Justify the following statement.Company has to fulfill certain provisi

1.	Justify the following statement.Company has to fulfill certain provisions while making Right Issue.
Answer» When a company wants to issue further capital it can issue shares to its existing equity shareholders which is called Rights Issue. According to the Companies Act 2013 company has to fulfil certain provisions for a making Rights Issue. The provisions are (i) Rights shares are sold to the existing shareholders at a price that is lesser than its market price. (ii) A company has to send ‘Letter of offer’ to the existing shareholders at the time of issuing Right Shares. (iii) The letter of offer shall mention (a) The number of shares offered. (b) 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 company can offer the unsold shares to new Investors.

Justify the following statement.Company has to fulfill certain provisions while making Right Issue.

Answer»

When a company wants to issue further capital it can issue shares to its existing equity shareholders which is called Rights Issue.
According to the Companies Act 2013 company has to fulfil certain provisions for a making Rights Issue.
The provisions are

(i) Rights shares are sold to the existing shareholders at a price that is lesser than its market price.

(ii) A company has to send ‘Letter of offer’ to the existing shareholders at the time of issuing Right Shares.

(iii) The letter of offer shall mention

(a) The number of shares offered.

(b) 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 company can offer the unsold shares to new Investors.