What is "pre-emptive right" under the Revised Corporation Code?

The concept of "pre-emptive right" under the Revised Corporation Code refers specifically to the entitlement of existing shareholders to purchase additional shares of the corporation before these shares are offered to any other party. This right ensures that current shareholders have the opportunity to maintain their proportionate ownership in the company and avoid dilution of their voting power and financial interest in the corporation when new shares are issued.

By allowing shareholders this priority, the pre-emptive right upholds the interests of existing investors, offering them a safeguard against potential value loss that could occur if new shares are issued to outside investors. This feature promotes stability and trust among shareholders and reflects a principle of protecting ownership stakes within the corporate structure.

Other options, such as the right to sell shares to anyone, influence management decisions, or automatic receipt of dividends, do not accurately describe the nature of pre-emptive rights and relate to different aspects of shareholder rights and corporate governance.