UNIT IV ISSUE OF SHARES

SHARES
Provisions of the Companies Act
Registration & Issue of prospectus Minimum Subscription Application money Money to be deposited in a scheduled bank Opening of subscription list Statement in lieu of prospectus to be delivered to the registrar Compulsory listing of all public issues Initial offer of securities to be in the demat form in certain cases

SHARES
Registration & Issue of prospectus
Where a public company offers shares & debentures to the public , a copy of prospectus must be duly filed with the registrar Registration must be made on or before the date of publication of the prospectus The prospectus must be issued within 90 days of its registration

Minimum Subscription

SHARES

Sec.69(1) No allotment shall be made unless the amount stated in the prospectus as minimum subscription has been subscribed and the sum payable has been received If the minimum subscription is not raised within 120 days of the issue of the prospectus , all the money received shall be repaid within 130 days after the issue of the prospectus otherwise the directors of the company will have to repay the amount with interest @ 6% p.a

SHARES
Minimum Subscription
As per SEBI guidelines a company must receive a minimum of 90% subscription against the entire issue If the company does not receive minimum subscription within 60 days of the closure of the issue, the company shall refund the entire amount Any delay beyond 8 days will make the company liable to pay interest @ 15% p.a

SHARES
Application money
The amount payable on application on each share shall not be less than 5% of the nominal amount of the share

Money to be deposited in a scheduled bank

All the money received on application must be deposited in a scheduled bank till
The certificate to commence business is obtained or The entire amount payable on application is received by the company in respect to minimum subscription

SHARES
Opening of subscription list
No allotment can be made until the beginning of the 5th day after the publication of the prospectus or Some other time as may be prescribed in the prospectus The company may keep the subscription list open for any length of time

SHARES
Statement in lieu of a prospectus to be delivered to the registrar
A company with a share capital which has not issued a prospectus, shall not allot any of its shares or debentures unless a statement in lieu of prospectus has been filed with the Registrar at least 3 days before the first allotment This is not applicable to a private company

SHARES
Compulsory listing of all public issues
Sec. 73 provides that every company intending to offer shares or debentures to public by the issue of a prospectus has to make an application to one or more of the recognised stock exchanges for permission for the shares or debentures to be dealt within the stock exchange The prospectus must specify the name of the stock exchange Any allotment made in pursuance of such a prospectus shall be void if any such stock exchange does not grant permission within 10 weeks from the closing of such a subscription

GENERAL PROVISIONS (Allotment of shares)

Allotment provisions Allotment Allotment time Allotment must be in accordance with the of the Articles must be communicated must be made within reasonable
must be absolute & unconditional

ISSUE OF SHARES AT PAR

SEBI GUIDELINES for par value of shares At any point of time the par shall be 1 or multiples of 1 All the shares should be of the same par value

ISSUE OF SHARES AT A DISCOUNT (SEC.79) The issue of shares at a discount must be of a class of shares already issued At least one year should have elapsed at the date of issue from the date of commencement of business by the company The issue is authorized by a resolution in the GM, which must state the maximum rate of discount

ISSUE OF SHARES AT A DISCOUNT (SEC.79) It is sanctioned by the NCLT Shares are issued within 2 months of the date on which the issue is sanctioned by the NCLT or within such extended time as the NCLT may allow The rate of discount must not exceed 10%, except with the approval of the NCLT

ISSUE OF SHARES AT A PREMIUM (SEC.78) Issue of shares at a price higher than the face value Total premium amount is transferred to Securities Premium Account

ISSUE OF SHARES AT A PREMIUM (SEC.78) The securities premium may be utilized for the following purposes :
To issue fully paid bonus shares to members To write off preliminary expenses To write off expenses or commissions paid or discounts allowed on an issue of shares or debentures To provide for the premium payable on redemption of any redeemable preference shares or debentures

ISSUE OF SHARES AT A PREMIUM (SEC.78) The securities premium may be utilized for the following purposes :
For buy back of own securities ( 77-A )

Even when the securities are issued at a premium for consideration other than cash, a sum equal to the amount of premium must be transferred to the securities premium account

CALLS ON SHARES

A call may be defined as a demand by the company, in pursuance of a resolution of the BOD & in accordance with the regulations of the articles upon its shareholders, to pay the whole or part of the balance remaining unpaid on their shares during the lifetime of the company.

