Do You Know The Procedure of Right Issue of Shares?

The term “Right Issue” means offer of shares to the existing shareholders/members in proportion to their existing shareholding. The right issue can be made to equity shareholders. Section 62 of the Companies Act, 2013 read with the Rules provides the procedure for right issue. By following the procedure for right issue of shares, the company can increase its issued capital. The procedure for right issue shares is mentioned below.

1. CUT-OFF DATE

The cut-off date is decided to identify the shareholders to whom the shares will be offered.

2. DRAFT OFFER LETTER

The draft Offer Letter is prepared for offering the shares to the shareholders on right basis.

3. BOARD MEETING

Conduct Board Meeting to pass resolution for issue of Offer Letter. The option to renounce the shares should be given in the Offer Letter.

4. OFFER PERIOD

The shares will be available for acceptance, rejection or renunciation of offer during the offer period. The offer period should be minimum 15 days and maximum 30 days. The shares should be accepted, rejected or renounced during this period which is mentioned in the Offer Letter.

5. ISSUE OFFER LETTER

The Offer letter is issued along with the Renunciation Letter to give the option to shareholders to renounce their shares in favour of any other person.

6. FILE MGT-14

File Form MGT-14 within 30 days from passing the Board Resolution.

Attachments: Copy of Board Resolution for Issue of Offer Letter

7. RENUNCIATION

The shareholders of the company have right to renounce their shares in favour of any other person. This option is given in the offer letter and the Renunciation Letter is attached with Offer Letter. A shareholder has right to accept some shares and renounce some shares in favour of any other person.

8. LETTER OF ACCEPTANCE

The shareholders should give their Letter of Acceptance for the shares accepted before closing of the offer period.

9. CLOSURE OF OFFER PERIOD

Once the offer period is closed, the shareholders send money for the shares accepted by them.

10. LIST OF ALLOTTEES

Once the money is received from all the shareholders who have given the Letter of Acceptance, the list of allottees is prepared.

11. ALLOTMENT

The shares should be allotted to the shareholders whose name appear in the List of Allottees within 60 days from the date of receiving the application money.

12. FILE PAS-3

File Form PAS-3 within 30 days from the date of allotment of shares to the shareholders.

Attachment: List of Allottees and Copy of Board Resolution for allotment of shares.

13. SHARE CERTIFICATE

Share certificates should be issued within 2 months from the date of allotment of Shares.

Note:

The above mentioned procedure for right issue of shares is followed only to issue the shares on right basis to the equity shareholders. The shares under right issue are not offered to the preference shareholders.

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