what is a right share???
Answers
Answer:
right share is the type of share in which we share everything right
#BAL
Sec. 81(1) of the Companies Act, 1956, states that right shares are those shares which are issued after the original issue of shares but having an inherent right of the existing shareholders to subscribe to these shares in proportion to their holding. Such shares must be offered to the existing equity shareholders on pro rata basis.
The offer of this type of shares shall be made in the form of a notice giving the particulars of shares offered and within a time not less than 15 days from the date of the offer for acceptance of such offer. These shares can also be issued to the new members when the existing shareholders do not accept the offer within a period of 15 days or more.
Usually, these shares are issued among the existing shareholders at a concessional rate.
Sec. 81(1) further states the provision regarding issue of Right Shares as:
(a) Such new shares shall be offered to the persons who, at the date of the offer, are holders of the equity shares of the company in proportion, as nearly as circumstances admit, to the Capital paid-up on those shares at that date.
(b) The offeree aforesaid shall be intimated by notice specifying the number of shares offered and limiting a time not being less that 15 days from the date of offer within which the offer, if not accepted, will be deemed to have been declined.
(c) The offers of the shares may renounce the offers in favour of any of the persons unless the Articles of the company provide otherwise.
(d) After the expiry of the time specified in the notice aforesaid or on receipt of earlier intimations from the person to whom such notice is given that he declines to accept the shares offered, the Board of Directors may dispose of them in such manner as they think most beneficial to the company. Shares issued under this section are called “Right” shares. But before issuing such shares the public company must follow the SEBI Guidelines in the regard.
Exceptions [Sec. 81(1A)]:
As per above section, under certain circumstances the company may offer further issue to persons other than the existing shareholders.
Under the circumstances, the company must follow either of the following procedures:
(i) If a special resolution is passed by the company in the general meeting;
(ii) If no special resolution is passed, then
(a) A proposal contained in the resolution is passed by a vote of majority members, and
(b) It is approved by the Board of Directors on that behalf. The Central Government has to be satisfied before approving the proposal that it is the most beneficial to the company.
Sec. 81(3) provides that the rules contained in Sec. 81(1) shall not apply:
(i) To a private company; or
(ii) Where the subscribed Capital of a Public Company is increased due to the debenture-holders or creditors who gave an option to convert the debenture or loans into share of the company. It must be remembered that a right is an option and not an obligation to the existing shareholders to purchase shares at the specified price.
However, a shareholder has four following options regarding ‘Right Issues’:
(i) To exercise the Right;
(ii) To sell their Rights;
(iii) To hold the Rights until they expire; and
(iv) To sell existing shares and, at the same time, to purchase new shares.