Question

Explain the following term/concept.

Rights Issue

Answer 1

1. When a company wants to raise further capital, it can issue shares to its existing equity shareholders in proportion to their existing shareholding. Such an issue of shares is called as ‘Rights Issue’ of shares.
2. Whenever a company makes further issue of shares, the existing Equity shareholders have ‘pre-emptive rights’ to subscribe to the new shares offered by the company.