Step by Step Process of Right Share Issue in India as per Companies Act

What is the meaning of Right Issue?

Through a letter of offer, the right issue involves giving shares to existing members in proportion to their existing shareholding. A rights issue is made directly available to all existing shareholders of the Company in proportion to their current stake.

Why Right Share are Issued ?

The company's directors are authorized to arrange finances for the company. They typically use loan or short-term credit facilities for short-term funding needs. However, for long-term use or to meet the company's long-term vision and objectives, the issuance of fresh equity shares is the ideal alternative.

Steps Involved for Right Issue:

Step-1: Convene the Meeting of Board of Directors of the Company

To make a decision on further capital needed. Preparation of the Board Meeting notice and agenda, as well as convening the Board Meeting to adopt the right issue, including the "letter of offer."

Step-2: Issue letter of Offer and receive acceptance

Send an offer letter to all current members as of the date of the offer. (Through registered post, speed post, or electronic means to all existing share-holders at least three days before the offering opens.)Acceptance/renunciation/rejection of rights from members to whom the offer was delivered, as well as persons in whose favor the right was renounced

Step-3: Convene the Meeting of Board of Directors of the Company

Preparation of the Board Meeting notice and agenda, as well as the convening of the Board Meeting to authorize the allotment of shares. Give notice to all of the Company's directors. Pass a board resolution authorizing the allotment of shares.

Step-4: Filing of Form with ROC in PAS-3

Within 30 days of the board resolution being passed, formPAS-3 must be filed with ROC, along with the list of allottees, the board resolution, and any other required attachments, if any.

Step-5: Issue Share Certificates

Members should be given share certificates.

What are Documents Required for Right Share Issue ?

Documents Required for Right Share 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

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