Preemptive Right

外汇网2021-06-19 16:24:52 39

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 pemptive right is written in the contract between the purchaser and the company, but does not function like a put option.

Also known as "pemption rights".

Taobiz explains Preemptive Right

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 pemptive rights in its shareholder's agreement, the shareholder can ensure that any seasoned offerings will not dilute his/her ownership percentage.

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