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Issue of Shares in India - Rights, Bonus, Private Placement Under Companies Act 2013

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Four Routes: Rights Issue (Section 62), Bonus Issue (Section 63), Private Placement (Section 42), and Preferential Allotment - each with specific compliance

PAS-3 Within 30 Days: Return of allotment must be filed with ROC within 30 days of allotment (15 days for private placement)

Rule 9B Demat Mandate: From June 30, 2025 - non-small private companies must issue all shares only in dematerialised form

Penalty Up to INR 2 Crore: Private placement non-compliance attracts penalty up to amount raised or INR 2 crore (whichever lower) + refund at 12% p.a.

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Overview What Is It Types Our Services Process Forms Mistakes Fees Deadlines Why Us Rights vs PP FAQs

Issue of Shares - Overview

📌 TL;DR - Issue of Shares Services at a Glance

The Companies Act 2013 provides four primary routes for issuing shares: Rights Issue, Bonus Issue, Private Placement, and Preferential Allotment. Return of allotment in Form PAS-3 must be filed within 30 days (15 days for private placement). Private placement is limited to 200 identified persons per FY. From June 30, 2025, non-small private companies must issue shares only in demat form (Rule 9B). Penalty for non-compliance: up to INR 2 crore. Starting at INR 4,999.

When a company decides to raise capital or reward its shareholders, it does so by issuing new shares. The Companies Act, 2013, provides four primary routes, each with its own legal framework, compliance requirements, and timelines. A misstep - such as exceeding the 200-person limit under Section 42, missing the 30-day PAS-3 window, or issuing shares without a Special Resolution - can result in penalties up to INR 2 crore or the entire amount raised.

Patron Accounting provides end-to-end issue of shares services for private limited companies, OPCs, and unlisted public companies - from board resolution and shareholder approval drafting to PAS-3 return of allotment and MGT-14 filing with the Registrar of Companies (ROC).

Content is reviewed quarterly for accuracy.

What is Issue of Shares?

Issue of shares is the process by which a company creates and allots new equity or preference shares to raise capital from existing shareholders, new investors, or both. When shares are issued, the paid-up share capital of the company increases.

The Companies Act 2013 regulates issue of shares through three primary sections: Section 42 (Private Placement), Section 62 (Further Issue of Share Capital - rights issue, preferential allotment, ESOP, loan conversion), and Section 63 (Issue of Bonus Shares).

2026 Update - Rule 9B: All private companies (other than small companies) must now issue shares exclusively in dematerialised form via NSDL or CDSL. Small company threshold from December 2025: paid-up capital up to INR 10 crore and turnover up to INR 100 crore.

Key Terms for Issue of Shares:

PAS-3 - Return of Allotment filed with ROC within 30 days of allotment (15 days for private placement).

PAS-4 - Private Placement Offer-cum-Application Letter sent to identified persons under Section 42.

MGT-14 - Filing of Board/Special Resolutions with ROC within 30 days of passing.

Rule 9B - Demat mandate: non-small private companies must issue shares only in dematerialised form from June 30, 2025.

ISIN - International Securities Identification Number obtained from NSDL/CDSL for demat-compliant issuance.

Sections 42, 62, 63 PAS-3 Filing

Types of Share Issuance Under Companies Act 2013

Type	Section	Key Feature	Who Gets Shares
Rights Issue	62(1)(a)	Pro-rata to existing shareholders; 15-30 day acceptance window	Existing shareholders
Bonus Issue	63	Free shares from reserves; no cash payment	Existing shareholders pro-rata
Private Placement	42	Max 200 identified persons; PAS-4 required	New or existing investors
Preferential Allotment	62(1)(c)	Pre-determined price; Special Resolution required	Promoters, VCs, strategic investors
ESOP	62(1)(b)	Options at pre-determined price	Employees and directors
Conversion of Loans	62(3)	Loan to equity; Special Resolution at time of loan	Lenders/debenture holders

Patron Accounting's Issue of Shares Services

Service	What We Do
Eligibility Review	Authorised capital adequacy, demat compliance (Rule 9B), existing offer status, and route selection (Rights/Bonus/Private Placement)
Document Drafting	Board resolution, EGM notice, explanatory statement, PAS-4 offer letter, special resolution - all CS-drafted
Authorised Capital Increase	SH-7 and MGT-14 filing for capital clause amendment if post-issue capital exceeds current authorised capital
Valuation Coordination	Registered valuer report for preferential allotment and private placement to determine fair market value
ROC Filing	PAS-3, PAS-4, PAS-5, MGT-14, and SH-7 filing on MCA V3 portal within statutory deadlines
Demat Coordination	ISIN and RTA coordination with NSDL/CDSL for Rule 9B-compliant share issuance; PAS-6 filing

Our Process

Step-by-Step Share Issuance Procedures

Three distinct procedures under Companies Act 2013. PAS-3 must be filed within 30 days (Rights/Bonus) or 15 days (Private Placement). Penalty for non-compliance: up to INR 2 crore or amount raised.

