members drawn up the Letter of Offer should be accompanied with
application form for subscripttion, splitting renunciation of shares, etc. Letter of
Offer should be sent to the shareholders in such a manner that they get atleast 15
days time to apply.
16. A Board meeting shall be convened for:
(a) Fixing the last date for payment of allotment money
(b) Opening of bank account for refund of excess application money
(c) Opening of bank account for acceptance of allotment money
(d) Authorising of printing of share certificate, etc.
17. The Banks will collect from the offerees or their nominees (to whom the rights
have been renounced) the forms of acceptances and the money payable upto the
last date fixed for the purpose i.e. not less than 2 weeks after. Time must be
computed as provided in section 53.
18. The Banks will forward acceptances together with lists regularly to the
company.
19. In respect of application received from NRIs, FIRC certificate is obtained from
the bankers and an application shall be made to RBI for its approval for
allotment of shares to NRIs.
20. After the last date is over, the company will ascertain the final position as
regards shares accepted, shares renounced and/or applied for and additional
shares applied for. Number of shares available for allotment to applicants for
additional shares will then be arrived at.
21. A Board meeting shall be convened for passing resolution for allotment of
shares and after the allotment, a return of allotment is filed with the ROC in e-
Form 2 within 30 days.
22. Prepare and dispatch letter of allotment or issue the share certificates within
three months from the date of allotment in accordance with the Companies
(Issue of Share Certificate) Rules, 1960.
23. Simultaneously, prepare and dispatch regret letters and refund orders to the
applicants to whom no shares have been allotted.
24. Immediately after the allotment, enter the particulars of the allottees in the
Register of Members.
Mitali Agarwal
(Company Secretary)
(638 Points)
Replied 25 January 2010
Thanks a lot for explaining the whole procedure.
CourseCart.in
(Mentor at SHAYVIDZ Academy)
(3756 Points)
Replied 25 January 2010
| Originally posted by : Mitali Agarwal | ||
 |
Thanks a lot for explaining the whole procedure. |  |
U Always welcome....
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