THIS IS FOR LEARNING PURPOSE

1. Regulatory framework
for small business
SUBMITTED TO - MRS. NEHA NAGORI
SUBMITTED BY - RIYA JAIN
ROLL NO. - 44

2. RIGHT ISSUE
1
2
3
BONUS SHARES
SWEAT EQUITY
TOPICS

3. RIGHT ISSUE
A rights issue is an invitation to existing
shareholders to purchase additional new shares in
the company. This type of issue gives existing
shareholders securities called rights. With the
rights, the shareholder can purchase new shares at
a discount to the market price on a stated future
date. The company is giving shareholders a chance
to increase their exposure to the stock at a
discount price.

5. CONTD...
1. Notice of Board Meeting
As per Section 179(3) of Companies Act, 2013, the notice of the Board Meeting should be sent to
the shareholders 7 days before the date of the Board Meeting. The notice should include the agenda
of the meeting
2.Hold Board Meeting
The Board Meeting is conducted, and Board Resolution is passed. The Resolution is passed as per
the Secretarial Standards-1 (SS-1).
The Right Issue does not need the approval of the Shareholders through Special Resolution. The
Board can pass a Board Resolution and offer shares to the existing shareholders of Company in
proportion to their current shareholding.
3. Letter of Offer
After passing of the Board Resolution, the approval of Letter of Offer is also given. The Letter of
Offer is sent to all the shareholders by registered post, speed post or through electronic mode. As
per Section 62(2) of the Companies Act, 2013, the letter must be posted at least 3 days prior to the
opening of the issue.

6. Contd...
4 Subscription Period of Acceptance
The maximum period for acceptance of the letter of offer is 15 days and at most 30 days. The
shareholders should accept the offer within this prescribed limit only.
5 Form MGT-1
After passing of the Board Resolution, Form MGT-1 is filed within 30 days of passing of the Board
Resolution. A true certified copy of Board Resolution should be attached with the Form MGT-1. The
Form MGT-1 is mandatory to be filed in case of Public Companies.
6 Accept Application Money
The accepted application should be sent to the Board with the application money. Cash in terms of
money is accepted in both private and public Company.
7 Second Board Meeting
After receiving the application, notice for second Board Meeting should be sent to all the
shareholders at least 7 days before the date of the Board Meeting. The notice should include the
whole agenda of the Board Meeting.

7. 8 Allotment of Shares
After passing of the Board resolution in the second Board Meeting, the Allotment of Shares is done.
The Allotment of Shares should be done within 60 days of receiving the application and application.
9 Filing of Forms to ROC
After Allotment of Shares, Form PAS-3 should be filed to the Registrar of Companies (ROC) by the
Director of Board of Company. The Form PAS-3 should be filed within 30 days from the Allotment of
Shares. The certified true copy of Board Resolution and list of Allottees should be attached with
Form PAS-3
Form MGT-14 for both Issues of Shares and Allotment of Shares should be filed with the ROC.
10 Issue Share Certificate
• After filing of the Form PAS-3, the Share Certificate is issued to the shareholders. The Share
Certificate should be issued within 2 months from the date of Allotment of Shares. The Share
Certificate should be signed by at least 2 Directors of the Company. The Share Certificate shall be
issued in Form SH-1.
The Share Stamp should be obtained within 30 days from the date of Issue of Share Certificate

8. • The right issue incurs low cost. ...
• The right issue provides an option for
the shareholders to maintain the same
ownership. ...
• Raise funds without a form of debt. ...
• The board of directors can not misuse
share issuing option.
• The existing shareholding
percentage may get diluted. ...
• After the right issue share price
gets decrease. ...
• Limitation of fund raise. ...
• The negative effect of the
company's public image.

9. • Bonus shares are additional shares
given to the current shareholders
without any additional cost, based
upon the number of shares that a
shareholder owns. These are
company's accumulated earnings
which are not given out in the form of
dividends, but are converted into free
shares.

