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preemptive right

 
Dictionary: preemptive right

n.
The right of certain stockholders to maintain ownership of a constant percentage of a firm's stock. Such stockholders have the first opportunity to purchase new stock in the firm proportionate to the percentage of shares already held.


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Investment Dictionary: Pre-Emptive Right
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The right of a company's existing common shareholders to have the first chance to purchase shares in a company's future stock issue.

Investopedia Says:
Also known as "pre-emption rights".

Related Links:
We delve into common stock owner's privileges and how to be vigilant in monitoring a company. Knowing Your Rights As A Shareholder
Knowing how the primary and secondary markets work is key to understanding how stocks trade. Markets Demystified


Financial & Investment Dictionary: Preemptive Right
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Right giving existing stockholders the opportunity to purchase shares of a New Issue before it is offered to others. Its purpose is to protect shareholders from dilution of value and control when new shares are issued. Although 48 U.S. States have preemptive right statutes, most states also either permit corporations to pay stockholders to waive their preemptive rights or state in their statutes that the preemptive right is valid only if set forth in the corporate charter. As a result, preemptive rights are the exception rather than the rule. Where they do exist, the usual procedure is for each existing stockholder to receive, prior to a new issue, a Subscription Warrant indicating how many new shares the holder is entitled to buy-normally, a proportion of the shares he or she already holds. Since the new shares would typically be priced below the market, a financial incentive exists to exercise the preemptive right. See also Subscription Right.

Business Dictionary: Preemptive Rights
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Right specified in the Charter of a corporation, granting to existing shareholders the first opportunity to buy a new issue of stock.

Law Encyclopedia: Preemptive Right
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This entry contains information applicable to United States law only.

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.

 
 

 

Copyrights:

Dictionary. The American Heritage® Dictionary of the English Language, Fourth Edition Copyright © 2007, 2000 by Houghton Mifflin Company. Updated in 2009. Published by Houghton Mifflin Company. All rights reserved.  Read more
Investment Dictionary. Copyright ©2000, Investopedia.com - Owned and Operated by Investopedia Inc. All rights reserved.  Read more
Financial & Investment Dictionary. Dictionary of Finance and Investment Terms. Copyright © 2006 by Barron's Educational Series, Inc. All rights reserved.  Read more
Business Dictionary. Dictionary of Business Terms. Copyright © 2000 by Barron's Educational Series, Inc. All rights reserved.  Read more
Law Encyclopedia. West's Encyclopedia of American Law. Copyright © 1998 by The Gale Group, Inc. All rights reserved.  Read more