Corp Affairs Min provides clarity on procedure related to rights issue

The corporate affairs ministry on Monday provided clarity on certain procedural requirements related to rights issues by companies.

In a circular, the ministry said that inability to send notices through postal or courier services to shareholders in the wake of the coronavirus pandemic would not be viewed as a violation of the Companies Act.

The relaxation would be in place for rights issue opening up to July 31, 2020 and would be applicable only if the companies follow procedures laid down by markets regulator Sebi.

Several representations were also received by the ministry seeking clarity on the mode of issuance of such notices to shareholders of listed companies.

On May 6, Sebi gave certain relaxations to companies in terms of compliance with procedural norms pertaining to rights issues opening up to July 31.

Abridged letter of offer, application form and other issues material to shareholders can be undertaken by electronic transmission as already provided under the ICDR (Issue of Capital and Disclosure Requirements) norms, it had said.

Failure to adhere to modes of dispatch through registered post or speed post or courier services due to prevailing COVID-19 related conditions would not be treated as non-compliance, as per Sebi.

In the wake of the coronavirus pandemic, which has disrupted economic activities, the ministry, Sebi and other regulators have extended various relaxations to entities concerned.