A rights issue is a method of issuing further shares to existing equity shareholders in proportion, as nearly as circumstances admit, to their existing paid-up share capital. It is governed principally by Section 62(1)(a) of the Companies Act, 2013 and applicable rules. CorporateWalla assists companies with rights-issue planning, board documentation, offer letters, shareholder communication, subscription tracking, allotment documentation and applicable MCA filings.
A rights issue gives existing equity shareholders an opportunity to subscribe to additional shares before the company offers the relevant shares elsewhere, subject to the statutory process and the company's Articles.
The offer is generally made in proportion to the shareholder's existing paid-up equity shareholding.
A rights issue is different from:
Companies may consider a rights issue when they want to:
A rights issue does not guarantee that every shareholder will subscribe.
The offer is made to persons who hold equity shares on the relevant date, in proportion as nearly as circumstances admit to their paid-up equity share capital.
Unless the Articles provide otherwise, the offer ordinarily includes a right for the shareholder to renounce all or part of the entitlement in favour of another person, subject to the applicable statutory process.
Section 62 provides an offer period of not less than 15 days or such lesser period as may be prescribed, and not more than 30 days. Rule 12A prescribes a minimum of 7 days for acceptance under the standard framework.
For eligible private companies and specified situations where statutory exemptions apply, shorter periods may be available subject to the prescribed conditions and shareholder consent.
The statutory notice/letter of offer must be dispatched to existing shareholders through a permitted mode with proof of delivery and within the applicable advance-notice period.
After the applicable offer period, or earlier decline, the Board may deal with unaccepted shares in a manner that is not disadvantageous to the shareholders and the company, subject to the Act, Articles and transaction structure.
| Rights Issue | Private Placement |
|---|---|
| Primarily offered to existing equity shareholders | Offered to identified persons under Section 42 |
| Proportionate entitlement is the starting point | No general proportionate entitlement |
| Governed principally by Section 62(1)(a) | Governed by Section 42 and related provisions |
| Renunciation may be available subject to Articles/law | Different offer and investor restrictions |
| Not a public solicitation | Cannot be conducted as unrestricted public solicitation |
A preferential issue is a separate route under Section 62(1)(c) and applicable rules. It may involve selected persons and additional valuation/approval requirements.
“Rights issue” is not a generic term for every issue to existing shareholders or selected investors.
Private companies can undertake rights issues, subject to the Companies Act, Articles and applicable exemptions.
Certain private-company exemptions can modify statutory timelines where the prescribed conditions and shareholder consent requirements are satisfied.
The exact exemption should be checked for the company's current status before using an accelerated process.
A rights issue is not the same as private placement or preferential allotment.
Renunciation and issue mechanics should be checked against the Articles.
The standard statutory framework permits a minimum of 7 days under Rule 12A, subject to applicable exemptions.
The offer notice must be sent using the prescribed/permitted method and within the applicable advance period.
Check authorised capital before final allotment.
FEMA/FDI requirements may apply.
The return of allotment is a separate compliance step.
The Board's disposal of declined/unsubscribed shares must follow the Act, Articles and applicable process.
Rights issue compliance is scope-based rather than a single universal fee. The engagement may depend on:
Government/MCA fees, stamp duty, valuation or other third-party costs, where applicable, are separately identified.
The overall timeline depends on:
The standard rights-offer acceptance window is subject to the statutory minimum/maximum framework, while certain private-company exemptions can permit shorter periods if their conditions are met. There is no universal “same-day” or “fixed 7-day completion” period.
Pick the speed and depth that matches your need. Same quality, same CA team — only the timeline changes.
Timeline: Quoted on number of shareholders and issue size
Timeline: Quoted on shareholders, renunciations and filings
Timeline: Quoted on capital structure, FEMA and allotment categories
Government fee — paid by you at actuals
Government/MCA fees, stamp duty, valuation or other third-party costs, where applicable, are identified separately from the professional fee.
Every price above is a professional fee, excluding GST and government charges. 50% on delivery.
Rights issue compliance is quoted on scope rather than a single universal fee, because the work depends on the number of shareholders, issue size, capital structure, renunciation complexity, non-resident shareholders and MCA filing requirements. Government/MCA fees, stamp duty, valuation or other third-party costs are separate where applicable.
Check the Articles of Association, existing equity shareholding, paid-up and authorised capital, existing classes of shares, shareholder rights, existing restrictions or arrangements, and whether the proposed issue requires an increase in authorised capital.
Define the number of new shares, rights ratio, face value, issue price, securities premium if any, record/relevant date, offer opening and closing dates, renunciation terms, purpose of the issue and proposed use of funds.
The company should have sufficient authorised share capital for the proposed issue. If additional authorised capital is required, complete the applicable capital-increase process before allotment.
The Board approves the proposed rights issue and authorises the relevant documents and actions, subject to the applicable legal and constitutional requirements.
Prepare the rights offer notice/letter with the required particulars, clearly explaining entitlement, issue price, acceptance process, opening and closing dates, renunciation where applicable, payment instructions and consequences of non-acceptance.
Send the offer to eligible shareholders using a permitted method with appropriate evidence of delivery. The statutory advance-dispatch requirements must be checked for the company and transaction.
Track applications received, shares accepted, renunciations, amount received and unsubscribed entitlement. Subscription money should be received through the company's permitted banking arrangements and accounted for correctly.
After the offer period closes, determine accepted applications, valid renunciations, unsubscribed shares and final allotment. The Board completes allotment in accordance with the applicable provisions and the approved issue terms.
Where shares are allotted, the company generally files Form PAS-3 with the Registrar. MCA's current PAS-3 instruction kit states that, generally, a company having share capital must file the return of allotment within 30 days of allotment, subject to the specific legal provisions applicable to the transaction.
Update, as applicable, the Register of Members, shareholding records, capitalisation table, share certificates or demat records, statutory registers, accounting records and beneficial ownership information.
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Articles, capital structure and authorised capital are reviewed, and the rights ratio, issue price, dates and renunciation terms are defined.
Board documentation and the rights offer notice/letter are prepared, and the offer is sent to eligible shareholders through a permitted method with evidence of delivery.
Applications, acceptances, renunciations, amounts received and unsubscribed entitlement are tracked through to final allotment.
Allotment documentation and the PAS-3 return of allotment are prepared, and the Register of Members, cap table and statutory records are updated.
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