Pre-emption Rights

Where a company proposes to issue new shares, existing shareholders may have the right to be offered a pro-rata part of the new shares before they are offered to a new shareholder. The rights are contained either in the Articles of Association or imposed by Section 89 Companies Act 1985. These pre-emption rights may be disapplied either generally or in relation to a particular new issue by a provision in the Articles of Association or a special resolution. In relation to sales of existing shares, similar rights require a shareholder wishing to sell shares to offer them first to existing shareholders before being able to transfer to outsiders. These rights are common for private companies and are found in the Articles of Association.