RIGHT ISSUERIGHT ISSUEA company always needs funds for its A company always needs funds for its

operations and for the fulfillment of its this operations and for the fulfillment of its this need securities are issued. And whenever need securities are issued. And whenever

company needs further capital then it has to company needs further capital then it has to further issue those securities to its existing further issue those securities to its existing shareholders first then it can issue them to shareholders first then it can issue them to

general public. This right to existing general public. This right to existing shareholders is known as RIGHT ISSUE. shareholders is known as RIGHT ISSUE.

These new shares are issued to the existing These new shares are issued to the existing shareholders as the matter of their pre-shareholders as the matter of their pre-

emptive right. Shares issued by the emptive right. Shares issued by the company under such right is known as company under such right is known as

Right shares. Right shares.

GUIDELINES BY SEBI GUIDELINES BY SEBI REGARDING RIGHT ISSUEREGARDING RIGHT ISSUE

Once a company has announced the right issue Once a company has announced the right issue then it cannot withdraw its proposal. It has to then it cannot withdraw its proposal. It has to issue the securities as per the announcement.issue the securities as per the announcement.

Underwriting of right issue is optional. Underwriting of right issue is optional. Underwriting can be done on the discretion of Underwriting can be done on the discretion of the company. the company.

Before right issue company has to take prior Before right issue company has to take prior approval of the registrar of the companies approval of the registrar of the companies (ROC ‘s). (ROC ‘s).

Right issues should not be kept open for Right issues should not be kept open for more then 60 days.more then 60 days.

Right issue must be kept open for atleast 30 Right issue must be kept open for atleast 30 days.days.

The amount of securities offered should not The amount of securities offered should not exceed the amount specified in the exceed the amount specified in the prospectus or letter of offer.prospectus or letter of offer.

Reservation is not allowed on right shares.Reservation is not allowed on right shares.

If a company does not receive minimum If a company does not receive minimum subscription of 90% of the issue then entire subscription of 90% of the issue then entire subscription will be refunded within 42 days.subscription will be refunded within 42 days.

If a company receives over subscription of right If a company receives over subscription of right issue then the excess amount will be refunded to issue then the excess amount will be refunded to the respective applicants.the respective applicants.

If a company delay the refund of over subscription If a company delay the refund of over subscription for more then 8 days after the period of 42 days for more then 8 days after the period of 42 days then it will be liable to pay interest @ 15% p.a.then it will be liable to pay interest @ 15% p.a.

Partly paid up shares must be made fully paid up.Partly paid up shares must be made fully paid up.

BONUS ISSUEBONUS ISSUE

The term ‘bonus’ in relation to share capital The term ‘bonus’ in relation to share capital refers to an extra dividend to the refers to an extra dividend to the shareholders from surplus profits. When a shareholders from surplus profits. When a company has accumulated profits which company has accumulated profits which are in excess of its need then the excess are in excess of its need then the excess amount can be distributed by way of bonus amount can be distributed by way of bonus share among existing shareholders. share among existing shareholders.

MODES OF USING PROFITSMODES OF USING PROFITS

1.1. By converting the existing partly paid shares By converting the existing partly paid shares into fully paid shares without requiring the into fully paid shares without requiring the shareholders to pay the uncalled amount. ORshareholders to pay the uncalled amount. OR

2.2. By issuing new un issued shares to the By issuing new un issued shares to the existing shareholders without requiring them existing shareholders without requiring them to pay the cash for the same.to pay the cash for the same.

GUIDELINES BY SEBI GUIDELINES BY SEBI REGARDING ISSUE OF BONUS REGARDING ISSUE OF BONUS

SHARESSHARES These guidelines are applicable to existing These guidelines are applicable to existing

companies because new companies cannot companies because new companies cannot have huge profits and therefore cannot issue have huge profits and therefore cannot issue bonus shares.bonus shares.

Bonus shares can be issued from the free Bonus shares can be issued from the free reserves.reserves.

Company cannot pay bonus shares in lieu of Company cannot pay bonus shares in lieu of dividend dividend

Partly paid shares must be paid fully paid Partly paid shares must be paid fully paid up.up.

After getting the approval of board of After getting the approval of board of directors the company must issue bonus directors the company must issue bonus shares with six months of that approval.shares with six months of that approval.