Know the Procedure For Allotment Of Right Issue Of Shares For Private Company Under Companies Act, 2013 [Applicable provisions Section 62 of Companies Act 2013] By CS Shiriti Kumari

Under Companies Act 2013, A Private Limited Company can raise funds via Capital in 3 Ways:-

  1. Private Placement/ Preferential Allotment;
  2. Right Issue/preferential Allotment; and
  3. Bonus Issue.
Among all above mentioned ways very simple and easiest way for private co is Right issue of shares only subject to approval of board meetings;

Right issue does not required approval of Shareholders through Special Resolution, the Board of Directors can pass a Board Resolution u/s 62(1)(a) to offer the shares to the existing Shareholders of the Company in proportion to their current paid-up shareholding
Where at any time, a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares shall be offered to persons who, at the date of the offer, are holders of equity shares of the company in proportion, as nearly as circumstances admit, to the paid-up share capital on those shares by sending a letter of offer subject to the following conditions, namely:

1) the offer shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days and not exceeding thirty days from the date of the offer within which the offer, if not accepted, shall be deemed to have been declined;

2) unless the articles of the company otherwise provide, the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person; and the notice shall contain a statement of this right;

3) after the expiry of the time specified in the notice aforesaid, or on receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the Board of Directors may dispose of them in such manner which is not dis-advantageous to the shareholders and the company;

4) The notice shall be dispatched through registered post or speed post or through electronic mode to all the existing shareholders at least three days before the opening of the issue.

Author: CS Shiriti Kumari
Founder: Compliance Calendar LLP

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Write a Comment

  • Thank You Smriti Madam for sharing Procedure of Rights Issue,

    From G. Nagendra, CS Final Student, Hyderabad.

    10-07-2018 / 06:37:47 PM
  • Can we issue 2 letter of offer with different period in one board meeting??

    30-05-2019 / 02:51:47 PM