Rights Issue

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Rights Issue

Section 62(1) of the Companies act, 2013 provides for further issue of share capital by a Company, if it proposes to increase its subscribed capital by the way of fresh issue of shares. Such shares should be first offered to existing shareholders at the date of the offer, are holders of equity shares of the company in proportion, by sending a letter of offer subject to the following conditions.

The object is, of course, to ensure equitable distribution of Shares and the proportion of voting rights is not affected by issue of Fresh shares.

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

The Securities and Exchange Board of India (SEBI), has in its recent SEBI/HO/CFD/DIL2/CIR/P/2020/13 dated January 22, 2020 sought to simply the rights issue process to make it more efficient and effective, by amending the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”) and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”). Accordingly, following changes are made with respect to the Rights Issue process. It has shortened the advance notice period from 7 days to 3 working days and instructed issuers to provide newspaper advertisement disclosing date of completion of dispatch and intimation of same to the stock exchanges for dissemination on their websites. The circular also contains the “Introduction of dematerialized Rights Entitlements (REs)” and “Procedures on the Rights Issue process” under Annexure 1.

Download SEBI circular (.pdf)

Click here to check FAQs on Rights Entitlement (REs)

Issuers desirous of using NSE's online E-IPO system for Rights Issue / Call Money Notice are required to comply with the following procedures: