{"id":4891,"date":"2020-03-14T18:01:56","date_gmt":"2020-03-14T12:31:56","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=4891"},"modified":"2022-09-10T14:20:16","modified_gmt":"2022-09-10T08:50:16","slug":"complete-procedure-for-right-issue-of-shares","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/complete-procedure-for-right-issue-of-shares\/","title":{"rendered":"Right Issue of Shares: Step by Step Procedure"},"content":{"rendered":"\n<p class=\"has-drop-cap\">To raise subscribed share capital of a <a href=\"https:\/\/corpbiz.io\/company-registration\"><strong>registered Company<\/strong><\/a>, additional capital shares are issued through Right Issue. However, instead of issuing shares to the public at large, the Company issue shares to existing shareholders of Company in proportion to their existing holding. It is an exceptionally used method to increase the share capital of the Company. <strong><em>According to <\/em><\/strong><em><strong>Section 62 of Companies<\/strong><\/em><strong> <\/strong><em><strong>Act, 2013<\/strong><\/em><sup><a href=\"https:\/\/www.mca.gov.in\/content\/mca\/global\/en\/acts-rules\/ebooks.html\"><strong>[1]<\/strong><\/a><\/sup><em><strong>,<\/strong><\/em> the Right issue of Shares is explained. <strong><em>The Company, when issue shares on a discounted rate to the existing shareholders, it is known as Right Issue<\/em><\/strong>. This method is used to raise Capital of Company in indigent times of the Company. <\/p>\n\n\n\n<p>This article will discuss the step by step procedure\nfor Right Issue of Shares under <strong><em>Companies Act, 2013.<\/em><\/strong><\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/complete-procedure-for-right-issue-of-shares\/#What_is_Right_Issue_of_Shares\" >What is Right Issue of Shares?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/complete-procedure-for-right-issue-of-shares\/#What_are_the_Key_Objectives_for_Right_Issue_of_Shares\" >What\nare the Key Objectives for Right Issue of Shares?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/complete-procedure-for-right-issue-of-shares\/#What_is_the_Procedure_for_the_Right_Issue_of_Shares\" >What\nis the Procedure for the Right Issue of Shares?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/complete-procedure-for-right-issue-of-shares\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Right_Issue_of_Shares\"><\/span>What is Right Issue of Shares?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"mt-3 mb-3 embed-responsive embed-responsive-16by9\"><iframe class=\"embed-responsive-item\" src=\"https:\/\/www.youtube.com\/embed\/eBx-YhJTq3k\" frameborder=\"0\" allow=\"accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture\" allowfullscreen=\"\"><\/iframe><\/div>\n\n\n\n<p><em><strong>The\nRight Issue of Shares is a formal invitation to the existing shareholders of\nthe Company to buy additional new shares<\/strong><\/em>.\nThe name Right Issue signifies that a right is given to the current\nshareholders to buy new shares at a discounted price as compared to the market price.\nTo increase market exposure in the shareholders, Right Issue of Shares is done\nin the Company. <\/p>\n\n\n\n<div class=\"shadow1\">The main objective for Right Issue of Shares is to ensure equitable distribution of share to the shareholders of the Company with no effect on the existing voting rights of the shareholders.<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Key_Objectives_for_Right_Issue_of_Shares\"><\/span>What\nare the Key Objectives for Right Issue of Shares?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>The Key Objectives for Right Issue of shares are as\nfollows:<\/em><\/strong><\/p>\n\n\n\n<ul><li>The Right Issue is done to increase the subscribed\ncapital of the Company.<\/li><li>The shares are issued to the existing shareholders\nof the Company in proportion to their current share capital issued earlier.<\/li><li>The Right Issue is done by sending a letter of offer\nto the shareholders of the Company.<\/li><li>The notice of the issue of shares should be sent to\nthe shareholders by offering them an option to take the shares offered to them.<\/li><li>The shareholders should answer the notice within 15\ndays or a maximum of 30 days.<\/li><li>The shareholder does not respond to the Company&#8217;s\nnotice of issuing shares; then the offer will be deemed to be declined by the\nshareholders. <\/li><li>The notice of shares issue should be sent through\nregistered post or speed post or any electronic mode to the shareholders.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_Procedure_for_the_Right_Issue_of_Shares\"><\/span>What\nis the Procedure for the Right Issue of Shares?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>The procedure followed for Right issue of Shares is as follows:<\/em><\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/image-30-e1584188143973.png\" alt=\"Procedure for the Right Issue of Shares\"\/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">Notice\nof Board Meeting<\/h3>\n\n\n\n<p>As per <strong><em>Section 179(3) of Companies Act, 2013<\/em><\/strong>,\nthe notice of the Board Meeting should be sent to the shareholders 7 days before\nthe date of the Board Meeting. The notice should include the agenda of the\nmeeting.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Hold\nBoard Meeting<\/h3>\n\n\n\n<p>The Board Meeting is conducted, and Board Resolution\nis passed. The Resolution is passed as per the <strong><em>Secretarial Standards-1<\/em><\/strong>\n(SS-1). <\/p>\n\n\n\n<p><em>The Right Issue does not need the approval of the Shareholders through Special Resolution. The Board can pass a Board Resolution and offer shares to the existing shareholders of Company in proportion to their current shareholding.