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    In Right Issue Whether Separate Bank Account is mandatory to open

    Posted By : SARIKA / Published on : 30-Sep-2022 11:33 AM / View : 1550 / Comment : 1

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    If you are issuing shares on rights basis to existing holders, then no need to go for a separate bank account but if we doing for new shareholders is it mandatory ?

    section 62 (1) (a) tells us about Right issue. and valuation report/special resolution and separate bank account is not required for right issue but for public issue and private placement it is required.

    section 62 (1) (c) is about private placement.
    If we are triggering 62(1) (c) which speaks of issue of shares to other than existing holders.

    Read more on : account mandatory open bank separate issue whether right

    • Yes, as per SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, a separate bank account is mandatory to be opened for the purpose of the rights issue. This account is called the "Issue Escrow Account" and it is used to receive the subscription money from the shareholders.

      The company is required to open the Issue Escrow Account with a scheduled commercial bank and the account needs to be operated by a registered merchant banker or a registrar to the issue or a SEBI-registered intermediary. The money received in the Issue Escrow Account needs to be utilized only for the purposes of the rights issue, and any excess money needs to be refunded to the shareholders within 15 days of the closure of the rights issue.

      Therefore, it is important for the company to comply with this requirement and open a separate bank account for the rights issue to ensure proper utilization of funds and transparency in the process.

      As per the Companies Act, 2013, there is no specific provision that mandates the opening of a separate bank account for a rights issue. However, it is a good practice to do.

      04-04-2023 / 09:17:28 AM
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