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Companies Act 2006

Section 561: Existing shareholders’ right of pre-emption

866.Subject to some exceptions, under section 89(1) of the 1985 Act, a company that is proposing to allot equity securities (defined in section 560) must offer them to existing shareholders first (that is, on a pre-emptive basis). The basic principle (which is unchanged by the Act) is that a shareholder should be able to protect his proportion of the total equity of a company by having the opportunity to subscribe for any new issue of equity securities. This is subject to various exceptions and subsection (5) provides a pointer to these exceptions.

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