Step 1

Check Authorised Share Capital

Verify authorised capital is sufficient. If post-issue paid-up capital exceeds authorised, increase first via SH-7 and MGT-14 filing.

Capital checkedSH-7 filed if needed

Capital OK01

Step 2

Convene Board Meeting

Approve the share issuance - fix ratio, price, record date, and terms. 7 days' notice to all directors required.

Board approvedTerms fixed

Board Done02

Step 3

File MGT-14 for Board Resolution

File Board Resolution with ROC within 30 days. For private placement: MGT-14 must be filed BEFORE sending PAS-4 offer letter.

MGT-14 filedROC notified

MGT-14 Filed03

Step 4

EGM and Special Resolution (if required)

Required for Bonus Issue, Private Placement, and Preferential Allotment. Not required for Rights Issue. File MGT-14 for Special Resolution within 30 days.

SR passedMGT-14 filed

EGM Done04

Step 5

Send Offer / Circulate PAS-4

Rights Issue: Letter of Offer to all equity shareholders (15-30 day acceptance). Private Placement: PAS-4 offer-cum-application to identified persons (max 50 per offer, 200/FY).

Offer sentAcceptance window open

Offers Sent05

Step 6

Collect Application Money and Allot

Receive money through banking channels only (no cash). Allot shares within 60 days of receiving application money. Pass allotment resolution at Board Meeting.

Money receivedShares allotted

Allotted06

Step 7

File PAS-3 (Return of Allotment)

Rights/Bonus: within 30 days. Private Placement: within 15 days. Attach board resolution and list of allottees. Late filing: INR 1,000/day, max INR 25 lakh.

PAS-3 filedROC updated

PAS-3 Filed07

Step 8

Issue Share Certificates or Inform Depository

Physical: Issue Form SH-1 within 2 months from allotment. Demat (Rule 9B companies): Inform NSDL/CDSL immediately on allotment. Update Register of Members.

Certificates issuedRegister updated

Complete08

Forms and Documents Required for Share Issuance

Form	Purpose and Deadline
PAS-3 (Return of Allotment)	Filed with ROC within 30 days of allotment (15 days for private placement)
PAS-4 (Private Placement Offer Letter)	Serially numbered offer sent to each identified person - Section 42
PAS-5 (Record of Offers)	Maintained by company; copy filed with ROC within 30 days of PAS-4 circulation
PAS-6 (Share Capital Reconciliation)	Bi-annual filing for demat companies under Rule 9B
MGT-14 (Resolutions)	Board and Special Resolutions filed within 30 days of passing
SH-7 (Capital Alteration)	Filed when authorised capital is increased before share issuance
SH-1 (Share Certificate)	Issued within 2 months from allotment; or depository informed for demat
Valuation Report	Registered Valuer certificate for private placement and preferential allotment
Board Resolution	Specifying number of shares, allottees, price, and terms
Special Resolution (EGM)	Required for Bonus Issue, Private Placement, and Preferential Allotment

Common Mistakes to Avoid in Share Issuance

Challenge	Impact	How Patron Accounting Solves It
Sending PAS-4 before filing MGT-14	ROC filing must precede the offer letter	Patron Accounting files MGT-14 first and only then circulates PAS-4 to identified persons
Exceeding 200-person limit for private placement	Deemed public offer; SEBI jurisdiction triggered	We maintain strict count per FY per security type; QIBs and ESOP employees excluded from count
Missing 60-day allotment window	Money becomes deposit; 12% p.a. interest liability	Allotment tracked from day of application receipt; Board Meeting convened well before deadline
Issuing physical certificates post Rule 9B	INR 10,000 + INR 1,000/day penalty (cap INR 2,00,000)	We verify Rule 9B applicability and coordinate ISIN/RTA with NSDL/CDSL before any new issuance

