Preemptive Right

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Related to Preemptive Rights: Right of first refusal, Drag Along Rights

Preemptive Right

The privilege of a stockholder to maintain a proportionate share of the ownership of a corporation by purchasing a proportionate share of any new stock issues.

In most jurisdictions, an existing stockholder has the right to buy additional shares of a new issue to preserve Equity before others have a right to purchase shares of the new issue.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.

preemptive right

n. the right of a shareholder in a corporation to have the first opportunity to purchase a new issue of stock of that corporation in proportion to the amount of stock already owned by the shareholder. (See: corporation, stock)

Copyright © 1981-2005 by Gerald N. Hill and Kathleen T. Hill. All Right reserved.
References in periodicals archive ?
If your head is spinning and you never want to deal with preemptive rights, our objective has been achieved.
Also serving as an observer was Nathaniel Gorham, son of the investor who first bought the preemptive rights to Six Nations lands from Massachusetts in 1786.
Not every issuance of stock triggers the preemptive rights of other shareholders, and state law should be consulted in this regard.
Cambrex also received preemptive rights to maintain its equity position in subsequent rounds of financing.
Its earlier decision in Bruken(56) (in which the court had carved out an exception from the statutory Rule for preemptive rights or rights of first refusal arising in commercial and governmental transactions)(57) did not suggest the propriety of doing so for commercial options inasmuch as preemptive rights only marginally affected transferability and in fact "actually encouraged the use and development of the land, outweighing any minor impediment to alienability."(58) As a result, the Bruken court believed that, unlike the instant case, judicial creation of an exception to the Rule furthered the legislative intent behind the Rule.(59)
In return SWIPCO would cash a 4.5% commission on the loan; and Anglo and M Marc Ledreit would get preemptive rights over the privatisation of the four companies concerned.
For example, in Maine a bill was introduced to eliminate preemptive rights of local communities over pesticide applications.
As part of the additional closing,the existing investors with preemptive rights purchased an aggregate of 3,512,124 shares of the company's common stock on the same terms and at the same price of USD1.3796 per share as the initial closing through the exercise of such preemptive rights and the purchase of certain additional shares.
Article 7 of Ayala's articles of incorporation allows the conglomerate to sell up to 100 million shares without preemptive rights or without having to offer them proportionately to existing shareholders.
Existing Pure Foods shareholders will not be allowed to exercise their preemptive rights under the share swap using the newly created shares, at a price yet to be finalized.