i) Pre-emptive rights:

Pre-emptive rights refer to the obligation on the company to offer any new issue of shares to existing shareholders before proceeding to make the offer to the general public. This ensures that existing shareholders have the opportunity to maintain their proportionate ownership in the company, preventing significant changes to the structure of ownership and control.

(2 marks)

ii) Rights issue:

A rights issue is an offer made by a company to its existing shareholders, giving them the right to purchase additional shares at a discounted price before the company offers these shares to the general public.

Advantage to the company:
Using a rights issue to raise additional capital is advantageous for the company because it is often cheaper and more cost-effective than issuing new shares to the general public. Additionally, it ensures that existing shareholders maintain their proportionate ownership and control within the company, which can be critical in maintaining shareholder confidence and support.