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

A company declares a rights issue and the shareholder, Ms. Kapoor, does not wish to subscribe but wishes to sell her entitlement. Which statement is correct regarding rights entitlements (REs) in the depository system?

Rights entitlements are credited to the eligible shareholder's demat account under a separate ISIN as of the record date, and the holder can renounce them by on-market sale or off-market transfer before the closing date. They are not credited to bank accounts.

  1. ARights entitlements are credited to the demat account of eligible shareholders as of the record date and can be renounced by transferring them on-market or off-market before the closing dateCorrect
  2. BRights entitlements can only be exercised and never transferred
  3. CRights entitlements are credited only in physical letters of offer
  4. DRights entitlements are credited to the bank account of the shareholder

Explanation

Under the framework, REs are credited in a separate ISIN to the demat account of eligible holders on the record date. They can be renounced through on-market sale or off-market transfer before the renunciation period closes. Hence the claim that they cannot be transferred is wrong.

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