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allotment of shares in public company

Postby ramneesh1 » Fri Feb 06, 2009 4:15 pm

Dear friends

A public company wishes to make allotment of shares by right issue

what is the procedure in brief

does it still call for requirement of general meeting as is in preferential allotment u/s 81(1A)


pl. reply

thanks

Ramneesh
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Re: allotment of shares in public company

Postby Rupender Dhiman » Fri Feb 06, 2009 4:33 pm

Dear Ramneesh,

After having a reading of Section 81, I am of the opinion that normal procedure of allotment of shares is to be complied like hold a board meeting, decide the pattern of allotment and make the allotment and File only Form 2 .

I think there is no need of convening General meeting and compliance of other requirement of Section 81(1A).

Members Pls correct me where I am wrong.

Regards
Rupender
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Re: allotment of shares in public company

Postby ramneesh1 » Fri Feb 06, 2009 4:52 pm

hi rupender

u mean to say board meeting to be convened, decide the allotment detail i.e. ratio etc. and despatch letter of offer and necessary documents to members, either they accept, renounce or keep silent

thereafter board is empowered to make the allotment for subscribed portion as per acceptance and for unsubscribed portion as per its discretion

in entire above procedure, since offer made to existing shareholders in proportion so this can be done without calling any general meeting,

correct me if wrong

thanks

Ramneesh
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Re: allotment of shares in public company

Postby Rupender Dhiman » Fri Feb 06, 2009 5:08 pm

Pls tell me why do you believe that EGM to be convened for this purpose.

Pls suggest.
Regards
Rupender
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Re: allotment of shares in public company

Postby ramneesh1 » Fri Feb 06, 2009 5:14 pm

dear rupender

i do not believe, rather i am of the opinion that procedure above is fine enough and no need for EGM

just wanted to confirm from our dear friends in the forum and to invite their counter views, if any

Ramneesh
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Re: allotment of shares in public company

Postby Rupender Dhiman » Fri Feb 06, 2009 5:28 pm

For unsubscribed portion in right issue, it is a point of debate whether board has power to allot it as per its discretion or not becoz existing shareholders has not taken any interest in such shares.

Further if such shares are allotted to other than existing, then it would amount to prefrential allotment.

So most of allotments to be made in public ltd company will have to comply prefrential allotment section 81(1A).

In my company what I do is I pass a special resolution under section 81(1A) with a bigger amount and keep on making allotment out of that amount for a period of next 6 months.

Pls correct me.

Regards
Rupender
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Re: allotment of shares in public company

Postby yogesh chande » Sat Feb 07, 2009 7:30 am

Rights issue has got nothing to do with section 81(1A).

No shareholders approval required, unless the article of association require the same.

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Re: allotment of shares in public company

Postby Rupender Dhiman » Mon Feb 09, 2009 10:18 am

Dear Yogesh,
I have a few query on right issue.

If allotment is to be made to one shareholder among the existing shareholders, then is it the right issue or prefrential?

As per my understanding, the right issue is to be offered to all the shareholders in proportion to their existing shareholding .

Further in relation to unsubscribed portion of right issue, if such shares are issued to other than existing will that be covered in right issue?

Pls suggest on the above.

Members' views are also invited.

Regards

Rupender Dhiman
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Re: allotment of shares in public company

Postby pca » Mon Feb 09, 2009 1:12 pm

Dear friends,

Further issue of shares by a public co. is governed by Sec.81. Gist of the Section is as under:

1) If the issue is to be made within 2 years of its incorporation or after expiry of one year from the allotment of shares made for the first time after incorporation, whichever is earlier, Sec.81 will not apply and the Board is competent to make allotment.

2) If the issue is to be made after the period specified in (1) above, Board can issue the shares provided the same are issued to the existing shareholders only on proportionate basis ("rights issue").

3) If the issue is to be made after the period specified in (1) above, but not on proportionate basis ("rights issue"), special resolution has to be passed u/s 81(1A)(a). Further, if the co. is unlisted, it has to follow Unlisted Public Cos. (Preferential Allotment) Rules 2003 and obtain certificate from Statutory Auditors for compliance of the Rules.

Regards,
PC Agrawal
Aurangabad (Maharashtra)
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