What are pre-emptive rights?
Incorporation Services Limited provides an expert
service for all your company formation and company law requirements, including
advice about different classes of shares, and the rights they may carry.
Pre-emptive rights (or rights of pre-emption) are any rights shareholders may
have to be offered shares in a company before they are made available to anyone
else. They can arise on the allotment, transfer or transmission of shares. Such
rights may be important to ensure that a shareholder's proportion of the voting
and other rights in the company are not diluted.
Pre-emptive rights on allotment can arise under the Companies Act or the company's memorandum and articles.
CA 1985, sec89: Shares must be offered to existing members in proportion to
their present holdings. The offer must be in writing and (sec90) the company
must allow at least 21 days for the shareholder to take up the offer.
These pre-emptive rights do not apply if:
(a) the memorandum or articles of a private company exclude them or provide
alternative provisions, e.g. to make the provision apply to allotments which
are not wholly for cash or where more detailed provisions are required in respect
of different classes of shares (sec91); or
(b) the company passes a special resolution to exclude them (sec95); or
(c) the shares are issued for non-cash consideration (sec89(4)).
(d) shares within an employees' share scheme.
The shares could also be offered to the members who then waive their rights to them.
There are no statutory provisions relating to share transfers, but they are quite commonly included in the articles of private companies as amendments to Table A. When this is done, the provisions will usually apply also to the transmission of shares (i.e. when a shareholder dies or is made bankrupt).
Related topics
|
