Preemptive Right

A privilege extended to select shareholders of a corporation that will give them the right to purchase additional shares in the company before the general public has the opportunity in the event there is a seasoned offering. A preemptive right is written in the contract between the purchaser and the company, but does not function like a put option.

Also known as "preemption rights".

When shareholders, usually a majority shareholder or a shareholder committing large amounts of capital to a startup company, purchase shares, they want to ensure they have as much voting power in the future as they did when they initially invested in the company. By getting preemptive rights in its shareholder's agreement, the shareholder can ensure that any seasoned offerings will not dilute his/her ownership percentage.

Investment dictionary. . 2012.

Look at other dictionaries:

  • preemptive right — n 1: right of first refusal 2: the right of a shareholder to buy shares of newly issued stock in proportion to existing holdings before a public offering is made in order to prevent dilution of ownership interest or seizure of majority control by …   Law dictionary

  • Preemptive right — Common stockholder s right to anything of value distributed by the company. The New York Times Financial Glossary * * * preemptive right preemptive right ➔ right …   Financial and business terms

  • preemptive right — common stockholder s right to anything of value distributed by the company. Bloomberg Financial Dictionary * * * preemptive right preemptive right ➔ right …   Financial and business terms

  • preemptive right — The privilege of a stockholder to maintain a proportionate share of ownership by purchasing a proportionate share of any new stock issues. An existing stockholder in most jurisdictions has the right to buy additional shares of a new issue to… …   Black's law dictionary

  • preemptive right — noun the right granting to shareholders the first opportunity to buy a new issue of stock; provides protection against dilution of the shareholder s ownership interest • Hypernyms: ↑preemption, ↑pre emption * * * noun : the right of existing… …   Useful english dictionary

  • preemptive right — noun The right of shareholders to maintain a constant percentage of a companys shares by receiving a proportionate fraction of any new shares issued, thus preempting any dilution …   Wiktionary

  • preemptive right — a privilege given to an existing shareholder to buy a portion of a new stock issue at the offering price on a pro rata per share basis. [1850 55] * * * …   Universalium

  • right — / rīt/ n [Old English riht, from riht righteous] 1 a: qualities (as adherence to duty or obedience to lawful authority) that together constitute the ideal of moral propriety or merit moral approval b: something that is morally just able to… …   Law dictionary

  • right of first refusal — right of first re·fus·al / ri fyü zəl/: the right to have the first opportunity to purchase property upon the owner s decision to sell at the same terms offered by a third party or at predetermined terms – called also preemptive right; Merriam… …   Law dictionary

  • preemptive rights — n. The right of someone who already holds shares of stock in a company to purchase additional shares of a new issue before they are made available to others. The Essential Law Dictionary. Sphinx Publishing, An imprint of Sourcebooks, Inc. Amy… …   Law dictionary

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