{"id":26982,"date":"2019-11-29T18:35:33","date_gmt":"2019-11-29T13:05:33","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=26982"},"modified":"2020-11-16T12:15:05","modified_gmt":"2020-11-16T06:45:05","slug":"procedure-for-shares-issue-through-right-issue","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/procedure-for-shares-issue-through-right-issue\/","title":{"rendered":"Procedure for Shares issue through Right Issue"},"content":{"rendered":"<p class=\"has-drop-cap\">Where the Company having a paid-up share capital at any time, proposes to increase the subscribed Share capital of the Company issue Right Shares is an exceptionally used method for increasing the share capital of the Company. As per Section 62 of the <strong><a href=\"https:\/\/enterslice.com\/learning\/key-managerial-personnel-companies-act-2013\/\">Companies Act, 2013<\/a><\/strong>, the <strong>Right Issue of shares<\/strong> is the shares issued by the Company to enable their existing shareholders to enhance their <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Market&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;A market is a structured environment, either physical or virtual, where buyers and sellers convene to trade goods and services. This trading hub operates based on the principles of supply and(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/market\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>market<\/a> divulgence.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The Reason behind issuing the Right Issue<\/h2>\n\n\n\n<p>By issuing the <strong>Right\nissue,<\/strong> the Company gets sufficient funds and besides gives the right to the\nexisting shareholders of the Company to purchase the shares at a discounted\nprice. Apart from raising the Capital of the Company, The Right issue bestows\nother advantages like-<strong>Provides ease for raising Fund, Converting the\nunsubscribed share capital to the Subscribed share capital of the Company,\nFavorable method of raising the Capital which results in expansion without\nDebt.<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Key Criteria of the Right Issue<\/h2>\n\n\n\n<p>The criteria for issuing the Right issue is mentioned below-<\/p>\n\n\n\n<ol><li>Right shares are issued to increase the subscribed capital by the issue of further shares.<\/li><li>The right issue applies to all types of Companies i<strong>.e. Listed Public Company, Public Company, and Private Company.<\/strong><\/li><li>The Shares are offered and issued to the existing <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Shareholder&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;A shareholder is an individual or entity that owns at least one share of a company&amp;#039;s stock, granting them partial ownership of the company. This status allows them certain rights, including(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/shareholder\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>shareholder<\/a> of the Company in proportion to the paid-up share capital on their shares at the time of the Right issue by sending a letter of offer.<\/li><\/ol>\n\n\n\n<div class=\"shadow1\"><strong>NOTE:<\/strong> Existing Shareholder of the Company here refers to the existing shareholder of equity shares. The issue is also termed as the Pre-emptive right of existing shareholders.<\/div>\n\n\n\n<ul><li>The notice must be given to all the existing shareholders of the company,\nby offering them an option to take the shares offered to the shareholder by the\nCompany.<\/li><li>The information must be provided to the shareholders to decide about the\nnumber of shares he has opted to buy by giving him at least <strong>15 days or a maximum\nof 30 days of notice.<\/strong><\/li><li>Dispatching the notice through registered post or speed post or through\nelectronic mode or any other mode of option having a delivery proof that the\nnotice is delivered to all the existing shareholders at least 3 days before the\nopening of the issue.<\/li><li>The Company&rsquo;s offer of issuing further shares shall be deemed to be declined\nif the shareholder does not convey to the company his acceptance.<\/li><li>The right of renouncement must be disclosed in the notice.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">What are the steps involved while issuing the\nRight Issue-?<\/h2>\n\n\n\n<p><strong>The steps involved while issuing the Right Issue are-<\/strong><\/p>\n\n\n\n<ol><li>Notice as per the norms of section 179(3) must be issued by the company to the <strong><a href=\"https:\/\/en.wikipedia.org\/wiki\/Shareholder\">shareholders<\/a><\/strong> of the company at least 7 days before the date of conducting the Board Meeting.<\/li><li>Pass the Board Resolution by conduct the Board meeting as per the Secretarial Standard-1 for approving the letter of offer which should enclose the right of renunciation.<\/li><li>Letter of the offer shall be sent to all the existing shareholders of the Company through registered or speed post or electronic mode.<\/li><li><strong>In the case of Private Company<\/strong>, Section 62 (2) states that the Letter of Offer must be posted at least 3 days earlier than the date of opening of the issue.<\/li><\/ol>\n\n\n\n<div class=\"shadow1\"><strong>NOTE:<\/strong> The notice can be sent to the shareholders even lesser than 3 days before the issue opens, provided 90% of the members have given their consent in writing (even by electronic mode).<\/div>\n\n\n\n<p><strong>However, in the case of Public Company, the notice must be posted at least 3 days prior to the date of opening of the issue.