10. • The eligibility for bonus shares depends on the record date and ex-date of the shareholders.
• The record date is a cut-off date set by the company and the investors must be shareholders of
the company before this date for them to be eligible to receive bonus share issue. Besides, the
ex-date is a day preceding the record date set by the company.
• In India, the delivery of shares into a Demat account takes place after 2 days from the trading
date. All existing shareholders before the ex-date and record date are eligible to receive bonus
shares issued by a company. However, to qualify to receive bonus shares, the company stocks
must be bought before the ex-date.
• Any stocks bought on the ex-date shall not be eligible for an issue of bonus shares as the
ownership of the stocks cannot be gained by the investor before the record date.

11. TYPES OF BONUS SHARES
FULLY PAID-UP
PARTIALLY PAID
UP
Fully paid bonus shares are those shares
that are distributed at no extra cost in the
proportion of the investors holding in the
company.
These types of bonus shares can be issued
from the following sources:
1) Profit and loss account 2) Capital
reserves 3) Capital redemption reserves
4) Security premium account
Before understanding party-paid up bonus shares, let’s
understand what a partly-paid share is?
A partly paid share is a share in a company that is only
partially paid compared to the full issue price. It means
that the investor can buy partly paid shares without
paying the total issue price.
However, the remaining amount for partly paid shares
can be paid in instalments when the company makes
calls.
So when the bonus is applied in the partly-paid shares
and converted into fully paid shares without calling out
the uncalled amount through profit capitalization, it is
called partly-paid up bonus shares.
However, unlike fully-paid up bonus shares, partly paid-
up bonus shares cannot be issued through a capital

12. SWEAT EQUITY
• The term sweat equity refers to
a person or company's
contribution toward a business
venture or other project. Sweat
equity is generally not
monetary and, in most cases,
comes in the form of physical
labor, mental effort, and time.
Sweat equity is commonly
found in real estate and the
construction industry, as well as
in the corporate world—
especially for startups.

13. TITLE
KEY TAKEAWAYS
Sweat equity is the unpaid labor employees
and cash-strapped entrepreneurs put into a
project.
Homeowners and real estate investors can
use sweat equity to do repairs and
maintenance on their own rather than pay
for traditional labor.
In cash-strapped startups, owners and
employees typically accept salaries that are
below their market values in return for a
stake in the company
KEY TAKEAWAYS

14. HOW DOES IT WORK ?
Sweat equity originally referred to the value-enhancing improvements generated from the sweat
of one's brow. So when people say they use sweat equity, they mean their physical labor, mental
capacity, and time to boost the value of a specific project or venture.
The term is commonly used in the real estate and construction industries. Sweat equity can be
used by homeowners to lower the cost of homeownership. Real estate investors who flip houses
for profit can also use sweat equity to their advantage by doing repairs and renovations on
properties before putting them on the market. Paying carpenters, painters, and contractors can
get extremely pricey, so a do-it-yourself renovation using sweat equity can be profitable when it
comes time to sell.
Sweat equity is also an important part of the corporate world, creating value from the effort and
toil contributed by a company’s owners and employees. In cash-strapped startups, owners and
employees typically accept salaries that are below their market values in return for a stake in the
company, which they hope to profit from when the business is eventually sold.

15. ADVANTAGES
• Saves Money. Many young
businesses are strapped for
cash and are searching for
ways to cut costs however
they can. ...
• Attracts Top Talent and
Skills. ...
• Creates Incentive.
Difficult to value: It can be
difficult to form a consensus
on how to value sweat equity.
Is it simply worth the salary
someone can earn in a given
position? ...
Can lead to disputes: The
ambiguity that surrounds the
valuation of sweat equity can
lead to disputes within the
business.
DISADVANTAGES

16. EXAMPLE OF SWEAT EQUITY
• Startup company: For example, a software
developer creates a new app while working a day
job, so the developer completes the DIY coding and
design for the app on nights and weekends. Finally,
the developer receives interest from an angel
investor, who wants to buy a twenty-five percent
stake in the company for $250,000. This puts the
total value of the company at $1 million. The
developer might value their time and effort—their
sweat equity—at $100,000. In percentage terms,
they have ten percent sweat equity in their
recently-valued company.

17. THANK YOU