| Commentary

138 Reason for statutory pre-emption rights

| Commentary

2: PRE-EMPTION RIGHTS ON ALLOTMENT OF SHARES

138 Reason for statutory pre-emption rights

There are a number of reasons why an existing shareholder may wish to have first refusal over any new shares which his company is intending to allot. First, taking up the new issue will enable the shareholder to prevent the allotment diluting his influence in the company without his consent and thereby protect his ownership rights. A pre-emption right over new allotments gives the existing shareholders a mechanism for curbing unconstitutional behaviour by directors (and perhaps majority shareholders) particularly in the context of a take-over bid. Therefore,

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