preemption (noun, pre-emp-tion, \ priˈem(p)shən \) right (noun, right, \ raɪt \)
Definition: is a privilege, a right granted to certain shareholders, which allows them to purchase the additional stocks and shares of the company prior to the stocks being made available to other company members and the general public. The preemption right allows the shareholders to maintain their total ownership percentage. The number of additional shares a company member can buy on the terms of his or her preemption right will typically depend on the number of stocks they currently possess. The term may also refer to the right, which allows one party to buy a certain asset before it is being offered to a third party.
In a Sentence:
- Oftentimes, the preemption right allows the shareholders to buy additional stocks at a lower price.
- You may want to use your preemption right if you want to maintain the percentage of your shares in this company.
- The preemption right, as it is mentioned in your contract, doesn’t actually allow you to sell your stocks.
Synonyms and related words: preemption, preemption clause, right of first refusal, preemption entry, preemption claimant, subscription right, subscription privilege
