DEFINITIONOF RIGHT ISSUE
‘Right Issue’ means offering shares to existing members in proportion to their existing shareholding. The object is, of course, to ensure equitable distribution of Shares and the proportion of voting rights is not affected by issue of Fresh shares.
A rights issue is an invitation to existing shareholders to purchase additional new shares in the company. This type of issue gives existing shareholders securities called rights. With the rights, the shareholder can purchase new shares at a discount to the market price on a stated future date.
Section 62 of the Companies Act, 2013, deals with further issue of capital and prescribes the principle of pre-emptive right of shareholders to subscribe to the rights shares. Shares offered to the existing shareholders are called 'right shares'. The issue of the letter of offer accompanied by the application form indicating there in the number of shares offered for subscription is an offer from the company making the
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