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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 is permitted to transfer his entitlement to another person. What is this facility called?

The facility is called renunciation of rights. It allows an existing shareholder who does not want to subscribe to a rights issue to transfer or sell his rights entitlement to another person, who may then apply for the shares.

  1. ARenunciation of rightsCorrect
  2. BConversion of rights
  3. CBuyback tender
  4. DLien marking

Explanation

Renunciation is the right of the existing shareholder to give up his entitlement in favour of another person, usually through the rights entitlement (RE) mechanism that is credited in demat form. Conversion relates to changing securities type, buyback tender is an offer to the company, and lien marking is a restriction on the account.

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