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

In a rights issue of a listed company, an existing shareholder wishes to renounce the rights entitlement in favour of another person. Which statement best describes how the rights entitlements are handled in the depository system?

Rights entitlements are credited to the shareholder's demat account under a separate ISIN. During the renunciation period they can be sold on the exchange or transferred off-market to another demat account. Unexercised entitlements lapse once the rights issue closes.

  1. ARights entitlements are credited to the demat account as a separate ISIN and can be transferred through an off-market or on-market transaction during the renunciation periodCorrect
  2. BRights entitlements can be renounced only by physical letter of allotment
  3. CRights entitlements are credited only to the broker's account
  4. DRights entitlements cannot be transferred in any manner

Explanation

Under the current framework, rights entitlements (REs) are credited to eligible shareholders' demat accounts under a separate ISIN and can be traded on the exchange or transferred off-market within the specified renunciation period. Unexercised REs lapse after the issue closes. The other options describe a physical or broker-based route that does not apply.

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