Answer: A right issue is an issue of further shares by a company first offered to its existing equity shareholders in proportion to their existing holding.
Under Section 62 of the Companies Act, 2013, when a company wants to increase its subscribed capital by issuing further shares, it must offer them to existing equity shareholders in proportion to the paid-up capital held by them, through a letter of offer. The offer must remain open for not less than 15 days and not more than 30 days. The shareholder may accept the offer, renounce it in favour of another person, or reject it. Shares not taken up may be disposed of by the Board in a manner not disadvantageous to the company. Rights issue helps existing shareholders keep their proportionate control.