preemptive right

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Preemptive right

Common stockholders' right to anything of value distributed by thecompany.

Preemptive Right

In stock, the ability of a shareholder to maintain the same percentage of ownership in a company should the company issue more stock by subscribing to a proportional number of shares at or below the market price. This protects the investor from devaluation of his/her shares if the company decides to hold a round of financing. The purchase of this proportional number of shares usually takes place before the new issue is offered to the secondary market, and must be exercised before a certain date (known as the expiration date) if the shareholder is to maintain the same percentage of ownership. It is also called a subscription right. See also: Anti-dilution provision.

preemptive right

A stockholder's right to keep a constant percentage of a firm's outstanding stock by being given the first chance to purchase shares in a new stock issue in proportion to the percentage of outstanding shares already held. Not all firms provide the preemptive right, which is more important to stockholders owning a significant part of a company. Also called subscription privilege. Compare privileged subscription. See also special subscription account.
References in periodicals archive ?
Articles 223/224 - Strategic Investor - The New Law allows companies to increase its capital and allot the newly issued shares to a Strategic Investor without applying the preemption rights of the existing shareholders to subscribe for the capital increase in question, provided that the Strategic Investor carries out similar or complementary activities to the company.
While Hutchings's lawyers were arguing his case in the Northern California District Court, a Mariposa state senator introduced a bill in the California Assembly granting preemption rights to Hutchings and Lamon.
In the document, he warned of a conspiracy to deprive settlers of preemption rights in all beautiful lands.
Rather, he wished to protect preemption rights purchased by Virginians after the Revolutionary War in which he had a personal interest and that were not directly at issue in the case.
41) While the case was initiated in the late eighteenth century, when Marshall wrote his decision in 1823 he changed the time flame involved to the postrevolutionary period in order to encompass the preemption rights that interested him personally.
Therefore, if a public company wishes to invite a strategic investor to invest in the company by way of a capital increase, such invitation will always be subject to with the preemption rights conferred to the existing shareholders by the CCL making commercial negotiation of placement terms problematic.
Alternatively, the company in question may circumvent the preemption rights of the existing shareholders by issuing CBs to the strategic investor, offering him the right, or the option, to convert such CBs into equity in the issuing company.
Total Exploration & Production USA (Total E&P USA), a division of Total SA (Paris:FP) (LSE:TTA) (NYSE:TOT), on Friday announced that it is exercising its preemption right to acquire Chesapeake's 75% interests in the jointly held Barnett Shale operating area located in North Texas.
The transaction should get preemption rights and government approval.
Preemption rights of current shareholders were excluded according to section 186 para.
The exclusion of shareholders' preemption rights was perceived necessary by the company given current equity market conditions.
The definitive buyer will be conditioned upon AIRTEL shareholders' preemption rights.