Issue of Shares in a Company
Allot new shares correctly: private placement, rights, bonus, preferential or ESOP, with resolutions and PAS filings done.
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Issue of shares is the process by which a company creates and allots new shares to investors, promoters, employees or existing shareholders in exchange for money or other consideration. Startups raising capital, closely held companies bringing in a new partner and groups restructuring ownership all rely on it. The route depends on who is being offered shares: private placement, rights issue, bonus issue, preferential allotment or employee stock options. Each carries its own resolutions, valuation needs and Registrar filings under the Companies Act, 2013, and foreign investment adds reporting to the Reserve Bank of India. Our team plans and documents the issue end to end.
Who provides this service: our team of Company Secretaries and compliance specialists.
Who Needs Issue of Shares?
- Startups raising money from angels, venture funds or friends and family
- Closely held companies admitting a new partner or strategic investor
- Companies rewarding employees through stock options
- Promoters capitalising reserves through a bonus issue
- Indian companies receiving investment from non-resident investors
- Companies converting existing loans into equity, subject to the applicable rules
Key Benefits
- Issue route matched to your investor and objective before any resolution is drafted
- Authorised capital headroom checked, with the amendment handled first where it falls short
- Valuation requirement identified early, with a registered valuer coordinated where the route needs one
- Board and shareholder resolutions, offer letters and allotment records prepared to the Act and the rules
- Form PAS-3 and related Registrar filings prepared, along with share certificates and updated registers
- Foreign investor cases reviewed for sector, pricing and Reserve Bank of India reporting requirements
How It Works
Plan the Issue
We confirm the type of issue, the investor profile, the pricing logic and whether authorised capital is enough, so the structure fits the Companies Act and any shareholders' agreement before anything is signed.
Capital and Valuation
If authorised capital must increase, the memorandum is amended first. Where the law requires a valuation, we coordinate a report from a registered valuer so that the issue price can be defended later.
Approvals and Offer Documents
We prepare board and shareholder resolutions, the explanatory statement and, for private placement, the offer letter and record of offerees, and file the special resolution with the Registrar where applicable.
Receipt of Funds and Allotment
Subscription money is received through banking channels into the right company account, and the board allots shares within the permitted period, with the allotment resolution and records properly minuted.
Filing the Return of Allotment
Form PAS-3 is filed with the Registrar of Companies with the list of allottees and attachments, alongside other forms the route needs, such as MGT-14 and the private placement offer and record forms.
Certificates and Registers
Share certificates are issued within the permitted time, with stamp duty paid under the applicable state law, and registers of members and securities are updated. For foreign investors, Reserve Bank of India reporting follows.
Documents Required
- Certificate of incorporation, memorandum and articles of association
- Latest list of shareholders and current capital structure
- Board and general meeting notices, resolutions and explanatory statements
- Valuation report from a registered valuer, where the route requires it
- PAN, address proof and identity proof of each allottee
- Subscription application or share subscription agreement
- Bank statement showing receipt of subscription money
- Draft private placement offer letter and record of offer, where applicable
- For foreign investors: KYC, remittance advice and eligibility declarations
- Details of the employee stock option scheme and grants, where employees are involved
Timeline and Fees
Indicative timeline: Typically two to four weeks for a simple private placement once documents and funds are ready; valuation, capital increase or foreign investment steps extend this, and Registrar processing time varies.
Professional fee: The professional fee depends on the type of issue, the number of investors, whether authorised capital must be increased, whether a valuation or foreign investment reporting is involved and the number of resolutions and filings. Contact us for a quote after a short review.
What Can Go Wrong if This Is Missed or Done Incorrectly
- Allotting without sufficient authorised capital or valid resolutions can make the allotment open to challenge
- Failing to file PAS-3 or other forms in time leads to additional fees and a public record that does not show true ownership
- Receiving funds in a manner the rules do not allow can require a refund and expose the company to penalties
- Pricing issues or a missing valuation can have tax or foreign exchange consequences for the company and the investor
- Late reporting of foreign investment may require regularisation with the Reserve Bank of India
Frequently Asked Questions
What are the different ways a company can issue shares?
A company can offer shares through a private placement to identified persons, a rights issue to existing shareholders, a bonus issue out of eligible reserves, a preferential allotment to selected investors, or an employee stock option plan. A public issue by prospectus is a separate route. Each has its own approvals, so the choice depends on who you want to bring in and why.
Do I need to increase authorised capital before issuing shares?
Shares can be issued only up to the authorised share capital stated in the memorandum. If the planned issue would exceed it, authorised capital has to be increased first through a resolution of shareholders and a filing with the Registrar. We check this at the planning stage because it affects the timeline, fees and stamp duty.
Is a valuation report mandatory for issuing shares?
Not for every route. It is generally needed for preferential allotment and private placement, and foreign investment has its own pricing rules that rely on a valuation. Whether your particular issue needs one is something we confirm before the resolutions are drafted, since the report supports the issue price.
What is the difference between a rights issue and a bonus issue?
A rights issue offers new shares to existing shareholders in proportion to their holding, usually for payment, giving them the first chance to subscribe. A bonus issue allots additional shares to existing shareholders without payment, by capitalising eligible reserves. The first raises money for the company, the second does not, and each has different conditions.
What forms are filed with the Registrar after allotting shares?
The central filing is Form PAS-3, the return of allotment. Depending on the route, MGT-14 is filed for the special resolution, and private placement involves the offer letter and record of offers in Forms PAS-4 and PAS-5. Form SH-7 applies to an increase in authorised capital. Form numbers can change, so we confirm against current MCA requirements.
Do I have to report to the RBI when a foreign investor subscribes?
Yes. When a person resident outside India receives shares, the Indian company has to report the issue to the Reserve Bank of India through its authorised dealer bank, currently using the FIRMS portal and forms such as FC-GPR. Sector caps, pricing rules and timelines apply, so these cases need a careful review before money is received.
Official Sources
Rules, forms and fees change. Check the current position on the official portal:
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Last reviewed: . Laws, fees and procedures change; check the official portal before you act.
Disclaimer: The information on this page is for general informational purposes only and does not constitute professional legal, tax or compliance advice. Requirements vary by situation. Please consult a qualified CA or CS for advice specific to your needs. Government fees and timelines are subject to change; verify with the relevant authority before proceeding.