Rights Issue by Pvt Ltd Co in Companies Act 2013- Detailed procedure
Mrs. Jayalakshmi Srinivasan, Company Secretary, Chennai
Let us look at Sec. 62 which deals with Rights Issue.
62. (1)Letter of offer to be sent to person who are shareholders at the date of offer. The offer should be in proportion, as nearly as circumstances admit, to the paid-up share capital on those shares by sending a letter of offer subject to the following conditions,namely:—
(i) the offer shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days and not exceeding thirty days from the date of the offer within which the offer, if not accepted, shall be deemed to have been declined;
(ii) unless the articles of the company otherwise provide, the offer aforesaid 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; and the notice referred to in clause (i) shall contain a statement of this right;
(iii) after the expiry of the time specified in the notice aforesaid, or on receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the Board of Directors may dispose of them in such manner which is not dis-advantageous to the shareholders and the company;
(2) The notice referred to in sub-clause (i) of clause (a) of sub-section (1) shall be despatched through registered post or speed post or through electronic mode to all the existing shareholders at least three days before the opening of the issue.
4) A return of allotment of securities under section 42 shall be filed with the Registrar within thirty days of allotment in Form PAS-3 and with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 along with a complete list of all security holders containing-
(i) the full name, address, Permanent Account Number and E-mail ID of such security holder;
(ii) the class of security held;
(iii) the date of allotment of security ;
(iv) the number of securities held, nominal value and amount paid on such securities; and particulars of consideration received if the securities were issued for consideration other than cash.
In my view there is no stipulation of the following and hence Nothing given below will apply:
The requirement of valuation of shares and letter of offer being in the form prescribed- PAS 4 is not applicable. Valuation report would perhaps be required Only in so far as this would be required to comply with FEMA for equity infusion from abroad.
No requirement to ensure the securities allotted by way of rights offer shall be made fully paid up at the time of their allotment and the payment to be made for subscription to securities shall be made from the bank account of the person subscribing to such securities and the company shall keep the record of the Bank account from where such payments for subscriptions have been received:
No time limit prescribed for making allotment of securities under rights issue Only as per RBI regulations there is a requirement to allot within 180 days of receipt of money.
Nothing mentioned about keeping the monies received on application under rights issue in a separate bank account in a scheduled bank and shall not be utilised for any purpose other than—
(a) for adjustment against allotment of securities; or
(b) for the repayment of monies where the company is unable to allot securities.
No restriction on utilisation of Money before allotment.
Though the offer would be made in name and company shall keep records of such offers and all offers covered under this section shall be made only to such persons whose names are recorded by the company prior to the invitation to subscribe, and that such persons shall receive the offer by name, and that a complete record of such offers shall be kept by the company there is No requirement of filing the complete information about such offer with the Registrar within a period of thirty days of circulation of offer letter.
No stipulation on monies being payable towards subscription of securities only through cheque or demand draft or other banking channels but not by cash.
So it appears that if a Pvt Company wants to make allotment to one shareholder then it is possible for it to make a rights offer and get the shares renounced by the other shareholders without going through the complications of the private placement In other words If there are three shareholders two can renounce the shares to one and the allotment can be made to only one shareholder and the rigours of pvt placement need be gone through.
(iii) the date of allotment of security ;
(iv) the number of securities held, nominal value and amount paid on such securities; and particulars of consideration received if the securities were issued for consideration other than cash.
In my view there is no stipulation of the following and hence Nothing given below will apply:
The requirement of valuation of shares and letter of offer being in the form prescribed- PAS 4 is not applicable. Valuation report would perhaps be required Only in so far as this would be required to comply with FEMA for equity infusion from abroad.
No requirement to ensure the securities allotted by way of rights offer shall be made fully paid up at the time of their allotment and the payment to be made for subscription to securities shall be made from the bank account of the person subscribing to such securities and the company shall keep the record of the Bank account from where such payments for subscriptions have been received:
No time limit prescribed for making allotment of securities under rights issue Only as per RBI regulations there is a requirement to allot within 180 days of receipt of money.
Nothing mentioned about keeping the monies received on application under rights issue in a separate bank account in a scheduled bank and shall not be utilised for any purpose other than—
(a) for adjustment against allotment of securities; or
(b) for the repayment of monies where the company is unable to allot securities.
No restriction on utilisation of Money before allotment.
Though the offer would be made in name and company shall keep records of such offers and all offers covered under this section shall be made only to such persons whose names are recorded by the company prior to the invitation to subscribe, and that such persons shall receive the offer by name, and that a complete record of such offers shall be kept by the company there is No requirement of filing the complete information about such offer with the Registrar within a period of thirty days of circulation of offer letter.
No stipulation on monies being payable towards subscription of securities only through cheque or demand draft or other banking channels but not by cash.
So it appears that if a Pvt Company wants to make allotment to one shareholder then it is possible for it to make a rights offer and get the shares renounced by the other shareholders without going through the complications of the private placement In other words If there are three shareholders two can renounce the shares to one and the allotment can be made to only one shareholder and the rigours of pvt placement need be gone through.
Solicit the views of co professionals on the same.
