Right shares are those shares which are
(a) Issued by a newly formed company
(b) First offered to the existing shareholders
(c) Issued to the directors of the company
(d) Issued to holders of convertible debentures.
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Right shares are those shares that are first offered to the existing shareholders. (Option b)
- Right shares must be in the ratio of equity shares of existing shareholders and should be issued within 15 days' notice.
- It will be offered and can either accept or reject this offer which is not opened more under guidelines.
- Provision will not apply to private companies, will not also apply to the conversion of debentures into shares.
- A rights issue will raise some cash for the company and will reduce the market value of the shares.
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