Understanding the Process of Issuing Shares in the Share Market

Issuing shares in the share market is a fundamental part of raising capital for businesses and governments. This process, often referred to as an Initial Public Offering (IPO), involves several steps to ensure that the shares are legally and effectively issued. This article will guide you through the process of issuing shares, from authorization to the creation of newly issued shares.

Authorization of Shares

The first step in the process of issuing shares is to ensure that enough shares with desired attributes are authorized by the issuer corporation. This authorization is typically done in the company’s articles of incorporation or through subsequent resolutions. This ensures that the shares issued conform to the corporate governance and regulatory requirements.

Securities Laws and Exemptions

After authorization, the issuer must determine if securities laws apply. Many jurisdictions have strict regulations governing the issuance of shares, which may require compliance with various legal requirements. Additionally, certain offerings can be exempt from these regulations under specific circumstances, typically involving smaller offerings or specific types of investors.

Subscriptions and Resolutions

Once the legal and regulatory checks are completed, the next step is to get written subscriptions from subscribers. This involves potential shareholders signing agreements that indicate their willingness to purchase the shares at the proposed terms. Following this, the board of directors must pass a resolution to issue shares at fair value, as determined by the board.

Payment and Issuance

After passing the resolution, the next step is for subscribers to make payment for the shares they have subscribed for. The payment can be made through various methods, including bank transfers, checks, or other agreed-upon payment mechanisms. Once payment is received, the shares are officially issued to the paid subscribers, also known as shareholders.

Corporate Secretary’s Role

The corporate secretary plays a critical role in the process of issuing shares. They are responsible for documenting the entire transaction, from the authorization and subscription to the issue and registration of the shares. This documentation is crucial for maintaining accurate records and ensuring the compliance of the issuer with relevant laws and regulations.

The Types of Issues

When a company or government raises money by issuing shares, it can do so through either public or private placement. In a public offering, shares are listed for allotment to more than 200 persons. This involves a complex process that includes marketing, registration, and compliance with regulatory requirements. On the other hand, private placements involve the allotment of shares to less than 200 persons, making the process generally less regulated but still subject to certain legal and compliance considerations.

Conclusion

Issuing shares in the share market is a detailed and critical process that involves multiple steps, from authorization to issuance. Understanding and adhering to these steps is essential for issuers to successfully raise capital and ensure regulatory compliance. By following the guidelines outlined in this article, companies and governments can navigate the complexities of the share issuance process and achieve their financing goals.