Right Issue-Allotment of Shares
Allotment of Share through Right Issue
₹
2,500/-*
₹
- Statutory Fees including additional fees or penalty in course of Filing of Form PAS-3 is not included in the above amount.
- Valuation of Shares is not included in the above case, Client is liable for providing the right issue price.
- Any advice given to the Client is only an opinion based on our knowledge of the Client’s particular circumstances.
- The client will be responsible for verifying the information contained in such returns and/or filings prior to approving/signing such return/filing.
- Fees Should be paid according to conversation held between the Legal Parivar Team and Client.
Allotment of Share on Right Basis
When a company needs additional capital and keeps the voting rights of the existing shareholders proportionately balanced, the company issues Rights shares. The Rights issue is like an invitation for current shareholders to buy new shares based on the number of shares they already own.
As the company grows, it seeks to raise more capital, and one way to do this is by issuing more shares. Instead of offering these shares to the general public, which could upset the balance of voting rights for current shareholders, the company opts to give more shares to its existing shareholders in a fair proportion to what they already own. This way, the company achieves its goal of getting more capital while ensuring that current shareholders keep their voting rights intact.
Rights Issue Procedure as per Section 62 (1) of the Companies Act 2013
- Issue of notice of Board meeting: According to Section 173(3) of the Companies Act 2013, the notice for the board meeting has to be sent minimum 7 days prior to the board meeting and must specify the agenda for the meeting.
- Convene the First Board Meeting: The Board meeting is held, and the resolution for issuing rights shares is passed. The rights issue does not require the approval of shareholders, and hence the board can proceed towards the issue.
- Issue Letter of Offer: On the passing of the resolution, the letter of offer is issued to all shareholders, and the same is sent through registered post or speed post. For shareholders to accept the offer a window period of 15 to 30 days is given that is to say the maximum time the shareholders can take to accept the offer is 30 days and the minimum period is 15 days. The offer is considered declined if it is not accepted before the expiry period.
- File Form MGT – 14 mandatory for a public limited company: After the passing of board resolution, the company must file the MGT -14 within 30 days of passing of the Board Resolution. The form MGT 14 is mandatory for a public limited company. A true certified copy of the Board Resolution needs to be attached to MGT 14.
- Receive application money: The members shall send either acceptance letter or renunciation letter to the Company within the time period specified in the offer letter. If the offer not accepted or renounced by the members then the Directors may pass the resolution for disposal of the shares as they deem fit, which is not dis-advantageous to the shareholders and the company. The shareholders must send the accepted application along with application money.
Convene the Second Board Meeting: The company must convene the second board meeting, the notice of which must be sent 7 days prior to the board meeting. The required quorum must be present, and the resolution for the allotment of shares must be passed. On passing the resolution for allotment of shares, the allotment of shares must be done within 60 days of receiving the application money for the same.
File the Form PAS-3 with ROC: The company must file the Form PAS -3, within 30 days from the allotment of the shares with the Registrar of Companies. The certified true copy of the Board Resolution and the list of the allottees must be attached to the form.
Issue of Share Certificates: The share certificates must be issued; if the shares are in Demat form, then the company must inform the depository immediately on allotment of shares. If the shares are held in physical form, then the share certificates must be issued within 2 months from the date of allotment of shares. The share certificate must be signed by at least 2 directors. The share certificates must be issued in Form SH -1.
Right of renunciation means the person to whom shares offered has a right to renounce the shares in favor of any other person. Offer letter should contain the statement of the above right. The Board of Directors of the Company may dispose the shares after the expiry of the time limit in the manner which is not dis-advantageous to the shareholders and the company, if the existing shareholders have not accepted the offer and not renounce in favor of any person.
Penalty:
If any company and directors fail to adhere with provision of right issue, there is no direct penal provision is given in the governed provision. However as per section 450 of the Companies Act, 2013 where no specific penalty or punishment is provided in the Act, the company and every officer of the company who is in default as defined under section 2(60) or such other person shall be punishable with fine up to Rs.10,000/- and further fine up to Rs.1,000/- for every day after the first during which contravention continues subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is in default or such other person.