Rights issues

A rights issue is a common way in which a company can raise capital.

A rights issue involves a company:

1. •

   making an offer of new shares to its existing shareholders (normally defined in the rights issue prospectus as qualifying shareholders) at an issue price that is normally set at a deep discount to the market value of the shares

2. •

   in proportion to (or as nearly as may be in proportion to) their holdings of shares or a class of shares in the company as reflected in the register of members on the record date (ie a specific date prior to the rights issue)

3. •

   by means of provisionally allotting new shares to those existing shareholders on a nil paid basis (ie providing them with nil paid rights to subscribe for the new shares subject to the terms and conditions of the rights issue) and (unless restricted by securities laws of the UK and/or overseas) involving:

   1. ◦

      the issue of a renounceable letter or other negotiable document (which is attached to the provisional allotment letter or PAL), to those shareholders who hold their existing shares in certificated