&nbsp; <\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Letter\nof Offer<\/h3>\n\n\n\n<p>After passing of the Board Resolution, the approval\nof Letter of Offer is also given. The Letter of Offer is sent to all the\nshareholders by registered post, speed post or through electronic mode. As per <strong><em>Section\n62(2) of the Companies Act, 2013<\/em><\/strong>, the letter must be posted at least 3\ndays prior to the opening of the issue.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Subscription\nPeriod of Acceptance<\/h3>\n\n\n\n<p>The maximum period for acceptance of the letter of\noffer <strong><em>is 15 days and at most 30 days<\/em><\/strong>. The shareholders should accept\nthe offer within this prescribed limit only. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Form\nMGT-1<\/h3>\n\n\n\n<p><strong><em>After passing of the Board Resolution, Form MGT-1 is\nfiled within 30 days of passing of the Board Resolution. A true certified copy\nof Board Resolution should be attached with the Form MGT-1.<\/em><\/strong> The <strong><em>Form MGT-1<\/em><\/strong> is mandatory to be filed\nin case of Public Companies. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Accept\nApplication Money<\/h3>\n\n\n\n<p>The accepted application should be sent to the Board\nwith the application money. Cash in terms of money is accepted in both private\nand public Company. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Second\nBoard Meeting<\/h3>\n\n\n\n<p>After receiving the application, notice for second\nBoard Meeting should be sent to all the shareholders at least 7 days before the\ndate of the Board Meeting. The notice should include the whole agenda of the\nBoard Meeting. <\/p>\n\n\n\n<p>The required quorum of the Board should be present\nat the Board Meeting. The Board Resolution for the Allotment of Shares will be\npassed. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Allotment\nof Shares<\/h3>\n\n\n\n<p>After passing of the Board resolution in the second\nBoard Meeting, the Allotment of Shares is done. <strong><em>The Allotment of Shares should be\ndone within 60 days of receiving the application and application.<\/em><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Filing\nof Forms to ROC<\/h3>\n\n\n\n<p>After Allotment of Shares, <strong><em>Form PAS-3<\/em><\/strong> should be\nfiled to the Registrar of Companies (ROC) by the Director of Board of Company.\nThe <strong><em>Form\nPAS-3<\/em><\/strong> should be filed within 30 days from the Allotment of Shares. The\ncertified true copy of Board Resolution and list of Allottees should be\nattached with <strong><em>Form PAS-3<\/em><\/strong>. <\/p>\n\n\n\n<p><strong><em>Form<\/em><\/strong>\n<strong><em>MGT-14<\/em><\/strong>\nfor both Issues of Shares and Allotment of Shares should be filed with the ROC.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Issue\nShare Certificate<\/h3>\n\n\n\n<p>After filing of the <strong><em>Form PAS-3<\/em><\/strong>, the Share\nCertificate is issued to the shareholders. <strong><em>The Share Certificate should be issued\nwithin 2 months from the date of Allotment of Shares.<\/em><\/strong> The Share\nCertificate should be signed by at least 2 Directors of the Company. The Share\nCertificate shall be issued in <strong><em>Form SH-1.<\/em><\/strong><\/p>\n\n\n\n<p>The Share Stamp should be obtained within 30 days\nfrom the date of Issue of Share Certificate.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p> To fortify equal distribution of Shares in the Company, Right Issue of Shares is done. The Right Issue of Shares is an invitation to the existing shareholders of the Company to purchase new shares at a discounted rate. Before someone decides to choose this method to raise the capital of Company, one should be well versed with the provisions related to it. We at&nbsp;<a href=\"https:\/\/corpbiz.io\/\"><strong>Corpbiz<\/strong><\/a><strong>&nbsp;<\/strong>have experienced and skilful professionals to help you with the Procedure of Right Issue of Shares. Our professional will direct you and help you in getting through the procedure. &nbsp; <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/issue-of-bonus-shares-under-companies-act-2013\/\">Issue of Bonus Shares under Companies Act, 2013<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>To raise subscribed share capital of a registered Company, additional capital shares are issued through Right Issue. However, instead of issuing shares to the public at large, the Company issue shares to existing shareholders of Company in proportion to their existing holding. It is an exceptionally used method to increase the share capital of the [&hellip;]<\/p>\n","protected":false},"author":16,"featured_media":4898,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[120,340],"tags":[400],"acf":{"service_id":"321"},"authorName":"Sakshi Sharda","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/02\/sakshi-sharda.jpg","authorDescription":"Sakshi Sharda has done BBALLB(HONS) and holds a strong knowledge on the matters pertaining to finance and law. From the past one year she is working as a legal advisor and in her leisure time she works on improvising her knowledge. Sakshi is spreading her knowledge by writing for Corpbiz.","postViews":68497,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/4891"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=4891"}],"version-history":[{"count":14,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/4891\/revisions"}],"predecessor-version":[{"id":48589,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/4891\/revisions\/48589"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/4898"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=4891"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=4891"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=4891"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}