CALLS ON SHARES Requisites of a Valid call

Resolution of the BOD The amount & time of payment Calls on shares of the same class to be made on a uniform basis Bona fide & for the benefit of the company In accordance with the provisions of the articles of the company (Regulations 13-18 of Table A)

FORFEITURE OF SHARES Compulsory termination of membership & taking away the shares from a member by way of penalty for non-payment of any call, installment or premium on shares

FORFEITURE OF SHARES Essentials of Valid Forfeiture:

Forfeiture for non-payment of calls Notice precedent to forfeiture Resolution of forfeiture Bona fide

FORFEITURE OF SHARES Effect of Forfeiture:

Defaulting shareholder ceases to be a member of the company He also loses the money paid by him

FORFEITURE OF SHARES Reissue of Forfeited Shares:

A forfeited share may be sold or otherwise disposed of on such terms as the board thinks fit No return of allotment is required to be filed for the reissue of forfeited shares The title of the purchaser of forfeited shares will not be affected by any irregularity in proceedings with reference to the forfeiture or sale of the shares

FORFEITURE OF SHARES Annulment of Forfeiture

At any time before the sale of forfeited shares, the board may cancel the forfeiture on such terms as it thinks fit This power cannot be exercised without the consent of the forfeiting member

SURRENDER OF SHARES When a shareholder abandons his shares in favour of the company it is known as surrender of shares Articles may provide for the acceptance of a surrender of shares under circumstances which would justify forfeiture

SURRENDER OF SHARES Directors powers to accept surrender of shares

A valid call & default must exist Surrender should not be used as a device to relieve any member from his liability Surrender of shares is ultra vires if the shares are not liable to forfeiture

SURRENDER OF SHARES Effect

Member ceases to be the member of the company He remains liable as a contributory as a past member of the company, if the company is wound up within 12 months of his surrendering of shares Partly paid up shares which are surrendered can be reissued in the same manner as forfeited shares Where the surrender of shares is illegal, the shareholder is justified in applying to have the register of members rectified by placing his name thereon

TRANSFER OF SHARES
Section 82 provides that the shares of the member in a company shall be a movable property, transferable in the manner provided by the Articles of the company

TRANSFER OF SHARES
PROCEDURE
Instrument of transfer to be delivered to the company Instrument of transfer to be in the prescribed form Transfer by legal representative Notice to transferee

TRANSMISSION OF SHARES
When shares pass by operation of law from one person to another, it is known as transmission of shares This happens when a member becomes insolvent or goes insane dies,

In all such cases the legal representative or the Official Assignee or Receiver or Administrator appointed by the court, shall be entitled to the shares

TRANSMISSION OF SHARES
Regulation 25-28 of Table A
On the death of a member, the survivor, where the member was a joint holder, shall be the only person recognized by the company as having any title to his interest in shares A person becoming entitled to a share on a death or insolvency of a member, on production of a satisfactory proof as to his title, may elect either
To register himself as the holder of shares or To transfer the shares as the original member could have done

TRANSMISSION OF SHARES
Regulation 25-28 of Table A
If a person concerned elects to become a member, he shall send a written & signed notice to the company notifying his election. If he elects to transfer, he shall notify the election by executing a transfer A person becoming entitled to a share on transmission shall have the same right as to dividend & other advantages & privileges, as if he were the original holder except
Before registration as a member, he shall not exercise any right as member at the meeting of the company

METHODS OF RAISING SHARE CAPITAL

Private Placement of Shares

Preferential Allotment

IPO
METHODS

FPO

ISSUES

PUBLIC ISSUE

BONUS ISSUE

RIGHT ISSUE

PRIVATE PLACEMENT

IPO

FPO

PREFERENTIAL ALLOTMENT QUALIFIED INSTITUTIONAL PLACEMENT

FRESH ISSUE

FRESH ISSUE

OFFER FOR SALE

OFFER FOR SALE

INITIAL PUBLIC OFFERING

Refers to the selling of shares by a private company to the public for the first time. Initial Public Offering is a source of funds raised from the primary market. All subsequent public offerings are known as Follow-on Public Offerings or Secondary Market Offerings.

