What is the meaning of Right Issue?
Right Issue means offering shares to existing members in proportion to their existing shareholding through letter of offer. A rights issue is directly offered to all existing shareholders of the Company in proportion to their current holding.
Need for Right issue:
The directors of the company are authorised to arrange funds for the company. For short-term funds need, they normally resort to loan or short-term credit facilities. However, for long-term use or to achieve the long-term vision and objective of the company, the issue of new equity share is the best option.
Steps Involved for Right Issue:
Step-1: Convene the Meeting of Board of Directors of the Company:
To decide on further capital requirements. Preparation of Board Meeting notice, agenda and convene the board meeting to approve right issue including “letter of offer”.
Step-2: Issue letter of offer and receive acceptance:
Send offer letter to all existing members as on the date of offer. (Through registered post or speed post or through electronic mode to all the existing share -holders at least three days before the opening of the issue). Receive acceptance/ renunciations/rejection of rights from members to whom offer has been sent & also from persons in whose favour right renounced.
Step-3: Convene the Meeting of Board of Directors of the Company:
Preparation of Board Meeting notice, agenda and convene the board meeting to approve allotment of shares. Issue notice to all the directors of the Company. Pass board resolution for approving allotment of shares.
Step-4: Filing of Form with RoC in PAS-3:
Within 30 days of passing board resolution form PAS-3 has to be filed with RoC with list of allottees, board resolution and any other required attachments, if any.
Step-5: Issue Share Certificates:
Issue share certificate to the members.
Documents Required for Right Issue:
- List of directors and shareholders of the Company.
- Proposed further capital requirements.
- Existing MOA and AOA of the Company.
- New Allottees details.
- Digital Signature (DSC) of any one of the Director of the Company