Friends,
Can a Right Issue be renounced in favor of a Non-Member? A Pvt. Co. wants to issue shares to non members, it doesnot wants to follow Private Placement/Preferential allotment as it is stringent and time consuming process.
Regards
6 Replies
Gurprit
(Company Secretary)
(44 Points)
Replied 02 March 2016
Section 62(1)(a)(ii)
unless the articles of the company otherwise provide, the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person; and the notice referred to in clause (i) shall contain a statement of this right;
In my opinion the only purpose of giving renouncement rights is to enable non-menbers to participate in right issue.
Swati Sharma
(TRAINEE)
(328 Points)
Replied 02 March 2016
Ya..but there are veiws that it will indirectly lead to invitation and issuance of prospectus to outsiders by violating the public issue norms and shall also be in violation to definition of private companies.
Gurprit
(Company Secretary)
(44 Points)
Replied 02 March 2016
when you read the defination of private company it prohibits invitation to public and the company is making offer to its members and not to public and it is upto the member to whom it will renounce its rights and don't you think that restriction on renouncement of shares will defeat the intention of Section 62 as well as right of a shareholder.
second thing is that the act allow 200 members in a private company and i don's think that it is possible that a company having 200 members and all of them belong to the same family.
(others views solicited)
Swati Sharma
(TRAINEE)
(328 Points)
Replied 02 March 2016
According to me a member can renounce its rights in favour of other member. Say by example Co.wants to issue 1000 shares as Right Issue and there are 3 members. Then 2 members can renounce their rights so that the third Director can buy 1000 shares.
Gurprit
(Company Secretary)
(44 Points)
Replied 02 March 2016
you read secton 62 and it says the renouncement can be made to any other person not only to member.
RISHABH ARORA
(Company Secretary in Practice )
(194 Points)
Replied 02 March 2016
According to Section 62(1)(a)(ii) of the Companies Act, 2013
- unless
the articles of the company otherwise provide, the offer aforesaid shall be deemed to include a right exercisable by the person concerned
to renounce the shares offered to him or any of them in favour of
any other person; and the notice referred to in clause (i) shall contain a statement of this right;
If the articles of the Company provide for Renouncement of Shares in line with the provisions of the Companies Act, 2013 then shares invited under Right Issue can be renounced in favour of any person, whether such person is a member of the company or not.
if the Articles contained- renouncement in the favour of only member of the Company then the provisions of the Article will prevail.
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