In the primary market, securities are offered to public for subscription for the purpose of raising capital or fund. The primary market provides the channel for sale of new securities. Primary market provides opportunity to issuers of securities; Government as well as corporate, to raise resources to meet their requirements of investment and/or discharge some obligation. They may issue the securities at face value, or at a discount/premium and these securities may take a variety of forms such as equity, debt etc. They may issue the securities in domestic market and/or international market. Secondary market is an equity trading venue in which already existing/pre-issued securities are traded among investors. Secondary market could be either auction or dealer market. While stock exchange is the part of an auction market, Over-the-Counter (OTC) is a part of the dealer market.

IPO

Initial public offer (IPO): When an unlisted company makes either a fresh issue of securities or offers its existing securities for sale or both for the first time to the public, it is called an IPO. This paves way for listing and trading of the issuers securities in the Stock Exchanges Further public offer (FPO) or Follow on offer: When an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public , it is called a FPO.

ISSUE

Rights issue (RI): When an issue of securities is made by an issuer to its shareholders existing as on a particular date fixed by the issuer (i.e. record date), it is called as rights issue. The rights are offered in a particular ratio to the number of securities held as on the record date.

ISSUE

Bonus issue: When an issuer makes an issue of securities to its existing shareholders as on a record date, without any consideration from them, it is called a bonus issue. The shares are issued out of the Companys free reserve or share premium account in a particular ratio to the number of securities held on a record date.

ISSUE
Private placement: When an issuer makes an issue of securities to a selected group of persons not exceeding 49, and which is neither a rights issue nor a public issue, it is called a private placement. Private placement of shares or convertible securities by listed issuer can be of two types: (i) Preferential allotment (ii) Qualified Institutional Placements

ISSUE
(i) Preferential allotment: When a listed issuer issues shares or convertible securities, to a select group of persons in terms of provisions of SEBI (DIP)guidelines, it is called a preferential allotment. The issuer is required to comply with various provisions which interalia include pricing, disclosures in the notice, lockin etc, in addition to the requirements specified in the Companies Act.

ISSUE
(ii) Qualified institutions placement (QIP): When a listed issuer issues equity shares or securities convertible in to equity shares to Qualified Institutional Buyers only in terms of provisions of SEBI (DIP) guidelines, it is called a QIP.

ADVANTAGES OF PUBLIC ISSUE

Money non-refundable except in the case of winding up or buy back of shares No financial burden i.e. no fixed rate of interest payable. However, in order to service the equity, dividend may be paid. Enhances shareholder's value if the company performs well Greater Transferability Trading & Listing of securities at stock exchanges Better Liquidity of securities Helps building reputation of promoters, company & its products / services, provided the company performs well

Eligibility norms for making these issues

SEBI has laid down eligibility norms for entities accessing the primary market through public issues. There is no eligibility norm for a listed company making a rights issue as it is an offer made to the existing shareholders who are expected to know their company. There are no eligibility norms for a listed company making a preferential issue. However for Qualified Institutions placement (QIP), only those companies whose shares are listed in NSE or BSE and those who are having a minimum public float as required in terms of the Listing agreement, are eligible. The main entry norms for companies making a public issue (IPO or FPO) are summarized as under:

