Answer» - When a company wants to issue further capital it can issue shares to its existing equity shareholders which are called Rights Issue.
- According to the Companies Act, 2013 company has to fulfill certain provisions for making a Rights Issue.
- the provisions are
- Rights shares are sold to the existing shareholders at a price that is lesser than its market price.
- A company has to send a ‘Letter of offer’ to the existing shareholders at the time of issuing Rights Shares.
- The letter of offer shall mention
- The number of shares offered.
- The period of offer i.e., offer is valid for a period not less than fifteen days and not exceeding thirty days from the date of offer.
- The letter of offer can be sent by registered post, speed post, courier, or through electronic mode.
- If a shareholder does not respond to the Rights Issue offer within a given time, it is implied that he is not interested in the offer and the company can offer the unsold shares to new Investors.
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