Invitation to Apply for New Shares

If pre-emption rights exist, new shares in a company must be offered first to existing shareholders in proportion to their current shareholding.

This anti-dilution measure is designed to allow current shareholders to maintain their existing percentage shareholding in the company, should they choose.

Use this letter to offer new shares to existing shareholders pro rata

This template letter invites existing shareholders to take up an offer to purchase shares in a proposed allotment of new shares pro-rata to their existing shareholding.

When this offer procedure must be followed

If pre-emption rights have not been disapplied or waived, this procedure must be followed even if the company is aware that shareholders will not take up this right.

This must take place before new shares are offered to outside investors.

• The offer must be made in writing.
• The company must allow at least 21 days for the shareholder to take up the offer.

Disapplying or waiving pre-emption rights

Note that a private company may disapply pre-emption rights, either permanently by amending its articles of association or by special resolution for a specific allotment.

A company may also enable its shareholders to waive their pre-emption rights in relation to a proposed allotment of shares.

This subfolder includes both a template shareholders’ special resolution to disapply pre-emption rights and a deed of waiver of pre-emption rights should this be a preferred route.

Check what pre-emption rights apply under the articles

However, no issue of shares should be made without knowing what pre-emptive rights apply under the articles and how these relate to current statutory provisions.

Invitation to Apply for New Shares is part of Corporate. Just £38.50 + VAT provides unlimited downloads from Corporate for 1 year.