Entry Norm I (EN I): The company shall meet the following requirements: (a) Net Tangible Assets of at least Rs. 3 crores for 3 full years. (b) Distributable profits in atleast three years (c) Net worth of at least Rs. 1 crores in three years (d) If change in name, atleast 50% revenue for preceding 1 year should be from the new activity. (e) The issue size does not exceed 5 times the pre- issue net worth To provide sufficient flexibility and also to ensure that genuine companies do not suffer on account of rigidity of the parameters, SEBI has provided two other alternative routes to company not satisfying any of the above conditions, for accessing the primary Market, as under:

Entry Norm II (EN II): (a) Issue shall be through book building route, with at least 50% to be mandatory allotted to the Qualified Institutional Buyers (QIBs). (b) The minimum post-issue face value capital shall be Rs. 10 crore or there shall be a compulsory market-making for at least 2 years OR Entry Norm III (EN III): (a) The project is appraised and participated to the extent of 15% by FIs/Scheduled Commercial Banks of which at least 10% comes from the appraiser(s). (b) The minimum post-issue face value capital shall be Rs. 10 crore or there shall be a compulsory market-making for at least 2 years. In addition to satisfying the aforesaid eligibility norms, the company shall also satisfy the criteria of having at least 1000 prospective allottees in its issue

Eligibility norms for making an IPO

Option A
It has Net Tangible Assets Rs. 3 crores in each of the 3 preceding of which a maximum of 50% can be held as monetary assets. If it has more than 50% of its net tangible assets in monetary assets, then it must have made a firm commitment to deploy such monetary assets in its business or in a project.

Option B(if not A )

The Offer must only be made by way of Book Building Further, at least 50% of the Offering must be allotted to Qualified Institutional Buyers (QIBs., failing which the full subscription money must be refunded. Or The Project is appraised by FIs/

Eligibility norms for making an IPO

Option B(if not A )

Scheduled Banks and at least 10% participation comes from the Appraiser and a further minimum 5% from other FIs/ Scheduled Banks. A further 10% must be allotted to QIBs. If these conditions are not met, then the full subscription money must be refunded and The minimum postissue face value of the capital is Rs. 10 crores.

Option A
It has a minimum net worth Rs. 1 crore in each of the 3 preceding full years of 12 months each It has a track record of distributable profits for 3 out of immediately preceding 5 years.

Option A
The proposed issue + all other issues made in the same financial year = 5times the pre-issue net worth as per the latest audited balance sheet of the last financial year. In case of a name change in the last one year, at least 50% of the revenue of the last one full year is from the activity suggested by the name.

Option B(if not A ) There is a compulsory market-making for 2 years from date of listing. The minimum buy and sell quotes must be for 300 shares and the difference between sell and buy quotes must not exceed 10%.

Option A The Offer can be by way of a Book Building or by way of a Fixed Price Offer The minimum number of prospective allottees must be 1,000.

Option B(if not A ) Further, the market maker must keep at least 5% of the issue size as inventory. The minimum number of prospective allottees must be 1,000.

Applicable Laws

A company is required to comply with the following laws in connection with a public issue :Provisions of Companies Act, 1956 Securities Contracts (Regulations) Act, 1956 SEBI rules & regulations Compliance of Listing Agreement with the concerned stock exchanges after the listing of securities. RBI regulations in case of foreign/NRI equity participation.

Management of a Public Issue involves the participation of . Managers to the Issue Underwriters Brokers Registrars to the issue Solicitors Printers Publicity and advertising agents Auditors Compliance officer Depositories Statutory agencies (ROC,SEBI,RBI AND STOCK EXCHANGES)

Agencies involved in a Public Issue

Documents required

Offer document Draft Offer document Red Herring Prospectus Abridged Prospectus Letter of offer Placement Document

Offer Document
Offer document is a document which contains all the relevant information about the company, promoters, projects, financial details, objects of raising the money, terms of the issue etc and is used for inviting subscription to the issue being made by the issuer. Offer Document is called Prospectus in case of a public issue or offer for sale and Letter of Offer in case of a rights issue.

