✅ Issue of Shares – A Complete Guide for Companies in India

Raising capital is one of the most important steps in the growth of any company. One of the most common and effective ways to do this is through the issue of shares. In simple terms, issuing shares means offering ownership in the company to investors in exchange for capital.

At CompaniesInn, we help you navigate the entire process of issuing shares with complete legal compliance under the Companies Act, 2013.

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📌 What is Share Issuance?

Issuing shares refers to the formal process where a company allots new shares to individuals or entities. These shares represent ownership in the company and entitle shareholders to dividends and voting rights, depending on the class of shares issued.

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🏛️ Legal Framework

The issue of shares is governed by:

• Companies Act, 2013 (Sections 23 to 42)
• Companies (Share Capital and Debentures) Rules, 2014
• SEBI Regulations (for listed companies)

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🧾 Types of Share Issues

Depending on the company's goals and structure, shares can be issued in the following ways:

1. Private Placement – Offered to select individuals or institutions.
2. Rights Issue – Offered to existing shareholders in proportion to their current holdings.
3. Bonus Shares – Free shares given to existing shareholders from profits or reserves.
4. Preferential Allotment – Issued to a select group by passing a special resolution.
5. ESOP / Sweat Equity – Issued to employees or directors as part of compensation.
6. IPO / Public Issue – For companies going public on stock exchanges.

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📝 Procedure for Issue of Shares (For Private Limited Companies)

Here’s a simplified overview of the share issue process:

1. Board Meeting

• Pass a resolution to issue shares.
• Approve draft of offer letter (in case of private placement).

2. Shareholder Approval (if required)

• Hold a general meeting and pass a special resolution.
• File Form MGT-14 with the Registrar of Companies.

3. Issue Offer Letter

• Share offer letter (Form PAS-4) with selected investors.

4. Receive Share Application Money

• Money should come through banking channels only.

5. Allot Shares

• Conduct board meeting to approve allotment.
• File Form PAS-3 (Return of Allotment) with ROC.

6. Issue Share Certificates

• Issue share certificates (Form SH-1) within 60 days of allotment.

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📄 ROC Forms & Due Dates

Form	Purpose	Due Date
MGT-14	Special resolution filing	Within 30 days
PAS-3	Return of allotment	Within 15 days of allotment
SH-7	Authorised capital increase (if applicable)	Within 30 days
SH-1	Share certificate issuance	Within 60 days of allotment

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⚠️ Compliance Essentials

• Ensure sufficient authorised capital before issuing new shares.
• Allotment must be completed within 60 days from receipt of money.
• Maintain a separate bank account for share capital.
• Keep updated Registers of Members and Board Resolutions.

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❌ Penalty for Non-Compliance

Non-compliance with share issue procedures can lead to:

• Refund of the money received
• Penalty up to ₹2 crore or equal to the amount raised
• Penalties on directors and officers in default

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🧩 How We Can Help

Our experts will guide you through the entire process—from board resolutions and shareholder approvals to ROC filings and issuing share certificates. Whether it’s a private placement, rights issue, or ESOP, we ensure every step is legally compliant and hassle-free.