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Section 62

Further issue of share capital

(1)
Where at any time, a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares shall be offered—
(a)
to persons who, at the date of the offer, are holders of equity shares of the company in proportion, as nearly as circumstances admit, to the paid-up share capital on those shares by sending a letter of offer subject to the following conditions, namely:—
(i)
the offer shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days or such lesser number of days as may be prescribed and not exceeding thirty days from the date of the offer within which the offer, if not accepted, shall be deemed to have been declined;
Proviso

Provided that not withstanding anything contained in this sub-clause and sub-section (2) of this section, in case ninety percent of the members of a private company have given their consent in writing or in electronic mode, the periods lesser than those specified in the said sub-clause or sub-section shall apply.

(ii)
unless the articles of the company otherwise provide, the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person; and the notice referred to in clause ( i ) shall contain a statement of this right;
(iii)
after the expiry of the time specified in the notice aforesaid, or on receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the Board of Directors may dispose of them in such manner which is not dis-advantageous to the shareholders and the company;
Proviso

Provided that notwithstanding anything contained in sub-clause (i), in case of a Specified IFSC public company, the periods lesser than those specified in the said sub-clause shall apply if ninety per cent. of the members have given their consent in writing or in electronic mode.

(b)
to employees under a scheme of employees’ stock option , subject to special resolution passed by company and subject to such conditions as may be prescribed; or
(c)
to any persons, if it is authorised by a special resolution, whether or not those persons include the persons referred to in clause ( a ) or clause ( b ), either for cash or for a consideration other than cash, if the price of such shares is determined by the valuation report of a registered valuer, subject to the compliance with the applicable provisions of Chapter III and any other conditions as may be prescribed. of a registered valuer subject to such conditions as may be prescribed.
(2)
The notice referred to in sub-clause ( i ) of clause ( a ) of sub-section (1) shall be despatched through registered post or speed post or through electronic mode to all the existing shareholders at least three days before the opening of the issue.
(2)
The notice referred to in sub-clause (i) of clause (a) of sub-section (1) shall be dispatched through registered post or speed post or through electronic mode or courier or any other mode having proof of delivery to all the existing shareholders at least three days before the opening of the issue.
(3)
Nothing in this section shall apply to the increase of the subscribed capital of a company caused by the exercise of an option as a term attached to the debenture issued or loan raised by the company to convert such debentures or loans into shares in the company:
Proviso

Provided that the terms of issue of such debentures or loan containing such an option have been approved before the issue of such debentures or the raising of loan by a special resolution passed by the company in general meeting.

(4)
Notwithstanding anything contained in sub-section (3), where any debentures have been issued, or loan has been obtained from any Government by a company, and if that Government considers it necessary in the public interest so to do, it may, by order, direct that such debentures or loans or any part thereof shall be converted into shares in the company on such terms and conditions as appear to the Government to be reasonable in the circumstances of the case even if terms of the issue of such debentures or the raising of such loans do not include a term for providing for an option for such conversion:
Proviso

Provided that where the terms and conditions of such conversion are not acceptable to the company, it may, within sixty days from the date of communication of such order, appeal to the Tribunal which shall after hearing the company and the Government pass such order as it deems fit.

(5)
In determining the terms and conditions of conversion under sub-section (4), the Government shall have due regard to the financial position of the company, the terms of issue of debentures or loans, as the case may be, the rate of interest payable on such debentures or loans and such other matters as it may consider necessary.
(6)
Where the Government has, by an order made under sub-section (4), directed that any debenture or loan or any part thereof shall be converted into shares in a company and where no appeal has been preferred to the Tribunal under sub-section (4) or where such appeal has been dismissed, the memorandum of such company shall, where such order has the effect of increasing the authorised share capital of the company, stand altered and the authorised share capital of such company shall stand increased by an amount equal to the amount of the value of shares which such debentures or loans or part thereof has been converted into. (Notified on 01-06-2016)
Notes, amendments & references (15)

Section 62 shall not apply to nidhi companies vide notification no. G.S.R. 465(E) dated 5th June 2015.To view the notification, Click Here

7 Days as prescribed under rule 12A of Companies (Share Capital and Debentures) Rules, 2014. To view the Rule, Click Here

Inserted vide Companies (Amendment) Act, 2020 dated 28.09.2020 with effect from 22.01.2021. To view the Act, Click Here and to view the commencement notification, Click Here .

Inserted vide Notification no. G.S.R.464 (E) dated 5th June, 2015.

(The exceptions, modifications and adaptations provided above shall be applicable only to those Private Companies which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June 2017)

To view the notification, Click Here

Provided Inserted vide Exemption Notification to specified IFSC Public Companies, GSR 08 (E) dated 04.01.2017. To view the notification Click Here

For private companies and IFSC Public Companies, an ordinary resolution suffices. Notification no. G.S.R.464 (E) dated 5th June, 2015 and GSR 09(E) dated 04.01.2017 respectively.

Refer rule 12 and Form No. SH-6 of the Companies (Share Capital and Debentures) Rules, 2014. To view the rule, Click Here

Substituted vide Companies (Amendment) Act, 2017 dated 03.01.2018 effective from 09.02.2018. To view the notification, Click Here

Refer rule 13 of the Companies (Share Capital and Debentures) Rules, 2014. To view the rule, Click Here

Inserted vide Companies (Amendment) Act, 2017 dated 03.01.2018 and effective from 09.02.2018. To view the notification, Click Here

Inability of listed companies to dispatch notice through registered post or speed post or through courier for issues opening upto December 31, 2020 shall not be considered a violation of 62(2) due to ongoing COVID – 19 pandemic according to MCA circular dated 03.08.2020. To view the circular, Click Here.

Inability of listed companies to dispatch notice through registered post or speed post or through courier for issues opening upto July 31, 2020 shall not be considered a violation of 62(2) due to ongoing COVID – 19 pandemic according to MCA circular dated 11.05.2020. To view the circular, Click Here.

Refer Rule 72 National Company law Tribunal Rules 2016.To view the rule, Click Here