Comapny law
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
13 April 2012
Equity shares
what is the meaning of right of pre-emption in the matter of fresh issue of capital.
what is the meaning of right of pre-emption in the matter of fresh issue of capital.
13 April 2012
existing shareholders of the company will be given preference over non-members/shareholder to subscribe in fresh issue.
Ajay Mishra
(Expert)
13 April 2012
Hi
In Corporate practice, the most common form of pre-emption right is the right of existing shareholders to acquire new shares issued by a company in a rights issue, a usually but not always public offering. In this context, the pre-emptive right is also called subscription right or subscription privilege.This is the right, but not the obligation, of existing shareholders to buy the new shares before they are offered to the public. In this way, existing shareholders can maintain their proportional ownership of the company, preventing stock dilution.
Other situations in which pre-emption rights are seen to arise are in property developments; parties close to the investors are often given a right of pre-emption in relation to new flats or condominiums within a development.
Overall, pre-emption right is similar to the concept of a call option.
In Corporate practice, the most common form of pre-emption right is the right of existing shareholders to acquire new shares issued by a company in a rights issue, a usually but not always public offering. In this context, the pre-emptive right is also called subscription right or subscription privilege.This is the right, but not the obligation, of existing shareholders to buy the new shares before they are offered to the public. In this way, existing shareholders can maintain their proportional ownership of the company, preventing stock dilution.
Other situations in which pre-emption rights are seen to arise are in property developments; parties close to the investors are often given a right of pre-emption in relation to new flats or condominiums within a development.
Overall, pre-emption right is similar to the concept of a call option.
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