Rights shares are first offered to employees
Rights shares are offered in lieu of dividends
Rights shares are offered to the existing shareholders in proportion to the equity shares held by them
Rights shares are those shares which are offered to the promoters
Answer is Wrong!
Answer is Right!
The correct answer is C. Rights shares are offered to the existing shareholders in proportion to the equity shares held by them.
A rights issue is a type of public offering where a company offers new shares to its existing shareholders. The shareholders are given the right to purchase new shares at a discount to the market price. This gives them the opportunity to maintain their proportionate ownership of the company.
Rights issues are often used by companies to raise new capital. They can also be used to increase the company’s share capital or to make a takeover bid.
Here is a brief explanation of each option:
- Option A is incorrect. Rights shares are not first offered to employees. They are offered to all existing shareholders, including employees.
- Option B is incorrect. Rights shares are not offered in lieu of dividends. Dividends are a payment made to shareholders out of the company’s profits. Rights shares are a new issue of shares that shareholders can purchase if they wish.
- Option C is correct. Rights shares are offered to the existing shareholders in proportion to the equity shares held by them. This means that if a shareholder owns 100 shares in a company, they will be entitled to purchase 100 new shares at a discount to the market price.
- Option D is incorrect. Rights shares are not those shares which are offered to the promoters. Promoters are the people who set up a company. They are usually the first shareholders in the company.