Listing of right shares - Security Analysis and Investment Management

The formalities that have to be fulfilled in the case of listing of right shares are given below:

  1. The company should notify the stock exchange, the date of meeting of Board of Directors at which the proposal of the right shares or debenture is to be considered.
  2. The company should inform the decision taken regarding the right issue to the stock exchange immediately.
  3. As per section 81 of the Companies Act, 1956 the company should obtain the consent of the shareholders by way of a special resolution in general body meeting.
  4. The record date for closure of register of members should be intimated to the stock exchanges.
  5. The letter of offer should give financial information before one month of the date of letter of offer and from the date of company’s last balance sheet. The working results regarding the sales/turnover and other income, estimated gross profit/ loss should be provided. The provisions made for depreciation and taxes should be presented. Estimated amount of profit and loss also should be given.
  6. The current price of the share, highest and lowest price of the equity during the related period and the week and prices for the last four weeks should be provided. The shareholders can renounce the rights in favour of their nominees. The company has power to reject any nominee of whom it does not approve. If the nominee is rejected, the shareholders have the right to take up shares applied by the rejected nominee. The shareholders are entitled to apply for additional shares. If the shareholders have renounced their shares in whole or in parts in favour of any other person, they cannot apply for additional shares. If the shares are not quoted at premium this condition would be relaxed by the stock exchanges.
  7. The applications are accepted at all centres where recognized stock exchanges are situated. If the company is not able to make such arrangements at all centres, it can have the centres of its own choice subject to the condition that bank commission and collection charges for out station cheques would be borne by the company.
  8. The letter of offer should be made within six weeks after the closure of the transfer books.
  9. The shareholders should be given reasonable time to record their interest or exercise their rights. It should not be not less than four weeks.
  10. The renunciation forms should be made available to the shareholders freely on request.
  11. The company should inform the stock exchange the last date fixed for submission of rights application, split/renunciation application and consolidated coupons.
  12. The company should forward a specimen copy of the letter of offer and application form for the rights issue to the stock exchange.
  13. After dispatching the allotment letters or share certificates the company should apply for listing in the prescribed form. The company has to submit the distribution, an analysis form and new issue statement forms.
  14. After receiving the application form along with the required documents, the stock exchange would permit the shares to be listed for official dealing by its members.
  15. The Securities and Exchange Board of India is taking steps to facilitate the speedy disposal of right issues. It has directed all stock exchanges to amend their listing rules. The appraisal of the rights issue is left with the merchant bankers. The provisions relating to the fixing of record dates for the purpose of right issue has been ignored. The companies can apply for record date simultaneously with the filing of the letter of offer with SEBI.

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