Share Issuance Service Fees 2026

Fee Component	Amount
Rights Issue (Private Limited Company)	INR 4,999 + GST (board resolution, letter of offer, PAS-3, MGT-14)
Private Placement (Section 42)	INR 7,999 + GST (EGM, special resolution, PAS-4, PAS-5, PAS-3, MGT-14 + valuation coordination)
Bonus Issue (Section 63)	INR 5,999 + GST (EGM, special resolution, reserves certificate, PAS-3, MGT-14)
Authorised Capital Increase (if needed)	INR 2,999 + GST (SH-7 and MGT-14) + government stamp duty on increased capital
ISIN and Demat Coordination (Rule 9B)	INR 3,999 + GST (NSDL/CDSL registration, RTA appointment, PAS-6)
Patron Accounting Professional Fees	Starting from INR 4,999 (Exl GST and Govt. Charges)

All fees and charges listed are indicative only and do not constitute a binding offer. Final amounts may vary depending on the volume of work and the complexity involved.

Professional service charges for drafting, filing, and representation are separate from the statutory fees. The exact fee depends on the complexity of the case, disputed amount, and number of hearings required. Contact us for a detailed quote.

Get a free Issue of Shares consultation - Call +91 945 945 6700 or WhatsApp us. No-obligation assessment.

Share Issuance Deadlines and Penalties

Stage	Estimated Timeline
MGT-14 filing (Board/Special Resolution)	30 days from passing resolution (Section 117(1))
PAS-3 filing (Rights/Bonus Issue)	30 days from allotment (Section 39(4))
PAS-3 filing (Private Placement)	15 days from allotment (Section 42(8))
Allotment after application money	Within 60 days (Section 42(6) / Section 62)
Refund if not allotted in 60 days	Within 15 days from 60th day (Section 42(6))
Share Certificate issuance	Within 2 months from allotment (Section 56(4)(a))
PAS-6 filing (demat companies)	Within 60 days of each half-year end (Rule 9B)

Penalty Warning: Private placement non-compliance: up to amount raised or INR 2 crore (whichever lower) + refund at 12% p.a. PAS-3 late filing: INR 1,000/day, max INR 25 lakh. Offer to 200+ persons: deemed public offer, SEBI applies.

Key Benefits

Why Choose Patron Accounting for Share Issuance?

Expert CS-Led Drafting

PAS-4 offer letters, board resolutions, EGM notices, and special resolutions drafted by experienced Company Secretaries.

100% On-Time PAS-3

Every PAS-3 filed within statutory deadline. No late filing penalties. INR 1,000/day penalty avoided.

Complete Eligibility Review

Authorised capital adequacy, demat compliance, existing offer status - all verified before proceeding.

Valuation Coordination

Registered valuer report arranged for preferential allotment and private placement valuations.

ISIN and RTA Coordination

Demat-compliant issuance with NSDL/CDSL registration and RTA appointment for Rule 9B companies.

Pan-India Service

Transparent flat-fee pricing from INR 4,999. No hidden charges. Offices in Pune, Mumbai, Delhi, Bangalore.

Why Companies Trust Patron Accounting

500+ Share Issuances Assisted | 100% On-Time PAS-3 Filing | Expert CA and CS Team Across India | Startups to Mid-Size Companies

Comparison of Share Issuance Routes

Parameter	Rights Issue	Private Placement
Section	62(1)(a)	42
Who Receives	Existing shareholders pro-rata	Up to 200 identified persons per FY
Cash Inflow	Yes	Yes
EGM Required	No - Board Resolution sufficient	Yes - Special Resolution required
Offer Letter	Letter of Offer (15-30 day window)	PAS-4 (serially numbered)
Valuation Report	Not mandatory	Required (Registered Valuer)
PAS-3 Deadline	30 days from allotment	15 days from allotment
Best For	Proportional capital raise from existing shareholders	Investor onboarding - angels, VCs, strategic investors

Related Corporate Compliance Services

Increase in Authorised Share Capital - SH-7 and MGT-14 filing
Transfer of Shares - SH-4, stamp duty, and board approval
Annual ROC Compliance - MGT-7, AOC-4, Director KYC
Private Limited Company Registration - new incorporation
Change in Object Clause - MOA alteration under Section 13

Legal Framework - Issue of Shares

Provision	Requirement
Section 42, CA 2013	Private Placement: max 200 persons/FY, PAS-4 offer letter, banking channels only, 60-day allotment window.
Section 62(1)(a)	Rights Issue: pro-rata to existing shareholders, 15-30 day acceptance, Letter of Offer.
Section 62(1)(c)	Preferential Allotment: Special Resolution, pre-determined price, valuation report.
Section 63	Bonus Issue: from free reserves/securities premium only (not revaluation reserves), Special Resolution.
Section 39(4) / 42(8)	PAS-3 filing: 30 days (rights/bonus) or 15 days (private placement) from allotment.
Rule 9B, PAS Rules 2014	Non-small private companies: demat-only issuance from June 30, 2025.
Section 42(10)	Penalty: up to amount raised or INR 2 crore (whichever lower) + refund at 12% p.a.
Section 56(4)(a)	Share certificate (SH-1) within 2 months from allotment.

