What is right-share
As per section 62 of The Companies Act 2013 right share means issue of fresh share to existing share-holder in proportion of their holding in the company and the proportion of right share is not affected by making fresh allotment of share.
Procedure for allotment of right share
Before taking decision of right share board shall ensure that companies must have sufficient authorized share capital for making allotment of fresh share as right share.
If company hot having sufficient authorized share capital the board shall first increase authorized share capital.
Step-1 :- Call board meeting
• Issue notice at least 7 days before date of notice
• Notice should be issued along with agenda
• Pass resolution of issue of right share
• Decide cut of date
• Prepare offer letter
• Decide proportion of right share to existing share-holder
Step 2:- hold Board meeting
• Before transecting business at meeting ensure that required quorum is presented at meeting
• Quantify the share-holder who are eligible for right share
• Approve offer letter
• Authorizes to any of director to issue offer letter to share-holder
• Offer letter shall be send to all existing share-holder along with application letter
Note :- offer should be open for 15-30 days
Step 3:- File MGT 14 with Registrar of company
• The company should file MGT-14 with ROC within 30 days of passing resolution
• Attached certified true copy of board resolution for issue of share on right basis
Step 4:- Receive application accepted by share-holder along with application money
• The board of the company should receive accepted application and ensure that application money is also paid along with application letter
• Ensure the proper filling of application form and signing thereon
Step 5:- call board meeting for allotment of share
• Issue notice at least 7 days before date of notice
• Notice should be issued along with agenda
Step 6:- hold board meeting for allotment of share
• Before transecting business at meeting ensure that required quorum is presented at meeting
• Pass resolution for allotment of right share
• Allotment should be made in 60 days of receiving application money and application
Step 7:- file share allotment in PAS- 3 with ROC
• The director authorized on board meeting shall file share allotment to ROC
• While filing ensure that make attachment of List of allotee and board resolution for allotment of share
Step 8:- issue share certificate
• Pass resolution for issue of share certificate
• At least 2 director shall be authorized to sign share certificate
• Share certificate shall be issued in form SH-1
Note:-
- For right issue prospectus is not required as per section 23(2) of the companies act 2013.
- Right is made through letter of offer as per section 62 of the companies act 2013
In the event of fractional share these share can be ignored but sometimes its unfavorable to minority share holder.