aaeaaqaaaaaaaazpaaaajdy4mjiyode0ltc2mtctndbjoc1imdi1lwq0odk0m2y0mtuwygAs per Section 62(1)(a) of the Companies Act, 2013, if the Company decides to issue Right shares, these should be offered to existing shareholders in proportion to their existing share holding. Companies pursue Rights Issue as an avenue to raise funds for various reasons, ranging from expansion or acquisitions to paying down debts.

Applicability

Provisions of Section 62 of the Companies Act, 2013 are mandatory for all Private companies, Public companies and listed as well as unlisted companies.

PROCEDURE FOR ALLOTMENT OF SHARES ON RIGHT ISSUE BASIS:

  1. Issue notice in writing to every Director at least seven days’ before convening the Board meeting. [Sec 173 (3)]
  2. Convene a board meeting and pass board resolution for approving Letter of offer; it must be keep in mind that letter of offer shall include Right of Renunciation also. Also authorize a Director of a company to issue “Letter of offer”.
  3. Dispatch Letter of offer through registered post or speed post or through electronic mode to all the existing shareholders at least three days before the opening of the issue.
  4. Receive acceptance, renunciation, rejection of rights from shareholders.
  5. Once Company received money from all the allottees, then it is required to allot shares within 60 days of receipt of application money.
  6. Issue notice in writing to every Director at least seven days’ before convening the Board meeting. [Sec 173 (3)]
  7. Convene a Board Meeting and present a list of allottees before the meeting and pass the resolution.
  8. File PAS -3 within 30 days from the allotment of shares.

    Attachment of PAS-3 are- (a) List of Allottees (b) CTC of Board Resolution for Allotment of Shares

  1. File MGT 14 for issue of securities.
  2. Issue share certificates within 2 months from the date of allotment of shares.

 Note. Sample of Board Resolution and List of Allottees are also attached to this articles, blogger can also get help of that.

Click here to download word format of List of Allottees

Click here to download word format of Board Resolution