Rights issue and private placement of shares

A rights issue offers new shares to the existing shareholders in proportion to their holdings. The offer stays open for at least 15 and not more than 30 days, and a shareholder may renounce the offer in favour of someone else unless the articles say otherwise. A private company can shorten these periods where the members holding 90% of its shares agree.

A private placement offers shares to identified investors, outside the existing shareholding pattern. It needs a special resolution, a valuation report from a registered valuer, an offer letter in PAS-4 to not more than 200 persons in a financial year (excluding qualified institutional buyers and employees under an ESOP), and the money must come from the investor's own bank account into a separate bank account of the company. Shares must be allotted within 60 days of receiving the money, or the money refunded.

The practice prepares the resolutions, the offer documents and the filings, and keeps the share capital, the register of members and the MCA record consistent. Where the investor is outside India, the FEMA side runs alongside: see [FEMA and RBI filings](/services/fema-rbi-filings-bengaluru).