PREEMPTIVE RIGHT Meaning and
Definition
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Preemptive right is a legal term that refers to a shareholder's right to maintain their proportionate ownership in a company by having the first opportunity to purchase additional shares of common stock before they are offered to the public or other shareholders. This right allows existing shareholders to protect their investment, avoid dilution of their ownership, and participate in any future growth or profits of the company.
The preemptive right enables shareholders to purchase new shares in proportion to their existing ownership, often at a discounted price compared to the public offering. This right typically arises in situations when a company issues additional shares to raise capital or for various corporate actions, such as mergers, acquisitions, or stock splits.
By exercising their preemptive right, shareholders can ensure that their percentage of ownership in the company remains the same. If a shareholder chooses not to exercise their preemptive right, they may face dilution of their ownership as other shareholders or the general public purchase the newly issued shares.
Preemptive rights are usually granted to common shareholders but may be excluded for preferred shareholders. They are governed by both corporate law and the company's articles of incorporation or bylaws. The terms and conditions of preemptive rights, including timing, price, and the maximum number of shares available for purchase, are commonly outlined within these legal documents.
In summary, a preemptive right is a legal protection mechanism granted to existing shareholders that enables them to maintain their proportional ownership by purchasing additional shares before they are offered to others.
Common Misspellings for PREEMPTIVE RIGHT
- oreemptive right
- lreemptive right
- -reemptive right
- 0reemptive right
- peeemptive right
- pdeemptive right
- pfeemptive right
- pteemptive right
- p5eemptive right
- p4eemptive right
- prwemptive right
- prsemptive right
- prdemptive right
- prremptive right
- pr4emptive right
- pr3emptive right
- prewmptive right
- presmptive right
- predmptive right
Etymology of PREEMPTIVE RIGHT
The word "preemptive" comes from the Latin term "praeemtus", which is the past participle of "praeimere". This Latin term is a combination of "prae" meaning "before" and "emere" meaning "to take". The word "right" is derived from the Old English word "riht", which means "just, fair, or proper". When these two words are combined into "preemptive right", it refers to the prior claim or privilege to purchase or acquire something before others have the opportunity.
Similar spelling words for PREEMPTIVE RIGHT
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