Plain language law

New Zealand law explained for everyone

Companies Act 1993

Shares and debentures - Issue of shares

45: Pre-emptive rights

You could also call this:

“Existing shareholders get first chance to buy new shares”

When a company wants to issue new shares that are equal to or better than existing shares, they must first offer these new shares to people who already own shares in the company. This is to make sure that current shareholders can keep their voting power and rights to receive money from the company.

The company needs to give current shareholders a fair chance to buy these new shares. They can’t just offer them for a very short time and then say, “Sorry, you missed your chance!”

However, a company can change these rules if they write it in their constitution. The constitution is like a rulebook for how the company works. They might decide to remove this rule completely, change it a bit, or put limits on it.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320160.

Topics:
Business > Industry rules
Business > Fair trading
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“Company boards can issue new shares if shareholders approve changes to company rules”

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Part 6 Shares and debentures
Issue of shares

45Pre-emptive rights

  1. Shares issued or proposed to be issued by a company that rank or would rank as to voting or distribution rights, or both, equally with or prior to shares already issued by the company must be offered for acquisition to the holders of the shares already issued in a manner and on terms that would, if accepted, maintain the existing voting or distribution rights, or both, of those holders.

  2. An offer under subsection (1) must remain open for acceptance for a reasonable time.

  3. The constitution of a company may negate, limit, or modify the requirements of this section.