Definition

Preemptive right (Ro.: drept de preempțiune, Gr.: δικαίωμα προτίμησης, Cz.: předkupní právo) (See also: first-look deal, call option, put option, right of first refusal, follow-on offering, subscription privilege)

(Broad meaning) generally, it regards the contractual right of one party to purchase an asset of the other party before it is offered to a third party. 

It can also have a legal nature. This means that the first opportunity to buy is granted by law to certain parties which enter a juridical relationship. For instance, in France, when someone sells their property there are cases in which local authorities have a right of preemption if that property is necessary for developments of public interests. In Romania and in France, tenants are granted preemptive rights should the owner decide to sell.

(Specific meaning) in company law, it is the privilege granted through the contract of association to stockholders to buy new stock that will be issued, with preference to other potential buyers. Its purpose is to preserve their percentage of the ownership of the company.

 

Useful links

Legislation

http://www.legislation.gov.uk/ukpga/2006/46/section/561 - section 561, Companies Act 2006, UK [en]

http://codes.droit.org /cod/urbanisme.pdf - Book II, Title 1, Chapter 1, Article R*211-1, French Code of Urbanism [fr]

http://codes.ohio.gov/orc/1107.11 - Ohio Revised Code [en]

http://legeaz.net/noul-cod-civil/art-1737-notarea-dreptului-de-preemptiune-asupra-unui-imobil-dispozitii-generale-contractul-de-vanzare - Romanian Civil Code  [ro]

http://www.minnesotalegalhistoryproject.org/assets/Microsoft%20Word%20-%20Preemption%20Act%20of%201841.pdf - The Preemption Act of 1841, USA [en]

Articles

http://www.pre-emptiongroup.org.uk/pre-emptiongroup/media/Documents/Statement-of-Principles-July-2008.pdf - The Pre-emption Group, Disapplying Pre-emption Rights. A stetement of Principles. July 2008. 

http://www.internationallawoffice.com/newsletters/detail.aspx?g=9a72a8c4-ab8e-db11-8a05-001143e35d55 - Frans van Hoogstraten, Options and Rights of First Refusal: What Is the Difference?

http://www.lexisnexis.com/uk/lexispsl/corporate/document/391387/55KB-9K81-F186-H08N-00000-00/Allotment%20and%20issue%20of%20share%20capital%20and%20pre-emption%20rights – Lexis PSL CORPORATE, Allotment and issue of share capital and pre-emption rights

https://www.lexisnexis.com/uk/lexispsl/property/document/393788/55KG-P261-F18C-430P-00000-00/Options%20and%20pre-emption%20rights - Lexis PSL PROPERTY, Options and pre-emption rights

http://bdo.co.za/documents/Pre-emptive%20rights%20for%20Company%20shares.pdf – Statucor. Company Secretarial Services, Pre-emptive rights for company shares

Publications 

http://books.google.ro/books?id=pAaOysAmCFoC&pg=PA531&dq=preemptive+rights&hl=ro&sa=X&ei=GEqwUo3qCorEsgbnp4H4CQ&redir_esc=y#v=onepage&q=preemptive%20rights&f=false -  Emanuel L., Emanuel S., 2009, Corporations, Aspen Publishers Online, pages 531-535

http://books.google.ro/books?id=-1VnWGrgID0C&pg=PA195&dq=preemptive+rights&hl=ro&sa=X&ei=GEqwUo3qCorEsgbnp4H4CQ&redir_esc=y#v=onepage&q=preemptive%20rights&f=false - Reinier K., Armour J., Davies P., Enriques L., Hansmann H.B., Hertig G., Hopt K.J, 2009, The Anatomy of Corporate Law: A Comparative and Functional Approach, Oxford University Press, pages 195-196

http://books.google.ro/books?id=Is-O46iiMTAC&pg=PA787&dq=preemptive+rights&hl=ro&sa=X&ei=3lewUtj2A8GytAbQzYC4Cg&redir_esc=y#v=onepage&q=preemptive%20rights&f=false - Clarkson K.W., Jentz G.A., Miller R.L., Cross F.B., 2010, Business Law: Text and Cases: Legal: Text and Cases : Legal, Ethical, Global, Cengage Learning, page 787

http://books.google.ro/books?id=ELgd2EnTZbwC&pg=PA145&dq=preemptive+rights&hl=ro&sa=X&ei=GEqwUo3qCorEsgbnp4H4CQ&redir_esc=y#v=onepage&q=preemptive%20rights&f=false - Fuerst O., Geiger U., 2003, From Concept to Wall Street, FT Press, pages 145-146 

http://books.google.ro/books?id=mLdLHhqxUb4C&pg=PA162&dq=preemptive+rights&hl=ro&sa=X&ei=GEqwUo3qCorEsgbnp4H4CQ&redir_esc=y#v=onepage&q=preemptive%20rights&f=false - Berle A.A,  Means G.G.C., 1991, The Modern Corporation and Private Property, Transaction Publishers, pages 162-163

http://books.google.ro/books?id=lnoy85p0Pr0C&pg=PA384&dq=preemptive+rights&hl=ro&sa=X&ei=GEqwUo3qCorEsgbnp4H4CQ&redir_esc=y#v=onepage&q=preemptive%20rights&f=false -  Schneeman A., 2012, The Law of Corporations and Other Business Organizations, 6th ed., Cengage Learning, page 384

 

By Bianca Alexandra Prunea