External Authority Link: MCA Portal - Forms and Filing

Frequently Asked Questions - Issue of Shares

Get answers about rights issue, bonus shares, private placement, PAS-3, demat mandate, and share issuance penalties.

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What is the difference between rights issue and private placement?

Rights issue under Section 62(1)(a) is offered pro-rata to existing shareholders without Special Resolution. Private placement under Section 42 is offered to up to 200 identified persons, requires Special Resolution, PAS-4 offer letter, and registered valuer report. Rights issue is faster; private placement allows onboarding new investors.

Which form is filed for return of allotment?

Form PAS-3 is filed with ROC within 30 days of allotment for rights/bonus issue, and within 15 days for private placement, under Section 39(4) of Companies Act 2013.

Can bonus shares be issued from revaluation reserves?

No. Section 63(1) explicitly prohibits bonus shares from revaluation reserves. Only free reserves, securities premium account, and capital redemption reserve are permitted sources.

What is the penalty for private placement non-compliance?

Under Section 42(10), penalty extends to amount raised or INR 2 crore (whichever lower) plus refund of all application money at 12% p.a. within 30 days. If offered to 200+ persons, deemed public offer and SEBI regulations apply.

Do private companies need to issue shares in demat form?

Yes, from June 30, 2025 under Rule 9B. All private companies other than small companies (paid-up capital up to INR 10 crore, turnover up to INR 100 crore from December 2025) must issue shares exclusively in demat form.

What is the maximum number of persons for private placement?

200 identified persons per FY per type of security, with max 50 per individual offer. QIBs and ESOP employees excluded from the count. The limit applies separately to equity, preference, and debentures.

Is an EGM required for a rights issue?

No. Rights issue under Section 62(1)(a) does not require EGM or Special Resolution. The Board of Directors can approve via Board Resolution, making it the fastest route for capital raising from existing shareholders.

Quick Answers

Which form for return of allotment? PAS-3 filed within 30 days (rights/bonus) or 15 days (private placement).

Bonus from revaluation reserves? No. Section 63(1) explicitly prohibits it. Only free reserves and securities premium permitted.

Max persons for private placement? 200 per FY per security type; 50 per individual offer. QIBs and ESOP excluded.

EGM needed for rights issue? No. Board Resolution is sufficient under Section 62(1)(a) - fastest route for capital raising.

File PAS-3 and MGT-14 On Time - Avoid Penalties Up to INR 25 Lakh

Key Deadlines:

30 days: MGT-14 for Board/Special Resolution after passing
30 days: PAS-3 for Rights/Bonus Issue allotment
15 days: PAS-3 for Private Placement allotment
60 days: Complete allotment after receiving application money - otherwise deposit provisions apply
2 months: Issue share certificates after allotment

Penalty: Private placement violation: up to INR 2 crore. PAS-3 late filing: INR 1,000/day (max INR 25 lakh). Offer to 200+ persons: deemed public offer.

Call +91 945 945 6700 or WhatsApp us for a free consultation.

Issue Shares Legally - Starting at INR 4,999

Whether raising capital through rights issue, rewarding shareholders via bonus shares, or onboarding investors through private placement, every share issuance must follow precise legal procedures under the Companies Act 2013. With Rule 9B mandating demat issuance and penalties up to INR 2 crore for non-compliance, professional CS-led compliance is essential.

Patron Accounting's CA and CS team has assisted 500+ share issuances across sectors - from early-stage startup seed rounds to mid-size company capital raises. 100% on-time PAS-3 filing record.

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Content Created: March 2026 | Last Updated: 20 April 2026 | Next Review: March 2027 | Reviewed By: CA & CS Team, Patron Accounting LLP

This page is reviewed annually. Trigger: MCA amending PAS Rules, Section 42/62/63 provisions, Rule 9B demat mandate, or small company threshold changes.