TCGA92/S123When a company declares a rights issue, see CG50292, it will usually send its shareholders a provisional letter of allotment for the new shares. This means the new shares have been allocated to the shareholders. If the shareholders want to take up all or part of the rights issue they will accept the allotment by paying for the shares. Because rights issues are often made at a discount to the prevailing market price the provisional letter of allotment is valuable. The shareholders can renounce or sell the letter of allotment to another person who wants to subscribe for the shares. This process is sometimes called the sale of rights nil paid. TCGA92/S123 provides that the disposal of a provisional letter of allotment shall be treated as a capital distribution. Section 123 also applies to provisional letters of allotment to acquire debentures.