Glossary

Pre-emption rights

Pre-emption rights give existing shareholders first refusal on new shares before they're offered elsewhere — a protection against being diluted when the company raises equity.

2 min read

First refusalOn new shares

Anti-dilutionProtects existing owners

Definition

Pre-emption rights entitle existing shareholders to be offered new shares in proportion to their current holding before those shares can be issued to outsiders, preserving their percentage ownership. They arise by statute and are often reinforced in the articles or a shareholders' agreement.

In plain terms

They stop the company selling new shares over existing owners' heads and quietly shrinking their stake — everyone gets the chance to keep their share.

Why it matters for your company

They matter whenever you raise equity, and are a reason many owners prefer debt, which doesn't dilute at all. See raising finance with multiple shareholders.