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CS Professional · Strategic Management and Corporate Finance · Raising of Funds from Equity and Procedural Aspects - Public Funding

Mehta Auto Ltd made a rights offer to its equity shareholders. The offer period has expired and some shares remain unsubscribed because certain shareholders declined them. Under section 62(1)(a)(iii), how may the Board dispose of these shares?

The Board may dispose of the unsubscribed shares in such manner which is not disadvantageous to the shareholders and the company. The Act gives this discretion after the offer period expires or declination is received, subject to that safeguard.

  1. AOnly by offering them to the promoters at face value
  2. BIn any manner it likes, even if disadvantageous to the company
  3. CIn such manner which is not disadvantageous to the shareholders and the companyCorrect
  4. DIt must cancel them and cannot dispose of them

Explanation

After the notice period expires or on earlier intimation of declining, the Board may dispose of the shares in a manner not disadvantageous to the shareholders and the company. A promoter-only or unrestricted disposal is not what the section provides.

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