preemptive right

Definition

The right of current shareholders to maintain their fractional ownership of a company by buying a proportional number of shares of any future issue of common stock. Most states consider preemptive rights valid only if made explicit in a corporation's charter. also called subscription privilege or subscription right.

Use preemptive right in a sentence

Preemptive right is a good option for those investing in startup companies to ensure that no matter how successful the organization becomes, the amount of ownership and voting power of the investors remains the same.

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