preemptive right   n.  The right of certain stockholders to maintain ownership of a constant percentage of a firm's stock. Such stockholders have the first opportunity to purchase new stock in the firm proportionate to the percentage of shares already held.

preemptive right

A stockholder's right to keep a constant percentage of a firm's outstanding stock by being given the first chance to purchase shares in a new stock issue in proportion to the percentage of outstanding shares already held. Not all firms provide the preemptive right, which is more important to stockholders owning a significant part of a company. Compare privileged subscription. Also called subscription privilege. See also special subscription account.

Main Entry: preemptive right
Function: noun
1 : RIGHT OF FIRST REFUSAL
2 : the right of a shareholder to buy shares of newly issued stock in proportion to existing holdings before a public offering is made in order to prevent dilution of ownership interest or seizure of majority control by management