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NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Public Offering / Corporate Actions

A company announces a rights issue and fixes a record date. Ms. Iyer buys the shares on the stock exchange after the record date has passed. For this rights issue, what is her position as regards the rights entitlement (RE)?

Ms. Iyer is not eligible for the rights entitlement, because eligibility is fixed by the beneficial owner holdings in the depository records as on the record date, and she acquired the shares only after that date had passed.

  1. AShe is not eligible for the rights entitlement, as entitlement is determined by holdings in the depository records on the record dateCorrect
  2. BShe is eligible, because she is the beneficial owner on the date of the offer opening
  3. CShe is eligible, provided she informs the DP within seven days
  4. DShe is eligible for half of the entitlement on a pro-rata basis

Explanation

Entitlement to corporate benefits such as rights is decided by the list of beneficial owners as on the record date. A buyer whose name appears in the depository records only after the record date does not get the entitlement. The other options invent rules that do not exist.

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