BBNC

Rights issue


A rights issue is a sale of rights to current shareholders of a company that allows them to purchase more shares directly from the firm at a reduced price rather than on the secondary market. The number of extra shares that can be purchased is determined by the shareowners' current holdings.
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Overview

When a firm wishes to raise more capital from current shareholders, rights issue method is used. It is accomplished by providing them with additional shares at a lower price than the market price. The number of shares available is determined on a pro-rata basis.

Existing shareholders have the option to purchase these shares, but they are not obligated to do so. This, on the other hand, provides them with an opportunity to expand their share in the firm.

Below are few reasons a company executes Rights Issue:
  1. A large amount of money may be required when a firm plans to expand its operations. Instead of taking on debt, they may want to take on stock in order to avoid making set interest payments. A rights issue to generate equity capital might be a more efficient approach to accomplish the goal.
  2. When debt/loan finance is unavailable, unsuitable, or too expensive for a project, a firm would often acquire money through a rights issue.
  3. Companies who want to enhance their debt-to-equity ratio or purchase a new firm can take the same approach to get capital.
  4. In order to repair their financial health, companies may issue shares to pay off debt.



Benefits of Rights issue

Checklist/Requirements

  1. Corporate Identification Number (CIN) /name of the Company
  2. Valid DSC (Digital signature Certificate) of Existing Director of the Company
  3. Type of Security to be issued new investor (Equity / Preference / Debenture)
  4. Whether the investor is existing shareholder or new investor in the company
  5. Proposed investment size
  6. % Of shares / No. of Shares to be issued to new investor
  7. Investors Name, Address, Occupation and Nationality
  8. Debt Structure of the company
  9. Copy of PAN of all investors
  10. Bank Statement (After receipt of investment amount)

Process of Rights issue

Step 1: Raise a request with us, discussion with BBNC team
Step 2: Client to share the information/documents required
Step 3: Convene and hold Meeting and pass Resolution
Step 4: BBNC to share documents with client
Step 5: Client to share executed documents
Step 6: BBNC to file e-Form with Ministry
Step 7: BBNC to Pay Stamp Duty on Share Certificate
Step 8: BBNC to issue share certificate

Key Deliverables

  1. Resolution and other relevant documents relating to allotment of security
  2. Filed e-Forms and Challans
  3. Share Certificates

Rights Issue

Why Choose Us

  Entrepreneur Friendly

We make the process so easy and fast that you will not even feel the headache of all the paperwork, and our professionals will provide you all the promised deliverable within a given span of time.

  Experienced Professionals

All our professionals are qualified and specialized in that particular work. Making sure no mistakes are done at the time of filings with the authorities so that company won’t have to pay any penalties due to mistakes.

  One Stop for All Your Requirements

We support you throughout the journey of your business, from the incorporation, Accounting and taxation support, Secretarial compliance support, and Legal support.

  Cost-Effective

We believe that cost plays a vital role in any company’s growth stage, that’s why we do not surprise our clients with hidden charges, you pay what you see in the initial proposal.


Frequently Asked Questions


Is accepting shares offered in rights issue mandatory?
It is not necessary to purchase the rights that are being provided. A shareholder has two options:
  • Ignore their rights and allow them to expire.
  • Sell the rights to other interested investors.
Companies offer rights issues to generate more cash for a variety of reasons.

A corporation may issue rights for a variety of reasons, as detailed below:
  • The firm has run out of cash and is in desperate need of financing.
  • For business growth, takeovers, mergers, and acquisitions.
  • To obtain equipment.
  • For corporate reasons in general.
  • To pay back the debt.
The rights issue benefits shareholders since it allows them to expand their interest in a firm at a lower price than the current market price.
The rights issue is a proposal that the shareholder must adopt. If a shareholder does not exercise his or her rights, such rights expire, which means the shareholder will not receive any further shares if they are not sought for.
No, it is only for the existing shareholders of the company. However, The Investors may renounce the Rights Entitlements, credited to their respective demat accounts by way of an off-market transfer through a depository participant.
Yes, applicants can apply for any number of additional shares but the allotment of the same will depend on shares available for apportionment and will also be in proportion to your holding, irrespective of additional shares applied by applicants.
The shareholders who are offered may or may not subscribe to the same. They may subscribe partly or fully the offer. They have a power to renounce the shares offered to any other person who need not be an existing shareholder of the company
If shareholders do not take up the rights issue, their stake in the company will be diluted.