Pre-emption Rights

Pre-emption Rights: the right of existing shareholder to have first refusal on the transfer of existing shares or the issue of new shares by a company. This is a statutory right set out in section 561 of the Companies Act 2006, whose main purpose is to protect shareholders of the company from dilution of their shareholding. Pre-emption rights on allotment of shares should not be confused with pre-emption rights on share transfers. The main purpose of pre-emption rights is to protect shareholders of the company against dilution of their shareholding. Please consult our article on share transfer provisions for more details.