Free Consultation by Expert

Many thanks to Setbharatbiz. We had an excellent experience working with its expert. They have a strong sense of professionalism when dealing with clients.

Mudassir CEO, Twinfinty DigiTech Solutions

We would recommend Setbharatbiz incorporation services to any founder without a second doubt. The process was beyond efficient and shows Setbharatbiz founder's vision

Nagasrinivas Director,Prakash Nagasrinivas & Saradhy Associates

I was searching for a company for assistance in the incorporation services. Then one of my friend tell me about Setbharatbiz and definitely the Setbharatbiz is the best.

Prakash Kakani Director, PNS EV Hub

Overview

Rights Issue/Private Placement

Rights Issue and Private Placement are methods used by companies to raise capital by issuing shares to existing shareholders or selected individuals/entities. These processes are governed by the Companies Act, 2013, SEBI Regulations (for listed companies), and applicable tax laws.

A Rights Issue involves offering shares to existing shareholders in proportion to their current holdings, while a Private Placement allows companies to issue shares or securities to a select group of investors. Both methods are effective for raising funds while maintaining control over ownership and operations.

Important

1. Efficient Fundraising : Raises capital without significantly altering ownership or operational structure.

2. Flexible Options : Rights issues protect existing shareholder rights, while private placements attract strategic investors.

3. Compliance-Friendly : Adheres to specific guidelines under the Companies Act and SEBI regulations.

4. Cost-Effective : Avoids the high cost and complexity of public offerings.

5. Quick Process : Offers faster access to funds compared to IPOs or public issues.

Applicability

1. Private Limited Companies : Frequently use private placement for equity funding or convertible securities issuance.

2. Public Limited Companies : Use rights issues for raising funds from existing shareholders or private placement to onboard strategic investors.

3. Startups and SMEs : Opt for private placements during funding rounds or to issue convertible notes. /p>

4. Listed Companies : Conduct rights issues under SEBI (ICDR) Regulations for transparency and compliance.

Key Compliance Requirements

1. Board and Shareholder Approval : Mandatory resolutions to approve the rights issue or private placement.

2. Offer Letter : Issued to shareholders (for rights issue) or selected investors (for private placement).

3. Filing with ROC and SEBI : File forms like PAS-4 and PAS-5 for private placements and disclosures for rights issues.

4. Utilization of Funds : Funds raised must be used as specified in the offer document.

5. Maintain Minimum Subscription : Ensure compliance with minimum subscription criteria for rights issues.

6. MValuation Report : Required for pricing shares or convertible securities during private placement.

7. Adherence to Allotment Timeline : Complete allotment within the prescribed period to avoid penalties.


Documents Required

For Rights Issue


For Private Placement



Features

Features & Benefits of Rights Issue/Private Placement

Rights Protection
Ensures existing shareholders retain their proportional ownership in rights issues.
Prev Next
Exclusive Offers in Private Placement
Shares issued to a select group of investors for strategic benefits.
Prev Next
Mandatory Offer Letters
Transparent terms for shareholders and investors.
Prev Next
ROC Filings
Essential compliance step to legalize the issuance.
Prev Next
Time-Bound Process
Adherence to strict timelines for allotment and filings.
Prev Next

Rights Issue/Private Placement

Valuation Reports
Protects the interest of shareholders by ensuring fair pricing.
Prev Next
Separate Bank Accounts
Application money handled through distinct accounts for compliance.
Prev Next
Tax Efficiency
May offer tax advantages for the company and investors.
Prev Next
Cost-Effective Fundraising
Avoids the high cost associated with public offerings.
Prev Next
Strategic Growth
Helps in onboarding institutional investors and raising expansion capital.
Prev Next


Comparison with Related Services

Feature Rights Issue Private Placement Public Issue
Objective Raise funds from existing shareholders Raise funds from selected investors Raise funds from the public
Regulatory Body MCA, SEBI MCA SEBI, MCA
Filing Frequency One-time One-time One-time
Forms Required PAS-3 PAS-3, PAS-4, PAS-5 Prospectus Filing
Target Audience Existing Shareholders Specific Investors General Public


Frequently Asked Questions

What is a rights issue?

A rights issue allows existing shareholders to purchase additional shares in proportion to their current holdings, often at a discounted price.

What is private placement?

Private placement is the issuance of shares or securities to a selected group of investors, such as HNIs, institutions, or strategic investors.

How is the issue price decided for private placement?

The price is determined based on a valuation report certified by a registered valuer.

