- Meaning: In accordance with the Company Act, the company which is in existence and is issuing new equity shares in the market; has to offer first to its existing equity shareholders is known as Right share.
- Provision:
1. Time limit: From the date of incorporation of the company till two years or one year form the share distribution date whichever date comes first the company cannot increase its paid up share capital before that.
2. Notice to Shareholder: Every shareholder who is subject to the right of getting such share has to be given a notice of minimum 15 days and not more than 30 days period with acknowledgement regarding their right of the Right share.
3. Rejection of Right: The shareholder who is authorized to get Right share may even reject the offer made to him by the company regarding the acceptance of Right share, by transferring it to some other person's name.
4. Discards of Right Shares: Any shareholder who is entitled to Right share, if gives a written application to the company for rejection of offer or does not declare his interest regarding such right shares within given time limit, the directors of the company can discard those share in the interest of company.
5. Share Application Money: The shareholder who is authorized to get right shares has to pay the necessary amount along with share application form.