Section 62 of CA 2013 : Section 62: Further Issue Of Share Capital

Explanation using Example

Imagine a company named "Tech Innovations Ltd." with a share capital, planning to expand its operations. To fund this expansion, it decides to issue additional shares. The board of directors, following Section 62 of the Companies Act, 2013, must first offer these new shares to the existing equity shareholders, proportional to their current shareholding.

For example, if John holds 10% of the equity shares, he gets an offer to buy an additional 10% of the new shares being issued. The company sends John a letter of offer, giving him 15 days to accept. The letter also states that John can renounce these shares in favor of someone else, say his sister Jane, if he doesn't want to increase his investment.

If John declines or doesn't respond within the given time, the company can then offer these shares to other interested parties, ensuring that the terms are not disadvantageous to the shareholders or the company.

If Tech Innovations Ltd. wanted to offer shares to its employees under an employee stock option scheme, or to external investors for cash or other considerations, it would need to pass a special resolution and adhere to specific conditions, including getting a valuation report from a registered valuer.

Moreover, if the company had issued debentures with an option to convert them into shares, this section would not normally apply. However, if the government has provided a loan or debentures and decides it's in the public interest to convert these into shares, it can order the conversion even if this wasn't previously agreed upon, as long as the company has the opportunity to appeal the decision.