What is Right Issue Section 62 of The Companies Act, 2013?
As per Section 62, a Company having a share capital may increase its subscribed capital by issuing further shares to its existing shareholders only.
*Existing Share Holders means the person who is already the holders of equity shares at the date of the offer
Compliances as per the Act and Companies Share Capital and Debentures Rules, 2014
- The offer shall be made by a notice containing the following:-
a. Number of Shares offered b. Time Limit (not less than 15 days and not more than 30 days) c. Right to the concerned person to renounce the shares offered to him.
- The notice shall be dispatched to all the shareholders of the company at least 3 days before the opening of the issue.
- The notice shall be dispatched by registered post or electronic post or through speed post.
- Resolution to be passed at Board Meeting issuing the shares and also giving them a right of renunciation.
- The offer shall be open for minimum 15 days and not more than 30 days
- Once the offer is closed conduct the Board Meeting and pass the resolution for allotment of shares.
- 7. File with the Registrar the Return of Allotment PAS-3 as per Rule 12 of Companies (Prospectus and allotment of Shares) Rules, 2014.
- What Is Private Placement Under Section 62 Of The Companies Act, 2013?
As per Section 42 of the Act, a Company may increase its subscribed Capital at any time by issuing shares to the select group of a person other than by Public offer.
Select Group of Person means a number of persons not exceeding 50 at times and 200 persons in aggregate during a financial year.
Compliances as per the Act and Companies (Prospectus and Allotment of Securities) Rules, 2014
- No fresh offer under this section shall be made unless any pending allotment has been completed, withdrawn or abandoned by the company.
- An offer letter in Form, PAS-4 shall be addressed to the person specifically to whom the offer is being made.
- Company shall maintain a complete record of private placement offer in Form PAS-5.
- A copy of such record shall be filed with the registrar in Form PAS-4.
- The company making an offer shall allow the securities within 60 days from the date of receipt of Application money.
- Documents PAS-3, PAS-4 and PAS-5
- Approval by Special Resolution
A glimpse of basic differences between Right Issue and Private Placement
S. No.
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Basis
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Right Issue
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Private Placement
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1
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Meaning
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An offer to the existing shareholder
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An offer to the select group of person
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2
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Separate Bank Account
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Not required
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Required
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3
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Mode of payment
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No such restrictions
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Through cheque, Demand Draft or other banking channels other than cash
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4
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Right of Renunciation
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Shareholders have such right
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No such right is available
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5
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Type of Meeting
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Board Meeting
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Members Meeting
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6
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Number of people
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No such restriction
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50 at the time and 200 in aggregate during the financial year.
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7
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Valuation Report
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Only if the issue to the existing NRI
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Mandatory
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