Preemptive right
Preemptive right is the right of the stockholder to purchase additional shares of stock to maintain a proportionate interest when the corporation issues additional stock.
Definitions
According to College Accounting: A Practical Approach by Slater (13th edition),
- Preemptive right. The right of the stockholder to purchase additional shares of stock to maintain a proportionate interest when the corporation issues additional stock.
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Preemptive right. Gives the current shareholders the right to purchase any new shares issued in proportion to their current holdings. The preemptive right enables current owners to maintain their proportion at share of ownership and control of the business.
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Preemptive right. A provision in the corporate charter or bylaws that gives common stockholders the right to purchase on a pro rata basis new issues of common stock (or convertible securities).
Related concepts
- Accounting (alternatively known as accountancy) is management of financial data, information, and knowledge about financial transactions of legal entities. Accountancy tends to include bookkeeping and, depending on a particilar enterprise, may also include quatitative analysis of financial data in the bookkeeping system and/or business intelligence.
