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RIGHT ISSUE

A company always needs funds for its


operations and for the fulfillment of its this
need securities are issued. And whenever
company needs further capital then it has to
further issue those securities to its existing
shareholders first then it can issue them to
general public. This right to existing
shareholders is known as RIGHT ISSUE.
These new shares are issued to the existing
shareholders as the matter of their pre-
emptive right. Shares issued by the
company under such right is known as
Right shares.
GUIDELINES BY SEBI
REGARDING RIGHT ISSUE
 Once a company has announced the right issue
then it cannot withdraw its proposal. It has to
issue the securities as per the announcement.
 Underwriting of right issue is optional.
Underwriting can be done on the discretion of
the company.
 Before right issue company has to take prior
approval of the registrar of the companies
(ROC ‘s).
 Right issues should not be kept open for
more then 60 days.
 Right issue must be kept open for atleast

30 days.
 The amount of securities offered should

not exceed the amount specified in the


prospectus or letter of offer.
 Reservation is not allowed on right

shares.
 If a company does not receive minimum
subscription of 90% of the issue then entire
subscription will be refunded within 42 days.
 If a company receives over subscription of
right issue then the excess amount will be
refunded to the respective applicants.
 If a company delay the refund of over
subscription for more then 8 days after the
period of 42 days then it will be liable to pay
interest @ 15% p.a.
 Partly paid up shares must be made fully paid
up.
BONUS ISSUE
The term ‘bonus’ in relation to share
capital refers to an extra dividend to the
shareholders from surplus profits. When a
company has accumulated profits which
are in excess of its need then the excess
amount can be distributed by way of
bonus share among existing shareholders.
MODES OF USING PROFITS

1. By converting the existing partly paid shares


into fully paid shares without requiring the
shareholders to pay the uncalled amount. OR
2. By issuing new un issued shares to the
existing shareholders without requiring them
to pay the cash for the same.
GUIDELINES BY SEBI
REGARDING ISSUE OF BONUS
SHARES
 These guidelines are applicable to existing
companies because new companies cannot
have huge profits and therefore cannot issue
bonus shares.
 Bonus shares can be issued from the free
reserves.
 Company cannot pay bonus shares in lieu of
dividend
 Partly paid shares must be paid fully paid
up.
 After getting the approval of board of

directors the company must issue bonus


shares with six months of that approval.