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Any private limited company registered in India can opt for a right issue, provided:
● The company has not declared dividends in the past two years.
● The Articles of Association permit right issues.
● There are no legal restrictions or encumbrances on the company.
Right issues offer distinct advantages:
● Internal Capital Generation: Raises capital from existing shareholders, showcasing trust and strengthening investor confidence.
● Proportional Ownership Maintenance: Maintains existing shareholder voting rights and equity distribution, avoiding dilution.
● Cost-Effective Fundraising: Offers a cheaper alternative to external fundraising options, minimizing administrative costs and potential investor negotiations.
● Market Signal: Demonstrates confidence in the company’s future growth, potentially attracting further investment interest.
Ensure you have all necessary documents readily available to avoid delays:
● Copies of Board Resolutions
● Notice to Shareholders
● Share Application Forms
● Proof of Shareholding of each shareholder
● Payment challan for filing fees
● Additional documents may be required depending on the state and ROC requirements.
Right issue follows a specific legal procedure outlined by the Companies Act, 2013. CAA guides you through every step, minimizing disruptions and ensuring legal compliance:
1. Board Resolution: Convene a Board Meeting and pass a resolution proposing the right issue, specifying the number of shares and offer price.
2. Notice to Shareholders: Issue a notice to all shareholders informing them of the right issue, offer details, and subscription deadlines.
3. Share Application Filing: Shareholders submit applications to subscribe to new shares within the specified timeframe.
4. Allotment of Shares: Based on received applications, allot new shares to shareholders in proportion to their existing holdings.
5. Payment and Listing: Shareholders make payments for allotted shares, and the new shares are listed on the relevant stock exchange (if applicable).
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Submit all necessary documents required for company registration.
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A right issue of shares refers to the issuance of additional shares to existing shareholders in proportion to their existing shareholding, enabling them to maintain their ownership percentage in the company.
Reasons may include raising additional capital, rewarding existing shareholders, funding expansion projects, or enhancing liquidity in the market.
The procedure typically involves obtaining board approval, offering shares to existing shareholders at a predetermined price, obtaining shareholders' approval, updating company records, and filing necessary forms with the RoC.
Yes, all existing shareholders have the right to participate in a right issue of shares, subject to their entitlement as per the terms of the issue.
Benefits may include the opportunity to increase shareholding at a discounted price, maintaining ownership percentage in the company, and potential capital appreciation.
The company can offer unsubscribed shares to other shareholders or raise capital through alternative means.
Absolutely! CAA offers comprehensive support, from drafting resolutions and notices to processing applications, allotting shares, and managing filings with the ROC.
Yes, restrictions may include compliance with SEBI regulations, approval requirements, pricing guidelines, and disclosure requirements, if applicable.
Documents such as board resolution, notice of the general meeting, offer letter to shareholders, Form PAS-3, and necessary forms for filing with the RoC are required.
The process must be completed within a specified timeline, as per the requirements of the Companies Act, 2013, and any applicable regulations.
Non-compliance may lead to legal challenges, rejection of the issue by regulatory authorities, penalties imposed by SEBI, and adverse impact on the company's compliance status and reputation.
Yes, Avenue Advisory provides expert assistance for conducting right issues of shares, including drafting of resolutions, preparation of documents, filing with the RoC, and compliance monitoring.
Shareholders may have tax liabilities depending on the offer price and holding period of the new shares. Consult a tax professional for specific advice.
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