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Issue of shares - Rights Issue & Private Placement
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Frequently Asked Questions
What is the difference between offering shares to the investors by Rights issue or private placement of shares and share transfer?
Share transfer is the transfer of share from an existing shareholder to the investor. The money in this case goes to the shareholders selling their shares. They will need to pay the applicable income tax.In the case of Rights issue or Private placement of shares, fresh shares are issued by the company in lieu of the investment amount.
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Do we need a separate bank account for the investment coming in?
In case the company is using the Private placement of shares method to raise capital, a separate bank account should be used to receive the investment.In case the company issues shares via Rights issue, the investment can come to the company’s primary bank account.
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Who issues the Share Certificate to the investors or new shareholders?
Share Certificates are issued to the shareholders by the company after paying the requisite stamp duty. In case the paid up capital of the company is less than Rs 50 lakhs, it is signed by the Directors of the company and for the cases where the paid up capital is more than Rs 50 lakhs, a Company Secretary (on the payroll of the company) needs to sign it
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What is the stamp duty that needs to be paid to issue Share Certificates?
Stamp duty for Share Certificates varies from state to state. However in majority of the states, the stamp duty is 1% of the investment amount.
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