A rights issue is an offer of new shares to the existing shareholders in proportion to their shareholding. It is governed by Section 62(1)(a) of the Companies Act, 2013, and Chapter III of the ICDR. The two regimes operate together, and a rights issue that complies with the Act but not the ICDR is not valid for a listed company.
The Statutory Offer
Section 62(1)(a) requires the company to offer the new shares to the persons who, at the date of the offer, are the holders of the equity shares in proportion to the paid-up share capital. The offer must be made by a notice specifying the number of shares offered and the period within which the offer must be accepted, which shall not be less than fifteen days and not more than thirty days. The offer may be renounced in favour of another person, and the company may dispose of the shares that are not subscribed.
The ICDR Conditions
Regulations 61 and 62 prescribe the eligibility and the procedural conditions. The issuer must be eligible to make a rights issue, and it must comply with the conditions relating to the minimum subscription, the promoter’s undertaking, the appointment of the intermediaries, and the letter of offer.
The minimum subscription requirement is ninety per cent of the issue size. The requirement is not applicable where the promoters and the promoter group undertake to subscribe to their entire entitlement, subject to the conditions on the use of proceeds. The issuer must file the letter of offer with the stock exchanges and obtain the in-principle approval before the issue opens.
The 2025 Amendments
The SEBI (ICDR) (Amendment) Regulations, 2025 have simplified the rights issue framework. The amendments reduce the disclosure requirements, permit the use of the proceeds for general corporate purposes within the prescribed limit, and streamline the process for the fast-track rights issue by a company with a consistent track record. The amendments also clarify the treatment of the partly paid shares and the call money.
The Process
The process begins with the board’s approval and the shareholders’ approval where required. The company files the letter of offer with the stock exchanges, obtains the in-principle approval, fixes the record date, and dispatches the letter of offer to the shareholders. The issue remains open for the prescribed period, and the allotment is made after the closure. The company files Form PAS-3 within thirty days and completes the listing formalities.
A technically sound rights issue is structured to comply with the Section 62 timeline, the ICDR eligibility conditions, and the minimum subscription requirement.
Call to Action
Anuj Desai & Associates advises listed companies on rights issues—from the Section 62 offer and the ICDR eligibility conditions to the letter of offer, the minimum subscription, and the listing formalities. If you are planning a rights issue, we can help you navigate the interface.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
🔗 linkedin.com/in/ca-anuj-desai-122547230
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