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by Undo Capital
December 15, 2025
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What are Preemption Rights?

Preemption rights give existing shareholders the first opportunity to buy new shares before they are offered to external investors.

Preemption Rights Meaning

The preemption rights' meaning centres on protecting shareholders from unwanted dilution. To define preemption rights in practice, when a company issues new shares, existing shareholders have the right to purchase a proportionate amount so they can maintain their ownership percentage. A clear preemption rights definition is crucial in venture-backed companies, as investors often rely on these rights to preserve influence, economic value and voting power. Preemption rights also support fair treatment by ensuring new investors cannot be brought in on terms that disadvantage current shareholders.

Disclosure Notice: This communication is issued by Undo Capital Limited (“Undo Capital”) and is provided strictly for informational purposes only. It contains general information and should not be relied upon as accounting, business, financial, investment, legal, tax, or other professional advice. Undo Capital is not regulated by the Financial Conduct Authority (FCA) and does not provide investment, financial, or tax advice. Our services are designed to assist startups and businesses with company formation, legal agreements, and funding-related documentation. Nothing in this communication constitutes, or should be construed as, a recommendation, offer, or solicitation to purchase or sell any security or financial instrument.
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Disclaimer: Our services are designed to assist startups and businesses with company formation, legal agreements, and funding-related documentation. We do not provide investment advice, financial advice, or tax advice, nor are we regulated by the Financial Conduct Authority (FCA). Participating in startups and early-stage enterprises carries inherent risks, including limited liquidity, absence of dividends, potential loss of investment, and dilution. Any decisions regarding investments should be made independently by the investor as part of a well-diversified portfolio.