Rights issue

This query is : Resolved

Siddharth Singh (Querist)
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23 April 2014 Dear Experts,

Please apprise that whether a company can make rights issue of shares at different price per share to each and every shareholder but the no. of shares will be issue according to their proportionate shareholding.

For instance the shares were issued earlier to some shareholders on par and some on premium basis and now the company wants to get the same amount from each shareholder in rights issue also, so is it legally valid if we charge different exercise price form different shareholder.

Thanks

V Uday Kiran

V Uday Kiran (Expert)
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23 April 2014 hi siddharth,

Rights shares are normally issued to raise money when they are in real need ... they would assign a price such that the shares offered are given at a discount compared to its current market price ... so the price is fixed for all the shares its offering and does not issue shares at different price .... second part of your query is right obviously it would offer the shares to its existing holders in proportion to the capital paid-up on their shares at the time issue...

Ex
Let's say you own 1,000 shares of some company XX , each of which is worth 550/- now The company is in a bit of financial trouble needs to raise cash to cover its debt . XX therefore announces a rights offering, in which it plans to raise 3000 million by issuing 1000 million shares to existing investors at a price of 300 each. thats how it works and not on different prices...