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

Under the Companies Act, 2013, a public company wishes to raise equity by offering shares to its existing equity shareholders in proportion to their paid-up capital. Which route does this represent, and which section governs the offer?

This is a rights issue governed by section 62(1)(a). Further shares are offered to existing equity shareholders in proportion to their paid-up share capital by a letter of offer, unlike a public offer by prospectus or a preferential offer to chosen persons.

  1. AA rights issue under section 62(1)(a)Correct
  2. BA preferential offer under section 62(1)(c)
  3. CAn employee stock option scheme under section 62(1)(b)
  4. DA public offer under section 23(1)(a)

Explanation

Section 62(1)(a) requires further shares to be offered first to existing equity holders in proportion to their paid-up capital through a letter of offer. This is the rights issue. Clause (c) covers offers to any persons by special resolution, and clause (b) covers employees.

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