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right to renounce in right issue of shares

Raghav Maheshwari (26 Points)

12 November 2017

meaning??

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Madhwesh K (272 Points)
Replied 12 November 2017

in rights issue, shares are first offered to existing shareholders.. so shareholders have "right" to apply for these shares or abstain from applying or renounce it in favor of others.. when a shareholder renounces rights offer in favor of others, the beneficiary can apply for shares .. so the beneficiary has to provide the company: renouncement letter in his favor, application form signed by him, the subscripttion money and other documents required by the company. once company is satisfied with docs n payment, it will allot the shares to beneficiary instead of the original offeree shareholder.

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Raghav Maheshwari (26 Points)
Replied 12 November 2017

thank u..😊

Law Aspire (CS) (755 Points)
Replied 18 November 2017

Originally posted by : Madhwesh K
	in rights issue, shares are first offered to existing shareholders.. so shareholders have "right" to apply for these shares or abstain from applying or renounce it in favor of others.. when a shareholder renounces rights offer in favor of others, the beneficiary can apply for shares .. so the beneficiary has to provide the company: renouncement letter in his favor, application form signed by him, the subscriptttion money and other documents required by the company. once company is satisfied with docs n payment, it will allot the shares to beneficiary instead of the original offeree shareholder.

if someone only rejects the offer and dont renounce then?

Madhwesh K (Practicing Company Secretary) (22 Points)
Replied 18 November 2017

It is a good question. Hence, we add a clause in the board resolution (where first the offer is approved) that "the board is authorized the dispose-off unaccepted portion of the offer in the manner as is beneficial to the company." Hence, the un-accepted portion (whether rejected parts or abstained parts) can be issued to others who is ready to invest. This works in addition to renouncements if any. Example, if ABC P Ltd offers shares to X, Y & Z. X renounces it to M, Y does not respond within offer period and Z rejects. Now M can accept the renounced part, the abstained part & also the rejected part; and if he does so the board will pass another resolution for alloting all the shares to M. Now, this will not work when AOA has a clause barring such power to the board; otherwise board can be authorized to do so. The logic is that once you give shareholder opportunity to excercise his (pre-emptive) right and if he does not, then he cannot question what happens to the reminder of the transaction.

CHANDRESH PARSEDIA (2 Points)
Replied 08 April 2019

What about Y who does not respond within the offer period?

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I.V.LAKSHMI (COMPANY SECRETARY & COMPLIANCE OFFICER) (23 Points)
Replied 03 October 2019

good response

Somasundar Krishnan (CA Job) (22 Points)
Replied 12 February 2020

In the event rights issue is renounced by existing shareholders can company issue such shares u/s 62(1)(iii) to a third party without a valuation report?