Q.Justify the following statement.
Company has to fulfill certain provisions while making Right Issue.

Yes — a right issue must follow Section 62 of the Companies Act, 2013, which prescribes conditions on proportion, notice period, right of renunciation and disposal of unsubscribed shares.

The statement 'Company has to fulfill certain provisions while making Right Issue' is justified because a right issue is governed by Section 62 of the Companies Act, 2013, which lays down the following provisions.

1. Offer to existing shareholders — The new shares must first be offered to the existing equity shareholders in proportion to the paid-up capital already held by them (their pre-emptive right).
2. Letter of offer — The company must send a letter of offer specifying the number of shares offered and the time within which the offer must be accepted.
3. Notice period — The offer must remain open for acceptance for a period of not less than fifteen days and not more than thirty days from the date of the offer.
4. Right of renunciation — Unless the articles provide otherwise, a shareholder has the right to renounce (transfer) the shares offered to him in favour of another person.
5. Deemed decline — If the shareholder does not accept the offer within the specified time, it is deemed to have been declined.
6. Disposal of unsubscribed shares — Shares not taken up may be disposed of by the Board of Directors in a manner that is not disadvantageous to the shareholders and the company. …