Is a rights Issue mandatory or voluntary?

A rights issue is voluntary for shareholders. The company offers additional shares in proportion to the shares already held, but shareholders are not obliged to subscribe.

For renounceable rights issues (the most common type), shareholders can choose to:

• Renounce their rights entitlement, and let someone else buy the shares.
• Let the rights lapse without taking any action.
• Purchase part of the entitlement and let the rest lapse.
• Purchase the full entitlement offered to them.
• Buy additional entitlement if the company allows oversubscription.
• Purchase the entitlement and sell it (in full or in part) to another investor.

Note: Since it’s voluntary, investors have the flexibility to decide how much to invest or whether to participate at all. The above options apply only to renounceable rights issues. For non-renounceable rights, shareholders must either subscribe to the full entitlement offered or let it lapse.