It is a privilege given to the existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company. The shareholders are offered to buy new shares in proportion to the number of shares they already possess. This is called:

Correct option is B

When a company offers new shares exclusively to its existing shareholders in proportion to their current shareholding, it is known as a Rights Issue.
In a Rights Issue:
· Existing shareholders receive a pre-emptive right to maintain their proportional ownership.
· They are offered shares at a discounted price, usually lower than the market price.
· They can subscribe, renounce, or transfer their rights to someone else.
· It protects shareholders from dilution of ownership and voting power.
The description given in the question—“privilege to existing shareholders” and “in proportion to the number of shares they already possess”—is the exact definition of a Rights Issue.
Information Booster
1. Rights Issue is governed by Section 62(1)(a) of the Companies Act, 2013.
2. Rights shares must be offered to existing shareholders before offering to outsiders.
3. Rights Issue is faster and cheaper than public issues because it avoids underwriting and advertising costs.
4. Shareholders may renounce their rights in favor of another person (renounceable rights).
5. Rights Issue helps companies raise capital without increasing financial leverage.
Additional Information
(a) Offer for Sale – Incorrect; this involves promoters or major shareholders selling shares to the public through intermediaries, not giving privilege to existing shareholders.
(c) Private Placement – Incorrect; shares are offered to a selected group of investors (not existing shareholders).
(d) Offer through Prospectus – Incorrect; this refers to a public issue made through a prospectus to general public, not specifically to existing shareholders.