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

In a rights issue, a shareholder who does not wish to subscribe to the shares offered to him can renounce the entitlement. In the depository system, what is the rights entitlement (RE) that is credited to the demat account?

A rights entitlement is a tradable entitlement credited to eligible shareholders' demat accounts under a separate ISIN as on the record date. It can be used to subscribe, sold in the market or transferred off-market before the issue closes, without any physical renunciation form.

  1. AA physical renunciation form that must be posted to the issuer
  2. BA separate ISIN-based, tradable entitlement credited to eligible shareholders' demat accounts on the record dateCorrect
  3. CA fully paid-up equity share issued at a discount
  4. DA debt instrument that matures after the issue closes

Explanation

Under the current framework, rights entitlements are credited in demat form under a separate ISIN to eligible holders as on the record date and can be traded on the exchange or transferred off-market before the closing date. They are not physical forms, equity shares or debt instruments.

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