# Rights Issue of Shares

> A rights issue offers new shares to existing equity shareholders in proportion to their holdings under Section 62(1)(a). The letter of offer must keep the offer open for at least 15 and at most 30 days, shareholders may renounce their rights in favour of others unless the articles prohibit it, and the allotment is reported in PAS-3 within 30 days. Private companies can shorten the timelines if 90% of members agree.

Practice: Company Secretary & Corporate Compliance — https://www.industax.com/services/company-secretary/

Rights issues are the simplest way to raise money from existing shareholders without changing proportionate ownership. No valuation by a registered valuer is required under the Companies Act for a pure rights issue, though issuing at a price far below fair value can have income-tax consequences for shareholders who take up more than their share.

If a non-resident shareholder subscribes, FEMA pricing and FC-GPR reporting apply as for any allotment.

Unsubscribed shares can be disposed of by the board in a manner not disadvantageous to shareholders, as provided in the letter of offer.

## Key facts

| Item | Detail |
| --- | --- |
| Law | Section 62(1)(a), Companies Act 2013 |
| Offer period | 15–30 days (shorter for private companies with 90% member consent) |
| Renunciation | Allowed unless the articles say otherwise |
| Return of allotment | PAS-3 within 30 days |

## Who needs this

- Companies raising money from existing shareholders
- Promoters increasing capital without diluting others' proportion
- Companies converting shareholder loans into equity

## What's included

- Board resolution and letter of offer
- Renunciation forms and acceptance tracking
- Allotment, PAS-3 and certificates
- Authorised capital check and SH-7 if needed

## Documents

- Register of members as on record date
- Board approval of issue terms
- Bank receipts of subscription money

## Process

1. **Terms** — Ratio, price and record date fixed by the board.
2. **Offer** — Letter of offer sent; acceptances and renunciations collected.
3. **Allotment** — Shares allotted; PAS-3 filed; certificates issued.

## FAQs

### Is a valuation needed for a rights issue?

Not under the Companies Act for a pure rights issue. FEMA valuation is needed if non-residents subscribe.

### Can a private company complete a rights issue faster?

Yes. Private companies can shorten the offer period if 90% of members consent in writing or electronically.

### What happens to unsubscribed rights shares?

The board can dispose of them as stated in the offer, in a manner not disadvantageous to shareholders and the company.

## Official sources

- Ministry of Corporate Affairs — MCA21 portal: https://www.mca.gov.in/
- Companies Act, 2013 (India Code): https://www.indiacode.nic.in/handle/123456789/2114

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This is general information, not advice for your specific facts.