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Non-Renounceable Rights

Non-renounceable rights refer to the rights offered to existing shareholders to purchase additional shares in a company at a discounted price, but the shareholders cannot sell or transfer these rights to others. These rights are usually part of a rights issue, where companies raise capital by offering more shares to existing shareholders. If shareholders do not exercise these rights within the allotted time, they lose the opportunity to buy the shares.

Example

A company offers non-renounceable rights to its shareholders, allowing them to purchase additional shares at a 10% discount. Shareholders must decide whether to buy the shares or forfeit the offer.

Key points

• Rights offered to existing shareholders to buy additional shares at a discount.

• Shareholders cannot sell or transfer these rights to others.

• If the rights are not exercised, shareholders lose the opportunity to purchase the shares at the discount.

Quick Answers to Curious Questions

They can lead to shareholder dilution if new shares are issued, but also provide existing shareholders the opportunity to maintain their ownership percentage by purchasing additional shares.

They allow the company to raise additional capital from existing shareholders without involving new investors, maintaining control and leveraging the existing investor base.

Shareholders should consider the discounted price relative to the market price, their investment strategy, and whether they want to maintain their ownership stake in the company.