Q&As
If the articles of a private company contain bespoke pre-emption rights, do the statutory pre-emption rights still need to be disapplied and, if so, how? How do you disapply contractual pre-emption rights?
pre-emption rights are an important shareholder protection because they enable an existing shareholder to maintain their percentage shareholding in the company on a new issue of shares. Where a private company's articles of association contain pre-emption rights which differ from but do not exclude the statutory pre-emption rights, do the statutory pre-emption rights still need to be disapplied and, if so, how can they be disapplied? Further, what if the articles contain bespoke pre-emption rights provision but do not contain a procedure for disapplying them? How can these contractual pre-emption rights be disapplied?
Disapplying statutory pre-emption rights
The Companies Act 2006 (CA 2006) gives existing shareholders of companies a statutory right of pre-emption in respect of the allotment of new equity securities.
For private companies only, all or any of the pre-emption requirements in CA 2006 may be excluded by a provision in the articles of association.
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