Draft Offer Document

Draft offer document means the offer document in draft stage. The draft offer documents are filed with SEBI, atleast 21 days prior to the filing of the Offer Document with ROC. So its an offer document filed with SEBI for specifying changes, if any, in it, before it is filed with the Registrar of companies (ROCs). SEBI may specifies changes, if any, in the draft Offer Document and the issuer or the Lead Merchant banker shall carry out such changes in the draft offer document before filing the Offer Document with ROC. The Draft Offer document is available on the SEBI website for public comments for a period of 21 days from the filing of the Draft Offer Document with SEBI. Draft offer document is made available in public domain including SEBI website, for enabling public to give comments, if any, on the draft offer document.

Red Herring Prospectus

Red herring prospectus is an offer document used in case of a book built public issue. It contains all the relevant details except that of price or number of shares being offered. It is filed with ROC before the issue opens .Red Herring Prospectus is a prospectus which does not have details of either price or number of shares being offered or the amount of issue. This means that in case price is not disclosed, the number of shares and the upper and lower price bands are disclosed. On the other hand, an issuer can state the issue size and the number of shares are determined later. In the case of book-built issues, it is a process of price discovery and the price cannot be determined until the bidding process is completed. Hence, such details are not shown in the Red Herring prospectus filed with ROC in terms of the provisions of the Companies Act. Only on completion of the bidding process, the details of the final price are included in the offer document.

Abridged Prospectus
Abridged prospectus is an abridged version of offer document in public issue and is issued along with the application form of a public issue. It contains all the salient features of a prospectus.

Placement Document
Placement document is an offer document for the purpose of Qualified Institutional Placement and contains all the relevant and material disclosures.

Price of an issue
SEBI does not play any role in price fixation. There are two types of issues :

One where company and LM fix a price (called fixed price) and Other, where the company and LM stipulate a floor price or a price band and leave it to market forces to determine the final price (price discovery through book building process).

Book Building

It is a process of price discovery. The red herring prospectus does not contain a price. It contains either the floor price of the securities offered through it or a price band along with the range within which the bids can move. Price band -- The spread between the floor and the cap of the price band shall not be more than 20%. In other words, it means that the cap should not be more than 120% of the floor price.

Vetting by SEBI/Stock Exchanges

A company cannot come out with public issue unless draft prospectus is filed with SEBI. A company cannot file prospectus directly with SEBI. It has to be filed through a merchant banker. SEBI on receiving the same, scrutinizes it and may suggest changes within 21 days of receipt of prospectus.

Vetting by SEBI/Stock Exchanges

If the issue size is upto Rs. 20 crores then the merchant bankers are required to file prospectus with the regional office of SEBI
If the issue size is more than Rs. 20 crores, merchant bankers are required to file prospectus at SEBI, Mumbai office. Prospectus is also required to be filed with the concerned stock exchanges along with the application for listing its securities.

Classes of Investors

According to the book building process, three classes of investors can bid for the shares: Qualified Institutional Buyers: QIBs include mutual funds and Foreign Institutional Investors. At least 50% of the shares are reserved for this category. Retail investors: Anyone who bids for shares upto Rs 1,00,000 is a retail investor. At least 35% is reserved for this category. The balance bids are offered to high net worth individuals and employees of the company.

Procedure for the Public Issue

Pre-Issue Obligations (i.e. before the opening of issue) Board Resolution for approving the draft prospectus and related resolutions

Filing of form 23 with ROC for passing special resolution for issuing shares as above. Appointment of intermediaries and entering into MOU with them Due diligence by a merchant banker Submission of all required papers/documents with merchant bankers.

Procedure for the Public Issue

Preparation of draft prospectus in consultation with the merchant banker and submitting the same with SEBI along with the fees & other requirements and submitting the same with stock exchanges as per guidelines.

Receipt of queries from SEBI / stock exchanges, if any and make changes in prospectus, if required.

Procedure for the Public Issue

Reply to SEBI /stock exchanges in connection with changes in prospectus. Obtaining in-principle approval from stock exchanges File final prospectus with SEBI / stock exchanges / ROC Statutory Advertisements Submission of 1% Security Deposit with the Regional Stock Exchange. Depositing Promoter's Contribution in the issue in a separate bank account.

