Pre-emption rights—general issues

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Pre-emption rights—general issues
  • Preliminary considerations
  • The right of pre-emption
  • Definitions
  • Making the pre-emptive offer
  • Exceptions to pre-emption rights
  • Exclusion of pre-emption rights
  • Other circumstances in which pre-emption rights may not apply
  • Disapplication of pre-emption rights
  • CA 2006, s 569
  • More...

Pre-emption rights—general issues

The Companies Act 2006 (CA 2006) gives existing shareholders of companies a right of pre-emption by providing that a company must not allot equity securities unless it has first made an offer to each existing ordinary shareholder to allot those securities to them, unless the circumstances fall within an exception to the right of pre-emption or such rights have been excluded or disapplied. Pre-emption rights give a company's existing shareholders important protection against dilution of their percentage holding of a company's issued share capital.

This Practice Note covers general issues relating to pre-emption rights. There are specific issues to be considered for each type of company making the allotment. For further information, see Practice Notes: Pre-emption rights—private companies with one class of shares, Pre-emption rights—private companies with more than one class of shares and public unlisted companies and Pre-emption rights—listed companies.

This note does not cover the additional rules, regulations and guidance applicable to listed companies and AIM companies.

The rules relating to pre-emption must be read in conjunction with the rules governing the allotment of shares. See Practice Note: Allotment and issue of shares—introductory points.

Preliminary considerations

Before taking any steps in relation to the allotment of shares or disapplication of pre-emption rights, the company must consider whether:

  1. the articles of association include any bespoke pre-emption rights

  2. there is any existing valid authority disapplying pre-emption rights

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