SEBI had announced several new rules on September 30 to speed up the process of rights issue. One of these was regarding the unsubscribed part of the issue. Now legal experts are expressing their concerns about this announcement. Actually, in the announcement of September 30, SEBI had announced several changes. According to one of these changes, the company issuing the rights issue can allocate the unsubscribed part of the issue to a particular investor.

This rule introduced to speed up the rights issue has the risk of being used as a back door entry for preferential allotment. However, in a report by Moneycontrol, the proxy advisor said that the new change can be misused by some people but it will help the company to raise the necessary funds while protecting the rights of the shareholders. In the report, Sandeep Parekh, former ED of SEBI and founder of Finsec Law Advisor, said that this would be exactly like preferential allotment without the approval of the shareholders. Which may be against the Company Law, according to which if a third party is to be brought into the company, then the approval of the shareholders is necessary. At the same time, another expert Mathew Thomas said that the new provisions can promote back door entry in preferential allotment. He said that we have to see whether the issuer company will have to follow any special procedure for this or not. He said that there is always a provision in the Companies Act that the board can allocate the unsubscribed portion in such a way that the interests of the shareholders are not affected. Because SEBI only said that the company can allocate the unsubscribed portion to a third party investor. In such a situation, it can be assumed that this process will be according to the method given under the Company Act. At the same time, proxy advisors have welcomed this step and said that this will encourage companies to use rights issue. And this will reduce both the cost and hard work of the companies. Another expert JN ​​Gupta said that there are apprehensions of tampering with any rule and the apprehensions about this change are being exaggerated. Rights issue and preferential issue are two ways for companies to raise funds. In the first method, existing shareholders are given the option to buy shares at a lower price. Shareholders' approval is not taken in this because under this process the percentage of stake of existing shareholders in the company does not change. Whereas under preferential allotment, the company issues shares to selected third party investors at a lower price and for this the company needs the approval of the shareholders. This is because with the arrival of third parties the number of shareholders increases and the share of existing shareholders decreases.