Absolute Discretions of the Board in Allotment of Unsubscribed Shares: An Analysis
A company needs additional capital and keeps the voting rights of the existing shareholders proportionately balanced, the company issues Rights shares. The issue is called so as it gives the existing shareholders a pre-emptive right to buy new shares at a price that is lesser than market price. This article covers who has the absolute authority over the allotment of unsubscribed shares, as well as the related statutes and case law. It talks about Sec. 62 of the Act which gives the board unrestricted or an absolute authority to allotment process of the unsubscribed stocks to issue rights to a non-shareholder, as long as the allocation is not damaging to the firm or its any of the shareholders. The article also covers how the Act, is silent on how unsubscribed shares may be distributed to third parties.
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