Right Issue of shares

Section 62(1)(a) of the Companies Act, 2013 governs the idea of a right issuance of shares. The provision in this section relates to the Company's expansion in subscribed share capital through the issuance of additional shares.

Simply put, a right issue of shares is an offer of shares to all existing Equity or Preference shareholders in proportion to their current shareholding in the company. It should be noted that this mechanism can be used to issue both equity and preference shares, as both will result in an increase in the Company's subscribed share capital.

The steps and method listed below must be followed:

1. Call a meeting of the Board of Directors: The first stage in the right issuance of shares process is to call a meeting of the Board of Directors, for which notice, agenda, and notes to the agenda must be distributed to the Directors at least seven days before to the meeting. The meeting can also be called at a later date to consider the issues on the agenda.

2. Setting the cut-off date and finalizing the letter of offer: At its meeting, the Board will approve the offer letter, which will detail the number of shares to be offered to shareholders and the process' cut-off date. Any director or directors may distribute the offer letter to the shareholders with the Board's permission. If a shareholder refuses to accept the offer, the letter of offer must also state that he or she has the right to renounce the shares in favor of another individual.

3. Renunciation of the offer: Shareholders who have received the offer letter have the option to accept or reject the offer in whole or in part, or to renounce the offer in favor of someone else.

4. Offer letter circulation period: The offer letter must be sent to all existing shareholders at least three days before the issue opens, either by registered mail, speed mail, electronic mail, courier, or any other method with proof of delivery. Furthermore, the offer should be kept available for a period of time not less than fifteen days or such shorter number of days as may be prescribed, but not more than thirty days from the date of the offer, after which the offer will be assumed to have been denied if not accepted.

5. Rejection of offer: If a shareholder who did not subscribe to the offer rejects the offer, the directors can dispose of the shares as they see fit, which is not detrimental to the shareholders or the firm.

6. Shareholders' share application money: The Company will receive share application money from shareholders who have accepted the offer before the offer's closing date.

7. Call a meeting of the Board of Directors to discuss the distribution of shares: A Board of Directors meeting must be called to approve the allotment of shares to shareholders/persons from whom money has been received, as well as to empower any director/directors to file the relevant paperwork with the Ministry, issue share certificates, and pay stamp duty.

8. Reporting to the Ministry: As required by section 39 of the Companies Act, 2013, the Company must file form PAS-3 within 30 days of the Board meeting.

9. Issuing share certificates: Within 60 days of the allotment, the Company shall issue share certificates that are signed by two directors of the Company and bear the company's common seal, if any, as required by section 56 of the Companies Act, 2013.

10. Stamp Duty: The Company is responsible for paying stamp duty on the share certificates at the applicable rates in the states where the Company's registered office is located.