Procedure for the Public Issue

Collection of Application forms and processing the same with the Registrar & Share Transfer Agent in consultation with the merchant banker. Separate account to be opened for the applications received from public Submitting 3-day post issue monitoring report with SEBI by merchant banker. Basis of allotment in consultation with the regional stock exchange. Post Issue Advertisement Despatch of share certificates / refund orders

Procedure for the Public Issue

Entering into an listing agreement Obtaining permission from Stock Exchanges for listing & trading of securities Commencement of trading of securities 78-day post issue monitoring report to be submitted by merchant banker with SEBI. Redressal of Investors Grievances Application to SEBI/Stock Exchange for refund of security deposit

Employee Stock Option

An option given to whole time directors, officers of employees of the company To purchase the shares of the company at a future date at a predetermined price.

Employee Stock Option

1. 2. 3.

Employee means:A permanent employee of the company A director of the company An employee of a subsidiary or a holding company

Important Terms

Vesting : Vesting means the process by which the employee gets the right to apply for and be issued shares of the company under the options granted to him. Till the vesting takes place, the employee does not have a right to apply for the shares. Upon vesting, the employee gets an unfettered right to apply for the issue of shares upon fulfilment of the conditions

Important Terms

Act of exercise :
The act of exercise implies an application being made by the employee to the company to have the options vested in him issued as shares upon payment of the option price. Exercise can take place as specified after vesting.

Employee Stock Option

Conditions : The Company should constitute a compensation committee for the administration of ESOP. A special resolution has to be passed to get the approval of the shareholders. There is no restriction on the no of shares issued to a single member

Employee Stock Option

Conditions : The securities offered are subject to a lock in period A minimum period of one year should be there between the grant of options and its vesting There should be a maximum period of eight years between the grant of options and vesting. Employee options must be exercised within a maximum period of five years from the date of vesting

Employee Stock Option

Conditions : Option granted to employee shall not be transferable to any person Options cannot be pledged, hypothecated or mortgaged On the death of the employee option will vest with the legal heir. The Directors report shall contain the details of options granted, options vested and options exercised.

BONUS SHARES

Conditions for Issue of Bonus shares AOA must permit such issue Sufficient undistributed profit must be present A resolution for capitalizing the profits must have been passed by the BOD The resolution of the BOD must be approved by the shareholders in the general meeting SEBI guidelines in this regard must be complied with

BONUS SHARES

Conditions for Issue of Bonus shares No company shall, pending conversion of FCDs/PCDs, issue any bonus shares, unless similar benefit is extended to the holders of such FCDs/PCDs through reservation of shares in proportion to such convertible part of FCDs/PCDs.

BONUS SHARES

Conditions for Issue of Bonus shares The company must file with the Registrar

a return stating the number and nominal amount of bonus shares issued together with the names, addresses & occupations of the allot tees & a copy of the resolution authorizing the issue of such shares

This must be done within 30 days of the allotment of such shares

BONUS SHARES

SEBI guidelines The bonus issue is made out of the free reserves built out of the genuine profits or shares premium a/c The declaration of bonus issue , in lieu of dividend, is not made The bonus issue is not made unless the partly paid shares, if any existing, are made fully paid up

BONUS SHARES

SEBI guidelines The company ----

Has not defaulted in payment of interest or principal in respect of fixed deposits & interest on existing debentures or principal on redemption thereof & Has not defaulted in respect of the payment of statutory dues like---provident fund etc.

