Listed companies, which were planning to come out with rights issues before July 31, have more procedural relief coming their way. Given the trying situation due to the Covid-19-induced nationwide lockdown, the Ministry of Corporate Affairs (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 Covid-19 threat 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 companies.
Corporate observers feel that the latest MCA clarification would come in handy for Reliance Industries, which has crore 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. MCA said it is providing this clarification following 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 on account of Covid-19.
The MCA’s move comes on the heels of SEBI granting a one-time relaxation from strict enforcement of certain SEBI ICDR regulations pertaining to rights issues opening up to July 31.
The 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 the 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 websites of the company, registrar, stock exchanges and lead managers to the rights issue, SEBI has said.