Question 15 of 44
Q.Explain the following term/concept.
Rights Issue
Maharashtra MsbshseMaharashtra HSC (MSBSHSE) Board 2022Subjective· 2mImportance★★★★★
34% · 15/44 Questions
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Start your 14-day free trial to unlock the full solution →A rights issue is the issue of additional shares by an existing company to its present equity shareholders, in proportion to the shares they already hold, before offering them to the public.
When a company already in existence wants to raise more equity capital, the law requires it to first offer the new shares to its existing shareholders. This is the rights issue.
- The shares are offered in proportion to the shareholder’s existing holding (for example, one new share for every four held).
- Existing shareholders get the first right (pre-emptive right) to buy these shares, which protects their proportionate ownership and voting power from being diluted. …
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