<\/strong><\/p>\n\n\n\n<p><strong>The time duration for opening the\nSubscription-<\/strong><\/p>\n\n\n\n<ul><li>For the subscription, the offer shall remain valid for a <strong>minimum of 15 days and a maximum of 30<\/strong> days. However, in the case of Private Company, the offer can be kept open for less than 15 days provided <strong>90%<\/strong> of the members gives consent in writing (even by electronic mode).<\/li><\/ul>\n\n\n\n<p>Further, in the case of Public\nCompany, the offer shall remain valid for the subscription for at least <strong>15\ndays and a maximum of 30 days<\/strong>.<\/p>\n\n\n\n<ul><li><strong>In the case of Public Company<\/strong>, <strong>MGT-1<\/strong> is required to be filed <strong>within a period of 30 days<\/strong> from the date of passing the Board Resolution. However, it is not applicable in the case of a <strong><a href=\"https:\/\/enterslice.com\/company-registration\">Private Company.<\/a><\/strong><\/li><li>Accepting the Application money from the shareholders willing to subscribe to the Rights Issue. (Cash in terms of money is acceptable in both the Public and Private Company).<\/li><li>After receiving the application money, Convene the Second Board Meeting as per SS-1.<br> The Notice of Board Meeting shall be given at least 7 days before the date of Board Meeting Agenda and notes shall be attested with the Notice.<\/li><\/ul>\n\n\n\n<p>However, for <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Allotment&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;An allotment is the systematic distribution of business resources, often pertaining to the distribution of shares during initial public offerings (IPOs) to underwriting firms or to new and(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/allotment\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>Allotment<\/a> of Shares, show the list of the allottee and Pass the Board Resolution.<\/p>\n\n\n\n<ul><li>File <strong>PAS-3<\/strong> within a period of <strong>30 days<\/strong> from the date of\nallotment along with the CTC of Board Resolution.<\/li><\/ul>\n\n\n\n<p><strong>Filing MGT-14<\/strong> for both issue of shares and\nallotment of shares to <strong>ROC.<\/strong><\/p>\n\n\n\n<ol><li>Within a period of 2 months from the\ndate of allotment, issue a Share Certificate which shall be signed by 2\nDirectors. In addition, 1 Authorised representative shall also sign the Share\nCertificate, i.e. SH-1.<\/li><li>Obtain the Share Stamp within a\nperiod of 30 days from the date of the issue of Share Certificate.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\">Conclusion<\/h2>\n\n\n\n<p>The Right Issue Shares is a prescribed invite to the existing\nshareholders of the Company to buy the further, new shares in the company which\ngives the right to the existing shareholder to purchase new shares at a discounted\nrate. While issuing the Right issue, the motive of the company is to fortify an\nequitable distribution of shares. However, it does not affect the voting rights\nof the shareholders.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Where the Company having a paid-up share capital at any time, proposes to increase the subscribed Share capital of the Company issue Right Shares is an exceptionally used method for increasing the share capital of the Company. As per Section 62 of the Companies Act, 2013, the Right Issue of shares is the shares issued [&hellip;]<\/p>\n","protected":false},"author":25,"featured_media":26994,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[2828],"tags":[2829],"acf":{"service_id":"103"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Procedure for Shares issue through Right Issue - Enterslice<\/title>\n<meta name=\"description\" content=\"By issuing the Right issue, the Company gets sufficient funds and besides gives the right to the existing shareholders of the Company to purchase the shares at a discounted price.\" \/>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterslice.com\/learning\/procedure-for-shares-issue-through-right-issue\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Procedure for Shares issue through Right Issue - Enterslice\" \/>\n<meta property=\"og:description\" content=\"By issuing the Right issue, the Company gets sufficient funds and besides gives the right to the existing shareholders of the Company to purchase the shares at a discounted price.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/enterslice.com\/learning\/procedure-for-shares-issue-through-right-issue\/\" \/>\n<meta property=\"og:site_name\" content=\"Enterslice\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/enterslice\" \/>\n<meta property=\"article:published_time\" content=\"2019-11-29T13:05:33+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-11-16T06:45:05+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/11\/Procedure-for-Shares-issue-through-Right-Issue.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"630\" \/>\n<meta name=\"twitter:card\" content=\"summary\" \/>\n<meta name=\"twitter:creator\" content=\"@enterslice\" \/>\n<meta name=\"twitter:site\" content=\"@enterslice\" \/>\n<!-- \/ Yoast SEO plugin. -->","authorName":"Priyanka Bajpayee","authorImageUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/09\/81216.jpg","authorDescription":"Priyanka Bajpayee has done Masters in International Business Law and well versed in content writing covering the area of legal and finance. 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