What is the procedure to Right Issue of Shares under Companies Act 2013?

What is the procedure to Right Issue of Shares under Companies Act 2013? 

In accordance with the provisions of clause (a) sub-section (1) of Section 62, 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.

Key Considerations:

  • Right issue means offer of shares to the equity shareholders of the Company, as on the date of offer, in proportion to the capital paid up on their shares. (Section 62(1)(a)
  • Shares shall be offered on rights basis by sending a letter of offer fulfilling the prescribed conditions. (Section 62(1)(a)
  • Unless the articles of the company otherwise provide, the offer of rights issue 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.
  • Board Resolution for considering the issue of shares on rights basis cannot be passed by circulation. (S.179 (3)(c).

The following procedure is to be followed for Rights Issue of Shares by a Company under Section 62:- Read Here

What is the procedure to Right Issue of Shares under Companies Act 2013?

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Incorporation of A Public limited Company

Section 2 (71) states that a public company means a company which:

  1. is not a private company;
  1. has a minimum paid-up share capital , as may be prescribed:

Provided that a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purpose of this act even where such subsidiary company continues to be a private company in its articles.

Points to be kept in mind before incorporation of a Public Limited Company:

Decide regarding the proposed name to be applied, objects to be carried by the Company, proposed registered office address, authorized capital, number of promoters, number of directors, number of shares to be subscribed by each promoter.

The name of the company should be in consonance with the principal objects of the company as set out in the memorandum of association. Every name need not be necessarily indicative of the objects of the company, but when there is some indication of objects in the name, then it shall be in conformity with the objects mentioned in the memorandum. [Rule 8(2)(b)(ii) of Companies (Incorporation) Rules, 2014]

The proposed name should not fall in the ambit of undesirable names specified in Rule 8 of Companies (Incorporation) Rules, 2014

The Company must have minimum Paid Up Share Capital as may be prescribed.

There must be at least 7 subscribers to the memorandum of Association of the company [Section 3(1)(a)]

Minimum number of Directors required is 3 Directors upto a maximum Limit of 15 Directors [Section 149(1) (a) & (b)]. A company can appoint more than 15 directors after passing a special Resolution in a general Meeting.

Every company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty-two days in the previous calendar year.[(Section 149(3)]

All Directors should have valid DIN. (In case the proposed directors don’t have a Director Identification number (DIN) allotted to them, Pl. Ref. procedure for DIN Application and allotment)

Digital Signature for any one of the Director is required to digitally sign the E-Forms to be submitted with the Registrar of Companies.

The Following Procedure to be followed for Incorporation of a Public Limited Company