Rights shares are given only to those shareholders who

Solution

Rights shares are given only to those shareholders who own the company’s shares on the record date.   Record date, also known as the cut-off date, is when the company checks its records to identify the eligible shareholders for a corporate action. Shareholders holding the shares in their demat accounts on the record date are eligible for corporate actions such as entitlement of rights shares, bonus shares, stock splits, dividends, etc.   Note – in case of listed companies, since the shareholders may change on a daily basis , it is important to identify the shareholders who would be eligible for a particular corporate action announced by the company. Record date is hence useful in this context.