Rights Issue of shares

A Rights Issue is a method by which a company raises additional capital by offering existing shareholders the opportunity to purchase additional shares directly from the company in proportion to their existing holdings within a fixed time period. The procedure for a Rights Issue, as outlined in the context provided, involves several key steps:

  1. Shareholder Approval:
    • The company must obtain shareholder approval for the Rights Issue at a General Meeting.
  2. Announcement to the Exchange:
    • The company is required to make an announcement to the Exchange immediately upon the decision of the Board of Directors to issue shares by way of rights. This announcement must include:
      • The number of shares to be issued.
      • The proportion in which shares are to be issued.
      • The consideration for which the shares are to be issued.
      • The current stated capital of the company.
      • The purpose for which the proceeds of the issue are to be utilized.
      • A statement confirming the Rights Issue is subject to the Exchange approving in principle the issue and listing of shares and obtaining shareholder approval at a General Meeting.
  3. Additional Listing Application – Rights Issue:
    • The company must submit several documents to the Exchange within five Market Days from the date of the announcement, including:
      • The listing application.
      • A Circular to Shareholders.
      • The Notice of General Meeting.
      • A certified copy of the Board Resolution.
      • The relevant fee payable to the Exchange for the listing.
  4. Provisional Letter of Allotment:
    • Documents such as the provisional letter of allotment, the form of acceptance and registration, the form of renunciation to the CDS, and the form of application for additional shares must be prepared and made available to shareholders.
  5. Timeframe for the Rights Issue:
    • The company should not announce the timelines for the Rights Issue until the issue and listing of shares is approved.
  6. Depositing to CDS Accounts:
    • For shareholders who maintain their shareholding in the CDS, their Rights entitlement will be directly deposited to their respective CDS accounts.
  7. Trading of Rights:
    • Trading of the Rights shall commence on the fourth Market Day from the date of dispatching/making available the Provisional Letter of Allotment and shall continue throughout the period of renunciation to the CDS.
  8. Listing of Securities:
    • Approval, in principle, must be obtained from the Colombo Stock Exchange to issue and list the new Securities.
  9. Applications for Additional Shares:
    • The Central Depository Systems (Pvt.) Ltd. will not accept applications for additional Right Shares. Cheques for additional shares will be banked by the Company only after the last date of Acceptance and Payment.

This procedure ensures that the Rights Issue is conducted in a transparent and regulated manner, providing existing shareholders with the opportunity to maintain their proportional ownership in the company.

Source Documents