Right of existing shareholders in a corporation to purchase newly issued stock before it is offered to others. The right is meant to protect current shareholders from dilution in value or control. Preemptive rights, if recognized, are usually set forth in the corporate charter. Shareholders will usually be issued a subscription warrant, which indicates how many shares of the newly issued stock they are entitled to buy, typically pro rata percentage of current ownership.
Definition from Nolo’s Plain-English Law Dictionary
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.
Definition provided by Nolo’s Plain-English Law Dictionary.
August 19, 2010, 5:22 pm