Meaning of Right Issue of Shares:
‘Right Issue’ refers to the act of offering shares to the existing members of the company in proportion to their current shareholding via a letter of offer.
Governing Section:
SECTION 62 of Companies Act 2013
The Provisions of Section 62 of the Companies Act, 2013 bind all Private companies, public companies, listed and unlisted companies.
Step by Step Procedure for Right Issue of Shares:
| STEPS INVOLVED | FOR PRIVATE COMPANY | FOR PUBLIC COMPANY |
| Step 1 | Issuance of the notice of Board Meeting at least 7 days prior the meeting as per the norms of section 179-(3) | Issuance of the notice of Board Meeting at least 7 days prior the meeting as per the norms of section 179-(3) |
| Step 2 | Summon the Board meeting as Per SS 1 to pass a board resolution for approving “Letter of offer” which should encompass right of renunciation also. |
Summon
the Board meeting as Per SS 1 to pass a board
approving “Letter of offer” which should encompass right of
renunciation also.
|
| Step 3 | Send the Letter of offer to all the existing shareholders via registered post or speed post or electronic mode | Send the Letter of offer to all the existing shareholders via registered post or speed post or through electronic mode |
| Step 4 | Section 62 (2) states that the Letter of Offer must be posted at least 3 days earlier then the date of opening of issue but after Notification dated 05.06.2015 Condition given that notice can be sent even lesser than three days before the issue opens, when 90% of the members give their consent in writing ( even by electronic mode). Time period of Open of subscription: As per section 61 (1) (a) The offer shall remain valid for the subscription for at least 15 days and at most 30 days but Notification date 05.06.2015 approves the offers to be kept open for less than 15 days when 90% of the members give consent in writing (even by electronic mode) . | Section 62 (2) states that the Letter of Offer must be posted at least 3 days earlier then the date of opening of issue. Time period of subscription: As Per 61 (1) (a)The offer shall remain valid for the subscription for at least 15 days and at most 30 days |
| Step 5 | NOT APPLICABLE | File MGT-1 in a period of 30 days from the date of passing Board Resolution. Attachment: CTC-of Board Resolution for the issue of Letter of Offer. |
| Step 6 | Accept Application Money ( cash money is permitted here) | Accept Application Money (cash money is permitted here) |
| Step 7 | Convene the Second Board Meeting after receiving application money 1. Send Notice Of Board Meeting minimum 7 days before the date of Board Meeting As per section- 173 (3), attest Agenda and notes with Notice CONVENE BOARD MEETING: As Per SS1, Show the list of Allottee and Pass the Board Resolution for Allotment of Shares | Convene the Second Board Meeting after receiving application money 1. Send Notice Of Board Meeting minimum 7 days before the date of Board Meeting As per section- 173 (3), attest Agenda and notes with Notice CONVENE OR HOLD BOARD MEETING: As Per SS1, Show the list of Allottee and Pass the Board Resolution for Allotment of Shares |
| Step 8 | File PAS-3 within a 30 days period from the date of Allotment coupled with CTC of Board Resolution for Allotment of Shares and List of Allottee. | File PAS-3 within a 30 days period from the date of Allotment coupled with CTC of Board Resolution for Allotment of Shares and List of Allottee. |
| Step 9 | Issue Share Certificate In the period of 2 Month From date of Allotment Empower two Directors in addition to One Authorized representative to Sign Share and Issue Share Certificate in SH-1 | Issue Share Certificate In the period of 2 months From date ofAllotment Empower two Directors in addition to One Authorized representative to Sign Share and Issue Share Certificate in SH-1 |
| Step 10 | Obtain the Share stamp from SDM Department within a period of 30 days from date of ISSUE |
Obtain
the Share stamp from SDM Department within a period 30 days from
date of ISSUE
|
Read Also: Complete Procedure for Bonus Issue of Shares by Companies
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