Draft Letter of Offer For Right Issue

draft-letter-of-offer-for-right-issue

DRAFT LETTER OF OFFER FOR RIGHT ISSUE


Issue of …………. Equity Shares of Rs……/- each for cash at par aggregating to Rs………. (Rupees …………………) on Rights basis to the existing shareholders.


Dear Equity Shareholder(s)

The Board of Directors of our Company have on ………….. decided to make an issue of ……… equity shares of Rs………/- each (hereinafter referred to as new shares) of an aggregate nominal value of Rs………… (Rupees ………….), for cash at par to the existing shareholders

Your Directors are pleased to hereby offer to you the number of shares specified in the enclosed application form, to which you are entitled in terms of the basis of offer i.e. …….. new equity shares for every ……… equity shares held.
  
Name
No. of shares
Face value/share in Rs.
Appln/Allot money in Rs.










 Objects of the Issue

The Object of the new right Issue is to raise funds for the ………….

The new equity shares now being offered are subject to the terms and conditions of this ‘Offer Letter’ and the enclosed application form, the Memorandum and Articles of Association of the Company, the allotment letter/share certificate to be issued, and the applicable provisions of the Companies Act, 2013 and Reserve Bank of India regulations.

The principal terms and conditions are as follows:

1. Basis of Offer: as per the provisions of section 62 (1) of the Companies Act, 2013 where at any time, a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares shall be offered to persons who, at the date of the offer, are holders of equity shares of the company in proportion, as nearly as circumstances admit, to the paid-up share capital of those shares. Accordingly, the entitlement of the existing shareholders and/or affiliates under the proposed offer is as stated above.

2. Face Value: The new equity shares shall be of a face value of Rs. …./- each.

3. Offer Price: The Offer price is Rs. ……./- per share.

4. Terms of payment: The full amount of Rs. ……/- per share shall be payable on application.

5. Mode of Payment

Share Application money shall be paid by way of Account Payee Cheque issued in the name of ………………………... and in case of foreign investors, the Payments should be made in accordance with the provisions/rules/regulations under the Foreign Exchange Management Act, 2002 and Reserve Bank of India Regulations. 

6. Ranking: The new shares shall rank pari-passu inter-se, i.e. without any preference or priority of one over the other or any of them and will rank pari-passu with the existing equity shares of the Company in all respects except that the new shares shall qualify for dividend if any to be declared by the Company for the current year pro-rata for the period during which such capital is paid up.

7. Acceptance of Offer: You may accept and apply for the equity shares hereby offered to you wholly or in part by filling up the enclosed Application form and submitting the same along with the application money to the Company from …………………….. to …………………………..

The application must be only on the prescribed form enclosed. As stated above, you may apply for additional shares if in the first instance, you have subscribed to all the shares offered to you.
  
8. Disposal of unsubscribed shares: If the Application Form alongwith the application money is not received by the Company on or before ……………………………, then this offer shall be deemed to have been declined and the Board or a Committee authorised by it may dispose of the un-subscribed shares in such manner as it thinks fit.

9. Renunciation: This offer carries right of renunciation.

10. Basis of Allotment: The Basis of allotment shall be finalised by the Board or Committee authorised by the Board in the following order of priority:

i)        Full allotment to the shareholders who have applied for their rights entitlement either in full or in part.
ii)     Allotment to the shareholders who have applied for additional shares provided that they have applied for all the shares offered to them and there is a surplus.

Allotment to any other person as the Board or Committee authorised by the Board may in their absolute discretion, deem fit, provided there is surplus available after allotment under i) and ii) above.

11. Allotment and Refund Order:

The Company will issue and despatch Letters of Allotment / Share certificates and / or letters of regret alongwith refund orders, if any within a period of 60 days from the date of closure of the subscription list.

General instructions:

The application form must be filled up in block letters in English.

The application must be accompanied with a certified copy of the resolution of the Board of Directors of the applicant Company.

This letter of Offer and any claims arising there from shall be subject to the jurisdiction of courts at Indore, India.

Caution: Attention of the applicant is specifically drawn to the provision of Section 38 of the Companies Act, 2013, which is reproduced below:

Section 38  (1) Any person who—
(a) makes or abets making of an application in a fictitious name to a company for acquiring, or subscribing for, its securities; or
(b) makes or abets making of multiple applications to a company in different names or in different combinations of his name or surname for acquiring or subscribing for its securities; or
(c) otherwise induces directly or indirectly a company to allot, or register any transfer of, securities to him, or to any other person in a fictitious name, shall be liable for action under section 447.
(2) The provisions of sub-section (1) shall be prominently reproduced in every prospectus issued by a company and in every form of application for securities.
(3) Where a person has been convicted under this section, the Court may also order disgorgement of gain, if any, made by, and seizure and disposal of the securities in possession of, such person.
(4) The amount received through disgorgement or disposal of securities under subsection (3) shall be credited to the Investor Education and Protection Fund.

DECLARATION

NO STATEMENT MADE IN THIS LETTER OF OFFER CONTRAVENES ANY OF THE PROVISIONS OF THE COMPANIES ACT, 2013 AND THE RULES MADE THEREUNDER. ALL LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE HAVE BEEN DULY COMPLIED WITH.

Yours Sincerely.


By the Order of the Board of Directors



                                                                                                Place     :
                                                                                                 Date    :

Encl: Application Form


................................................................................................................................................
This below given Application Form should be sent to shareholders with the Offer Letter For Right Issue.
APPLICATION FORM

Issue of …………. Equity Shares of Rs……/- each for cash at par aggregating to Rs………. (Rupees …………………) on Rights basis to the existing shareholders. 
 
Name, Address and Folio Number of the applicant:








To
The Board of Directors

Dear Sir(s)

Pursuant to the Letter of Offer dated ********, I/we accept …………… number of  equity shares offered to me/us and apply for allotment of the same as indicated in Block I below.

Having accepted the equity shares in full, I /we also apply for additional shares indicated in Block II below and agree to accept these shares or whatever lesser number is allotted to me/us by the Board of Directors.

I/we enclose the amount specified in Block IV at the rate of Rs. …/- per share payable on application.




(To be filled up by applicant)
Regd. Folio No.
No. of shares held on
………….
Number of new shares offered
Amount payable on application
Rs.
No. of new shares accepted
Number of additional New shares accepted

Total No. of shares applied
Actual Amount Paid
(Rs.)





BLOCK I
BLOCK II
BLOCK III
BLOCK IV









The Application money has been paid by cheque No. _____________ dated ___________, Bank Name ____________________________.

We hereby agree to accept and hold the Equity shares applied for or such lesser number as may be allotted to us, subject to the terms and conditions of this Offer Letter, the application form and the Memorandum & Articles of Association of the Company.

We hereby authorise you to enter against our names the shares allotted to us in the Register of Members as the holders of Equity shares so allotted to us.

We hereby undertake that we shall sign such other documents and do all such other acts, if any, necessary on our part to be registered as the holders of Equity shares issued to us.

I/ we declare that I/we are not applying for the shares as a nominee of any other person.

We declare that we are a Domestic Company.

We hereby enclose a copy of the resolution of the Board of Directors of the Company authorising the subscription of the shares applied for.

Thanking you




Shareholder

..................................................................................................................................
The above drafts Letter of Offer For Right Issue and Application Form are to be used for reference only, kindly  make  necessary  changes as applicable in your case.

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