Co-emption refers to the right of a person or entity to have the first opportunity to purchase a property or asset before it is offered to others. This right is typically outlined in a contract or agreement and gives the co-emption holder the ability to match any offer made by a third party in order to retain their interest in the property or asset. Failure to adhere to the co-emption right may result in legal action being taken by the co-emption holder.
Co-emption refers to the right of existing shareholders to have the first opportunity to purchase additional shares in a company before they are offered to external parties.
Co-emption is important as it allows existing shareholders to maintain their proportional ownership in a company and prevents dilution of their shares by ensuring they have the first right to purchase any new shares issued.
When a company intends to issue new shares, it must first offer them to existing shareholders in proportion to their existing shareholdings. If any existing shareholder declines to purchase the offered shares, only then can the company offer them to external parties.
Co-emption is not a legal requirement in all jurisdictions, but it may be included in a company’s articles of association or shareholders’ agreement to protect the interests of existing shareholders.
No, a shareholder cannot be forced to exercise their co-emption rights. It is entirely voluntary, and they have the choice to either purchase the offered shares or decline the opportunity.
In some cases, a company’s articles of association or shareholders’ agreement may exclude certain shareholders from co-emption rights, such as founders or key executives. However, this must be clearly stated and agreed upon in the relevant documents.
In certain circumstances, a company may be allowed to issue shares without offering them to existing shareholders. This could be due to exemptions provided by law or if the shares are being issued as part of a private placement or public offering.
If a shareholder declines to exercise their co-emption rights, the company can then offer the shares to external parties, such as new investors or existing shareholders who have already exercised their co-emption rights.
Co-emption rights can be waived or modified if all shareholders agree to do so. This typically requires an amendment to the company’s articles of association or shareholders’ agreement, which must be approved by the shareholders in accordance with the applicable laws and regulations.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 5th April 2024.
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