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Unit 9: Share and Share Capital

issue, the company will pay interest for the delayed period. @ 15% per annum as prescribed Notes
in sub-section (2) and (2A) of Section 73 of the Companies Act, 1956.”
In case of composite issue, the Lead Merchant Banker shall ensure that the requirements of
minimum subscription is satisfied both jointly and severally, i.e., independently for both
rights and public issues.

No Reservation in Rights Issues: SEBI guidelines prohibit any preferential allotment in
favour of the issuing companies, permanent employees and financial institutions. If a
company desires to make any preferential allotment to the employees or any identified
persons it may do so independent of rights issue by complying with the guidelines in that
regard.
Promoters’ Contribution and Lock-in-Period: The requirement of promoters contribution
shall not be applicable in case of rights issues.

Rights of FCD/PCD Holders: No company shall, pending conversion of FCDs/PCDs, issue
any shares by way of rights unless similar benefit is extended to the holders of such FCDs
or PCDs. The benefits shall be extended by making a reservation of shares in proportion
to the convertible part of FCDs/PCDs. The shares so reserved may be issued at the time of
conversion of such debentures on the same terms on which the rights issue was made.
Restriction on Further Capital Issues: No company shall make any further issue of capital
in any manner whether by way of issue or otherwise, during the period commencing
from the submission of offer document to SEBI on behalf of the company for rights issues,
till the securities referred to in the said offer document have been listed or application
money refunded on account of non-listing or under-subscription, etc.
Over- subscription not to be Retained: Over-subscription shall not be retained under any
circumstances.
Issue to be made Fully-Paid Up: The issue shall have to be made fully-paid up within
12 months, except where the issue size exceeds 500 crore.

Additional Facility for Applying: The Lead Merchant Banker shall ensure that an
advertisement giving the date of completion of dispatch of letters of offer, is released in at
least one English National Daily circulated at the place where registered office of the
issuer company is situated. The advertisement must be published at least 7 days before the
date of opening of the issue.

Self Assessment

State whether the following statements are true or false:
12. A company can issue shares at a discount within six months of the date on which it became
entitled to commence business.

13. Share premium amount can be treated as free reserves.
14. Share premium amount can be utilised for issuing fully paid bonus shares to members.
15. The maximum rate of discount on shares must not exceed 10 percent or such higher rate as
the central government may permit in any special case.
16. The Companies Act 1956, does not prescribe the maximum rate of premium on shares.

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