Preemptive Right Legal Meaning and Definition

Here is a simplified definition of the legal term Preemptive Right.

Preemptive Right (noun)

This is a legal concept typically used in the context of corporate business. A Preemptive Right refers to the special privilege granted to existing shareholders of a corporation, allowing them to buy additional shares of newly issued stock before it's offered to new investors. This right lets the shareholders maintain their proportional ownership in the corporation, preventing dilution of their shares if the corporation decides to issue more stocks.