Relevant provisions
As per Section 62 of Companies Act 2013 the right offer shall include a right exercisable by the person concerned to renounce the shares offered to him in favor of any other person further if concerned person declines to accept the shares offered, the Board of Directors may dispose them in such manner which is not dis-advantageous to the shareholders and company;
Analysis of law
There are two ways by which shares can be issue to the outsider other than the existing share holder of company by way of Right Issue.
1. Renouncing shares by existing shareholder that are offered to him by Letter of Offer
2. Disposing unsubscribed capital by the Board of Directors
Below is the detailed procedure for same
Renouncing Shares By Existing Shareholder
1. Company will give offer of “Renunciation” to existing shareholders in the Letter of Offer. If Shareholder wants to renounce the Shares offered to him then shareholder will give a letter of renunciation in favor of other person (“herein referred as renouncee) to Company.
2. Company will receive an acceptance letter and share application money from the renouncee.
3. After closing of offer period company will hold a Board Meeting and allot shares to renouncee.
Disposing Unsubscribed Capital By The Board Of Directors
1. Company will give offer of “Renunciation” to existing shareholders in the Letter of Offer.
2. If Shareholder don’t subscribe to the ‘right issue’ nor renounce their right to a third person than Board of Directors can allot the un-subscribed portion of shares to any other person in such manner which is not detrimental to the interest of shareholder and the company.
3. Calling the Board Meeting for following
a. Allotment of shares
b. Taking note that the said allotment is in the best interest of the shareholder and the company
Note: – Normally practice followed by good companies is to ask the Shareholders to apply for additional shares, over and above the shares allocable to them as a matter of right. The un-subscribed portion is allotted to the members who have applied for additional shares on an equitable basis and balance amount is refunded.
The price at which shares are allotted to third person shall not be less than the price at which shares are allotted to existing shareholders
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