RIGHT ISSUE

Right issue is the sale of securities to the existing shareholders. Right issue is the methods which discussed above can be used both by new companies as well as by established companie s. In the case of companies whose shares are already listed and widely-held, shares can be offered to the existing shareholders,this is called right issue.

 Under this method, the existing shareholders are offered the right to subscribe to new shares in proportion to the number of shares they already hold. This offer is made by circular existing shareholders only. Right issues are not normally underwritten, But to ensure precaution and full subscription a few companies have resorted to underwriting of right shares.

 The chief merit of Right issues is that it is an inexpensive method. One of the disadvantage of this method is this method can be only used by existing companies. It is observed that in Right issue method underwriting services is little economically useful.

 Here it represent insurance against risk is : Readily avoidable and can be extremely rare occurrence even when no steps is are taken to avoid it.