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

A company makes a rights issue and the Rights Entitlements (REs) are credited to eligible shareholders' demat accounts. A shareholder does not wish to subscribe and has not renounced the REs. What is the position if the shareholder neither applies nor renounces before the issue closes?

The unused Rights Entitlements lapse and are extinguished from the demat account once the renunciation or issue period ends. They are not converted into shares, carried forward, or passed to promoters, so a shareholder who wants shares or value must apply or renounce in time.

  1. AThe REs lapse after the renunciation or issue period and are extinguished from the accountCorrect
  2. BThe REs are automatically converted into shares
  3. CThe REs are carried forward to the next rights issue
  4. DThe REs are transferred to the promoter's demat account

Explanation

REs are credited in a separate ISIN and can be either exercised or renounced (on-market or off-market) within the renunciation period. If they are not used in time they lapse and the DP/depository debit them. They are never converted automatically or carried to other issues.

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