Can shareholders renounce their rights in a rights issue?

Yes, shareholders can renounce their rights in favor of others by transferring the entitlement.

What happens if the minimum subscription is not achieved in a rights issue?

The rights issue may be canceled or extended, as per company and regulatory guidelines.

What is Form PAS-3?

Form PAS-3 is the return of allotment filed with the ROC, detailing the securities allotted during a rights issue or private placement.

Rights Issue/Private

Overview

Rights Issue/Private Placement

Rights Issue and Private Placement are methods used by companies to raise capital by issuing shares to existing shareholders or selected individuals/entities. These processes are governed by the Companies Act, 2013, SEBI Regulations (for listed companies), and applicable tax laws.

A Rights Issue involves offering shares to existing shareholders in proportion to their current holdings, while a Private Placement allows companies to issue shares or securities to a select group of investors. Both methods are effective for raising funds while maintaining control over ownership and operations.

Important

1. Efficient Fundraising : Raises capital without significantly altering ownership or operational structure.

2. Flexible Options : Rights issues protect existing shareholder rights, while private placements attract strategic investors.

3. Compliance-Friendly : Adheres to specific guidelines under the Companies Act and SEBI regulations.

4. Cost-Effective : Avoids the high cost and complexity of public offerings.

5. Quick Process : Offers faster access to funds compared to IPOs or public issues.

Applicability

1. Private Limited Companies : Frequently use private placement for equity funding or convertible securities issuance.

2. Public Limited Companies : Use rights issues for raising funds from existing shareholders or private placement to onboard strategic investors.

3. Startups and SMEs : Opt for private placements during funding rounds or to issue convertible notes. /p>

4. Listed Companies : Conduct rights issues under SEBI (ICDR) Regulations for transparency and compliance.

Key Compliance Requirements

1. Board and Shareholder Approval : Mandatory resolutions to approve the rights issue or private placement.

2. Offer Letter : Issued to shareholders (for rights issue) or selected investors (for private placement).

3. Filing with ROC and SEBI : File forms like PAS-4 and PAS-5 for private placements and disclosures for rights issues.

4. Utilization of Funds : Funds raised must be used as specified in the offer document.

5. Maintain Minimum Subscription : Ensure compliance with minimum subscription criteria for rights issues.

6. MValuation Report : Required for pricing shares or convertible securities during private placement.

7. Adherence to Allotment Timeline : Complete allotment within the prescribed period to avoid penalties.


Documents Required

For Rights Issue


For Private Placement



Features

Features & Benefits of Rights Issue/Private Placement

Rights Protection

Ensures existing shareholders retain their proportional ownership in rights issues.

Exclusive Offers in Private Placement

Shares issued to a select group of investors for strategic benefits.

Mandatory Offer Letters

Transparent terms for shareholders and investors.

ROC Filings

Essential compliance step to legalize the issuance.

Time-Bound Process

Adherence to strict timelines for allotment and filings.

Valuation Reports

Protects the interest of shareholders by ensuring fair pricing.

Separate Bank Accounts

Application money handled through distinct accounts for compliance.

Tax Efficiency

May offer tax advantages for the company and investors.

Cost-Effective Fundraising

Avoids the high cost associated with public offerings.

Strategic Growth

Helps in onboarding institutional investors and raising expansion capital.



Comparison with Related Services

Feature Rights Issue Private Placement Public Issue
Objective Raise funds from existing shareholders Raise funds from selected investors Raise funds from the public
Regulatory Body MCA, SEBI MCA SEBI, MCA
Filing Frequency One-time One-time One-time
Forms Required PAS-3 PAS-3, PAS-4, PAS-5 Prospectus Filing
Target Audience Existing Shareholders Specific Investors General Public


Frequently Asked Questions

What is a rights issue?

A rights issue allows existing shareholders to purchase additional shares in proportion to their current holdings, often at a discounted price.

What is private placement?

Private placement is the issuance of shares or securities to a selected group of investors, such as HNIs, institutions, or strategic investors.

How is the issue price decided for private placement?

The price is determined based on a valuation report certified by a registered valuer.

Can shareholders renounce their rights in a rights issue?

Yes, shareholders can renounce their rights in favor of others by transferring the entitlement.

What happens if the minimum subscription is not achieved in a rights issue?

The rights issue may be canceled or extended, as per company and regulatory guidelines.

What is Form PAS-3?

Form PAS-3 is the return of allotment filed with the ROC, detailing the securities allotted during a rights issue or private placement.

Related Services