Preemptive Rights, also known as subscription rights or preemptive rights of shareholders, are the right of existing shareholders of a company to maintain their ownership percentage by purchasing new shares of the company when they are offered. Preemptive rights allow shareholders to prevent dilution of their ownership stake by ensuring that they have the opportunity to purchase new shares in proportion to their current ownership.Preemptive rights are typically granted to shareholders as a way to protect their interests and ensure that they are treated fairly when new shares are issued. They are often included in a company's articles of incorporation or bylaws, or may be granted through a separate agreement with shareholders.Preemptive rights may be triggered by a variety of events, such as the issuance of new shares through a stock offering, the conversion of convertible securities, or the issuance of new shares as employee compensation.Preemptive rights can be an important consideration for shareholders, as they can help protect their ownership stake in the company. It is important for shareholders to understand the preemptive rights granted to them and to carefully consider whether to exercise their preemptive rights when new shares are offered.