BONUS SHARES

SEBI guidelines A company announces its bonus shares after the approval of BOD must implement the proposal within 6 months from the date of approval & shall not have the option of changing the decision There should be the provision in AOA of the company for capitalisation of reserves & ,if not, the company shall pass a resolution in general meeting making provision in AOA

BONUS SHARES

SEBI guidelines
Consequent to the issue of bonus shares, if the subscribed & paid up capital exceed the authorised share capital, a resolution shall be passed by the company at its general body meeting for increasing the authorised capital A company while issuing bonus shares, forward to SEBI a certificate duly signed by the issuer company & duly countersigned by its statutory auditor by a CS in practise to the effect that conditions for the issue of bonus shares have been duly complied with

RIGHT ISSUE

Existing shareholders have the privilege to buy a specified number of new shares from the firm at a specified price within a specified time. A rights issue is offered to all existing shareholders individually and may be rejected, accepted in full or accepted in part. Rights are often transferable, allowing the holder to sell them in the open market.

RIGHT ISSUE (Notice)

The company must give notice to each of the equity shareholders, giving him the option to take the shares against payment of the specified money The notice must mention the number of shares the shareholder has the option to take Minimum of 14 days notice must be given for exercise of his option

RIGHT ISSUE (Notice)

Unless the Article provides otherwise, the notice must also state that the shareholder shall have the right to renounce the offer in whole or in part, in favour of some other person If the shareholder does not inform the company of his decision within a stipulated time, he shall be deemed to have declined the offer

RIGHT ISSUE (Notice)

However, where some shareholders of a company were not given notice to apply for allotment of additional shares, subsequent allotment of shares to other shareholders at a meeting would be invalid

RIGHT ISSUE (SEBI Guidelines)

Applicability

Listed companies Where offer exceeds 50 lacs Such company shall not be permitted to get any of its securities listed for a minimum period of 12 months

Withdrawal of a rights issue after announcement

Underwriting Appointment of Registrar Appointment of Merchant Banker

RIGHT ISSUE (SEBI Guidelines)

Partly paid up shares to be made fully paid Disclosure in letter of offer Agreement with depository Filing of letter of offer with Regional Stock exchange Closure of rights issue

Open for 30 days but not more than 60 days

RIGHT ISSUE (SEBI Guidelines)

Minimum subscription

90 % minimum subscription If not received then entire amount collected should be refunded within 42 days from the date of closure of the issue In case of delay in refund by more than 8 days, interest has to be paid @ 15% p.a

No reservations in right issue Promoters contribution and lock in period

RIGHT ISSUE (SEBI Guidelines)

Rights of FCDs & PCDs holders Restriction on further capital issue Oversubscription not to be retained Issue to be made fully paid up within 12 months Utilisation of funds in case of rights issue Compliance report

3 day post issue monitoring report 50th day post issue monitoring report

RIGHT ISSUE (SEBI Guidelines)

Additional facility for applying

Advertisement must be published at least 7 days before the date of opening of the issue. It must contain the following details : Centers where the shareholders may obtain duplicate copy of application forms in case they do not receive the original app form Shareholders may make application to subscribe to the rights on plain paper (if above condition is not satisfied)

RIGHT ISSUE (SEBI Guidelines)

Additional facility for applying

The advertisement must also contain a format to enable the shareholders to make the application on a plain paper like name , address, ratio of right issue, issue price, number of shares held etc. The applications can be directly send through registered post along with the application money Shareholders making the application otherwise than on a standard form shall not be entitled to renounce their rights and shall not utilise the standard form for any purpose even if it is received subsequently

RIGHT ISSUE (Exceptions)

In the following circumstances the company need not give the right issue to the existing shareholders:

In case of the allotment of shares within 2 years of the formation of a company or within 1 year after the first allotment , whichever event occurs earlier Where a special resolution is passed in the general meeting providing that the shares need not be offered to the existing shareholders

Contd.

Where no such special resolution is passed but the votes cast in favour of the proposal contained in the resolution moved in the GM exceed the votes, if any, cast against the proposal & the Central Govt. is satisfied, on an application made by the BOD in this behalf, that the proposal is most beneficial for the company

Contd.

A private company need not offer its further issue first to existing shareholders In case of issue of shares against conversion of loans or debentures Sec 81 does not come into play where the company proposes to make allotment of shares to its creditors