Form to be filed to ROC in case of Rights Issue – Procedure and key Goals

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 Procedure and key Goals Form to be filed to ROC in case of Rights Issue

Additional capital shares are issued through Right Issue to raise subscribed share capital of a registered company. Instead of offering shares to the general public, the Company issues shares to existing shareholders in proportion to their current holdings. It is a highly effective strategy for increasing the Company’s share capital. The issue is so there because it allows current owners a first-look opportunity to purchase additional shares at a lower price than the market price. The rights issue is an offer to existing shareholders to purchase more shares in proportion to their current holdings. We will explore more about the Form to be filed to ROC in case of Rights Issue in this article.

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“Rights Issue” under Form to be filed to ROC in case of Rights Issue

The term ‘right issue’ refers to the practice of issuing shares to current members in proportion to their existing shareholdings. The goal is, of course, to guarantee that the proportion of voting rights is not subject to modification by the issuance of new shares.

In other words, The Right Issue of Shares is a formal invitation to the Company’s current shareholders to purchase additional new shares. The term “Right Issue” refers to the right granted to present shareholders to purchase new shares at a lower price than the market price. The Company conducts a right issue of shares in order to improve the market exposure of its shareholders.

Registrars of Companies (ROC) under Form to be filed to ROC in case of Rights Issue

Registrars of Companies (ROC) as per Section 609 of the Companies Act, 2013 for the various states and union territories have the primary responsibility of registering companies and LLPs formed in those states and union territories and ensuring that such companies and LLPs comply with the Act’s statutory requirements. These offices serve as a registry of records pertaining to the firms registered with them, which are open to the public for examination upon payment of the authorized price. The administrative supervision of these offices is under the Central Government through the respective Regional Directors.

Form to be filed to ROC in case of Rights Issue – Private Company

Before the 5th of June, 2015, the Private Company had to file two forms, namely:

(a) PAS – 3 for return of allotment, and 

(b) MGT – 14 for powers of the board under section 179 (3) (c) which states that a board resolution can pass it for the issue of shares; therefore, section 117 (3) (g) requires passing of resolutions in accordance with subsection (3) of section 179. Further applicant should file it with the ROC.

On June 5, 2015, the Ministry of Corporate Affairs issued a notification exempting private companies from Section 117 (3). (g). As a result, if a private company wishes to conduct a rights issue, they can do so by simply attaching PAS -3 (Table A and B, as well as the Board Resolution for allotment) to the ROC within 30 days after the passage of the Board Resolution for allotment of shares.

Form to be filed to ROC in case of Rights Issue – Public Companies (Unlisted)


Forms required for Public Company are:

  • PAS – 3 within PAS – 3 with (Table A and B and Board Resolution for allotment) as an attachment to the ROC within 30 days of the Board Resolution for allocation of shares after its completion process, and
  • MGT – 14 for board powers under section 179(3)(c) which states that a board resolution gets its approval for the issuing of shares; hence, section 117(3)(g) states that resolutions passed in accordance with sub-part (3) of section 179 must be submitted with the ROC.

Rights Issue – Key Goals

  • The Right Issue takes place to raise the Company’s subscribed capital.
  • Company’s existing shareholders will recieve the share in proportion to their current share capital issued before.
  •  The Right Issue is complete by issuing a letter of offer to the Company’s shareholders.
  •  Shareholders should be notified of the issuance of shares and given the opportunity to accept the shares offered to them.
  •  The shareholders must respond to the notification within 15 days, with a maximum of 30 days.
  • If the shareholder does not react to the Company’s notification of issuing shares, the offer will act as rejected by the shareholders.
  • The communication of share issuance shall be there in the notification and delivery of such notification is hand-over to shareholders through registered mail, speed mail, or any electronic means.

Rights Issue – Procedural Steps 

These are the procedures for the Right Issues of Shares:

  • Board Meeting Notice: The notice of the Board Meeting shall be provided to shareholders seven days before the date of the Board Meeting, according to Section 179(3) of the Companies Act of 2013. The agenda for the meeting should be there in the notice.
  • Organize a Board Meeting: The Board Meeting will take place along with a adoption of a Board Resolution. The Resolution gets its approval in accordance with Secretarial Standard-1 (SS-1). The Right Issue does not require Shareholder approval by Special Resolution. The Board of Directors has the authority to enact a Board Resolution and issue shares to existing shareholders of the Company in proportion to their present holdings.
  • Letter of Acceptance: Following the adoption of the Board Resolution, after the Letter of Offer gets its approval. The distribution of Letter of Offer takes place to all shareholders through registered mail, express mail, or electronic means. The issuance of letter must takes place at least three days prior to the opening of the issue, according to Section 62(2) of the Companies Act of 2013.
  • Acceptance Subscription Period: Acceptance of the letter of offer has a maximum term of 15 days and a maximum period of 30 days. The shareholders should accept the offer only if it falls within the specified limit.
  • MGT-1 Form: Applicant must file Form MGT-1 within 30 days from the passing of the Board Resolution. Form MGT-1 should accompany a genuine certified copy of the Board Resolution. In the event of public companies, the applicant must file the Form MGT-1.
  • Accept Application Funding: The applicant shall deliver the application after its acceptance, along with the application fee to the Board. Both commercial and public companies accept cash as payment.
  • Second Board of Directors Meeting: Following receipt of the application, a notice of the second Board Meeting shall be provided to all shareholders at least 7 days before the meeting date. The agenda for the Board Meeting should be there in the notification. At the Board Meeting, the requisite quorum of the Board should be present. The Board Resolution for Share Allotment will approve in the second meeting of directors.
  • Distribution of Shares : The Allotment of Shares is following the passage of the Board resolution at the second Board Meeting. The company can allot the Shares within 60 days after receiving the application and application.
  • Forms must be sent to ROC: Following the allotment of shares, the Company’s Director of Board of Directors must submit Form PAS-3 with the Registrar of Companies (ROC). The applicant must file Form PAS-3 within 30 days following the share allotment. Form PAS-3 should be accompanied with a certified authentic copy of the Board Resolution and a list of allottees.
    The applicant must submit Form MGT-14 to the ROC for both Share Issues and Share Allotment.
  • Allocation of Share Certificates: The Share Certificate is provided to the shareholders upon the submission of Form PAS-3. The issuance of should takes place Share Certificate within two months after the date of share allotment. At least two of the Company’s Directors should sign the Share Certificate. The issuance of Share Certificate will takes place in SH-1 form.The applicant must receive the Share Stamp within 30 days of the issuance of Share Certificate.

Get ROC Annual filings starting from ₹ 3000/-

Endnote

The purpose for Right Issue of Shares is to ensure equitable distribution of Shares in the Company. The Right Issue of Shares is an offer to the Company’s current shareholders to acquire new shares at a reduced price. Before deciding to use this way to acquire funds for a company, one should be familiar with the regulations governing it. 

We have experts to assist you with the Procedure of Right Issue of Shares. Our specialist will guide you and assist you during the treatment.

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