• 0

Public Issue of Equity by a Company

by | Last Updated On March 26, 2023

Can a Company Make a Public Issue of Equity if It’s Not Fully Paid Up on Any of Their Partly Paid Shares?

When a company needs to raise funds, it may consider issuing shares to the public. However, the question arises whether a company can make a public issue of equity if it’s not fully paid up on any of their partly paid shares. Let’s explore this question in detail.

Public Issue of Equity by a Company

What are Partly Paid Shares?

Partly paid shares are shares on which the shareholder has not paid the full amount of the share capital. In other words, the shareholder has paid only a portion of the share capital, and the remaining amount is due to be paid at a future date. Partly paid shares are a common way for companies to raise capital, particularly in the early stages of their development.

Can a Company Make a Public Issue of Equity if It’s Not Fully Paid Up on Any of Their Partly Paid Shares?

The short answer is yes, a company can make a public issue of equity even if it’s not fully paid up on any of their partly paid shares. However, there are certain conditions that must be met.

  • Firstly, the company must disclose the amount of unpaid calls on its partly paid shares in the prospectus for the public issue. This disclosure must be made in a prominent manner so that potential investors are aware of the company’s financial position.
  • Secondly, the company must use the proceeds from the public issue to pay off any unpaid calls on its partly paid shares. This ensures that the company’s financial position is strengthened, and its ability to meet its obligations is not compromised.
  • Thirdly, the company must obtain the necessary approvals from its shareholders and regulatory authorities for the public issue. This includes obtaining approval from the board of directors, passing a special resolution at a general meeting of shareholders, and obtaining the necessary approvals from regulatory authorities such as the Securities and Exchange Board of India (SEBI).

In addition to these conditions, it’s important for the company to carefully consider the impact of the public issue on its existing shareholders. A public issue of equity can dilute the ownership of existing shareholders, which can negatively impact their interests. Therefore, the company should take steps to ensure that the public issue is structured in a way that minimizes the impact on existing shareholders.

Conclusion

In conclusion, a company can make a public issue of equity even if it’s not fully paid up on any of their partly paid shares. However, the company must disclose the amount of unpaid calls on its partly paid shares in the prospectus, use the proceeds from the public issue to pay off any unpaid calls, obtain necessary approvals, and carefully consider the impact on existing shareholders. By following these conditions, the company can raise funds through a public issue of equity while ensuring that its financial position is strengthened and its existing shareholders are not unduly impacted.

FAQs: Public Issue of Equity Shares by a Company

The price of shares in a public issue of equity is determined through a process called book building. The company hires an investment bank to help set the price range for the shares, and then investors place bids for the shares within that range. The final price is determined based on the demand for the shares.

Investing in a public issue of equity can provide investors with the opportunity to buy shares in a company at an early stage and potentially profit from the company's growth. It can also be a way to diversify an investment portfolio and potentially earn higher returns than other types of investments.

Investing in a public issue of equity involves risks, including the possibility of losing some or all of the investment if the company's performance does not meet expectations. Additionally, the price of shares can be volatile and may fluctuate based on market conditions and other factors.

To participate in a public issue of equity, investors can typically purchase shares through a broker or online trading platform. It's important to do research on the company and its financials before investing and to consider the risks and potential rewards of the investment.

Related Posts:

Tags:

Nikesh

Nikesh is a Banker and Experienced Financial and Investment Advisor with over 20 Years of Experience in the Field of Finance and Investment. He possesses vast experience in the field of Stock Market, Mutual Funds and Investment Portfolio Management. Keep visiting for daily dose of Share Trading Tips and Tutorials.

Also Read:

Leave a Reply