Meaning & use
preemption rights
Last updated
Meanings
nounplurallegalbusiness
The legal right of existing shareholders to buy newly issued shares before they are offered to others.
Grammar: Used in the plural; takes a plural verb: 'preemption rights are'.
Patterns
- have preemption rights
- exercise preemption rights
- waive preemption rights
The company's articles grant preemption rights to all existing shareholders.
Before issuing new shares, the board must offer them to current investors according to preemption rights.
Shareholders voted to waive their preemption rights to allow a quick capital raise.
nounplurallegal
A right to purchase something before it is offered to anyone else.
Grammar: Often used in legal contexts; can be singular 'preemption right' for a single instance.
Patterns
- preemption rights over something
- grant preemption rights
The tenant held preemption rights over the property, meaning she could buy it before it went on the market.
The contract included preemption rights for the landlord to purchase the land if it was sold.
Word forms
| singular | preemption right |
|---|
Common combinations
- statutory preemption rights
- Statutory preemption rights give shareholders the first chance to buy new shares.
- waive preemption rights
- The investors agreed to waive their preemption rights to speed up the deal.
- exercise preemption rights
- She exercised her preemption rights and purchased additional shares.
- preemption rights clause
- The shareholders' agreement contains a preemption rights clause.
Synonyms and how they differ
- preemptive rights
- Often used interchangeably, but 'preemptive rights' is more common in US legal contexts.
- first refusal rights
- Similar but broader; 'first refusal' can apply to any asset, while 'preemption rights' often specifically refer to shares.
Word family
- preempt verb
- To take action to prevent something or to acquire a right before others.
- preemptive adjective
- Done to prevent something or to secure a right before others.
Commonly confused: preemption rights or preemption?
preemption rights vs preemption
Preemption is the act of preempting; preemption rights are the specific legal entitlements.
Practice
In business law, what do preemption rights allow shareholders to do?
Choose one answer.
Preemption rights give existing shareholders the first opportunity to purchase new shares, protecting them from dilution.
Make it your own
Write a sentence using “preemption rights”, then check it and compare it with the examples above.