Explain the following term / concept : Rights Issues

Answer: A rights issue is an offer of new shares made by a company to its existing equity shareholders in proportion to their existing holding.

• It is governed by Section 62(1)(a) of the Companies Act, 2013.
• The offer is made by a letter of offer giving not less than 15 days and not more than 30 days for acceptance.
• The shareholder may accept the offer, renounce it in favour of another person, or reject it.
• It protects the existing shareholders’ proportion of ownership and control, and the shares are usually offered at a price lower than the market price.