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?

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Published on: 27 November 2014
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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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Jurisdiction(s):
United Kingdom
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Key definition:
Private company definition
What does Private company mean?

A private company is not a public company within the meaning of the Companies Act 2006 and is prohibited from making any offer of securities of the company to the public.

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