What is the right of pre-emption in relation to shares?

The right of pre-emption in relation to shares refers specifically to the ability of existing shareholders to purchase new shares issued by the company before they are offered to other potential buyers. This right is typically designed to protect shareholders from dilution of their ownership stake in the company. When a company decides to issue additional shares, existing shareholders with pre-emption rights have the first opportunity to buy those shares in proportion to their existing holdings. This ensures that they can maintain their percentage ownership and influence over the company.

The other options do not accurately capture the nature of pre-emption rights. For instance, an unlimited right to buy any shares is misleading, as pre-emption rights are not about acquiring any shares at will but rather about maintaining ownership through new share issuances. Similarly, the right to veto share issues entirely does not reflect the mechanism of pre-emption, which allows for participation in new share offerings rather than blocking them. Lastly, the right to receive dividends before other shareholders is not related to pre-emption rights, as pre-emption specifically involves the purchase of new shares rather than the distribution of dividends.