Difference between rights issue & preferrential issue

Hi!

Right Issue means issuance of shares to the existing shareholders only.

Prefrential Issue means issuance of shares to the Promoters and their relatives whether they are existing shareholder of the company or not.

Regards

In Simple Terms:-

Preferential allotment is a way of infusing fresh equity in the business by issuing shares or warrants to the specified entities at specific prices to a promoter or promoter group or a person acting in concert (PAC) or institutional players.

There are guidelines of SEBI for Listed Companies and for unlisted companies there are "Unlisted Public Companies (Preferential Allotment) Rules, 2003" .

While Preferential allotment is to specific people, Rights Issue is an issue where fresh equity is infused by making offer to all the "Existing Shareholders" and not to specific people.

In public unlisted company Section 81 deals with Right issue and section 81(1A) deals with Preferential Allotment.

Regards

Ankur