preemptive right

preemptive right definition - finance
A right given to shareholders to retain the same percentage of ownership they currently have if new shares are issued. Preemptive rights prevent the current ownersÂ’ stake and control from being diluted. Preemptive rights usually are transmitted by giving existing shareholders a subscription warrant that spells out how many new shares they are entitled to buy. Preemptive rights often exist only if they are listed in the corporationÂ’s charter.

Webster's New World Finance and Investment Dictionary Copyright © 2003 by Wiley Publishing, Inc., Indianapolis, Indiana.
Used by arrangement with John Wiley & Sons, Inc.

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