Which right allows existing shareholders to have first refusal before a company can issue new shares?

The right that allows existing shareholders to have first refusal before a company can issue new shares is known as the right of pre-emption. This legal provision is designed to protect existing shareholders by granting them the opportunity to purchase additional shares in proportion to their current holdings before the company offers those shares to outside investors. This mechanism helps to prevent dilution of ownership and maintains the shareholders' proportionate equity stake in the company.

Having a right of pre-emption fosters a sense of security among current investors, as it gives them a chance to maintain control or influence over corporate decisions. It is commonly found in corporate governance documents and shareholder agreements, emphasizing its importance in protecting shareholder interests.

While other terms such as the right of first offer or right of refusal may sound similar, they do not specifically convey the same legal implications or protections as the right of pre-emption. The right of first offer involves negotiations before third-party offers are made, while rights like the prior claim and refusal do not pertain directly to the issuance of new shares in a manner that protects existing shareholders' interests in the same way.