preemptive right

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

Preemptive right

Common stockholders' right to anything of value distributed by thecompany.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
In many cases, clients work around such rights and reach an accommodation each can live with notwithstanding the preemptive rights. Other times, such rights can turn a real estate transaction into a litigation nightmare.
Although his speech does not mention the figure, the following day he offered the Senecas a $4,000 annuity for all but two of their reservations and promised that he would give them the preemptive rights that he held to Allegany and Cattaraugus.
Preemptive rights may come into play not only in structuring incentive packages for prospective employees, but whenever the company issues stock to third parties.
Largely because of these policy concerns, an increasing number of states have statutorily exempted both options and preemptive rights from the scope of the Rule.
It appeared that the bill was being crafted as a preemptive rights law for local communities.
4 April 2013 -- Ohio-USA-based bank holding company Farmers National Banc Corp (NASDAQ: FMNB) said it is seeking shareholders support for a move by management and firm's board to increase the company's authorised shares and eliminate preemptive rights.
Does AAR have preemptive rights? According to Bloomberg on Friday, which cited AAR's CEO Stan Polovets, AAR made an offer to BP a month ago, which BP declined.
The closed subscription includes no more than 7.5 million new shares in exchange for 35,934 shares in CJSC Artel of prospectors Ayax, no more than 10 million new shares in exchange of 100 percent of OOO Rudnik Kvartsevyi and no more than 66,875,000 new shares minus the new shares purchased by those with preemptive rights, to JSC Polymetal Management.
Article 7 of Ayala's charter allows the conglomerate to sell up to 100 million shares without preemptive rights or without having to offer them proportionately to existing shareholders, Limcaoco noted.
'They sit on our board, and when we are discussing this stock rights offer, we have made request to them if they could waive their preemptive rights so that when we tell the brokers that you [other owners] cannot subscribe to this, we can tell the brokers,' he said.