preemption right definition

preemption right

Privilege granted in articles of association or bylaws of a firm under which the current stockholders (shareholders) are given the first option to buy a new issue of common stock (ordinary shares). It enables them to maintain their percentage of the total ownership of the firm, and is usually exercised on the basis of current stockholding. Also called subscription privilege or subscription right.

Contractual right under which a party has the first opportunity to buy an asset before it is offered to a third party. Compare with right of first refusal. Also called preemptive right or right of preemption.

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