Listed companies which were looking to come out with Rights Issue before July 31 have more procedural relief coming their way. Given the trying situation due to Covid-19 induced nationwide lockdown, the Corporate Affairs Ministry (MCA) has now allowed such companies to refrain from dispatching notices to shareholders through registered post or speed post or courier.
Not sending notices through postal or courier services on account of the threat posed by Covid-19 would not be seen as a violation of section 62(2) of Companies Act 2013, the MCA has said in a circular. This is also expected to provide some cost savings for the issuing company.
MCA ;also said that it is providing this clarification in view of the representations received by the Ministry on the mode of issue of notice for Rights Issue by listed companies, in view of the difficulties faced by companies in sending notices through post or courier.
Corporate observers feel that the latest MCA clarification would come in handy for Reliance Industries, which has millions of shareholders and is coming up with its mega ₹53,125 crore Rights Issue (the company’s first in three decades) in the coming weeks.
This MCA move comes on the heels of SEBI granting one-time relaxations from strict enforcement of certain SEBI’s ICDR regulations, pertaining to Rights Issue opening up to July 31.
The capital market regulator said that issuers can electronically transmit the abridged letter of offer, application form and other issue material to shareholders. Failure to adhere to modes of dispatch through registered post or speed post or courier services due to prevailing Covid-19 related conditions will not be treated as non-compliance during the period up to July 31.
However, the issuers would have to publish the letter of offer, abridged letter of offer and application forms on the website of the company, registrar, stock exchanges and lead managers to the Rights Issue, SEBI has said.
Currently, applications to Rights Issue were to be made only through ASBA facility. In view of the difficulties faced and to ensure all eligible shareholders are able to apply for Rights Issue, SEBI has allowed the issuer along with registrar to institute an optional mechanism (non-cash mode only) to accept the application of shareholders.
In another significant procedural relief, SEBI had said that for all offer documents filed until July 31, authentication/certification/undertakings in respect of offer documents may be done using digital signature certifications. Also, the issuer along with lead manager should provide procedure for inspection of material documents electronically.