Preemptive rights

Question 1

Preemptive rights defined

Answer 1

1. right of existing shareholders to maintain their percentage of ownership by buying stock whenever there is a new issuance of stock for money
   i. the right to prevent dilution
   ii. only kicks in when stock is issued for money (i.e. consideration the corporation receives is money)

Question 2

Miscellaneous preemptive rights

Answer 2

2. split on whether new issuance includes issuance of treasury stock
3. the right is to buy stock to keep the SH’s percentage ownership
4. opt-in regime: no pre-emptive rights unless included in articles of incorporation
   i. majority rule: default rule is no pre-emptive rights
   ii.