Pre-emption Rights

Pre-emption rights, also known as rights of first refusal, are provisions that grant existing shareholders the opportunity to purchase additional shares of a company before those shares are offered to external investors. These rights ensure that existing shareholders have the first opportunity to maintain their ownership percentage and prevent their stake from being diluted. When new shares are issued, shareholders with pre-emption rights have the right to purchase their proportionate share of those shares based on their existing ownership. If a shareholder decides not to exercise their pre-emption rights, those shares can then be offered to external investors. Pre-emption rights play a crucial role in protecting the interests of existing shareholders and maintaining their control over the ownership structure of the company.