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E-library Corporate Law Pre-emption right and purchase price

Pre-emption right and purchase price

20 Feb 2013

To be valid, a pre-emption clause must indicate the price which must be paid for the purchase of the shares upon exercise of the pre-emption right.

Generally, the pre-emption purchase price is equal to that offered by the third party purchaser.

The parties may however agree on a different price. The pre-emption clause may thus provide that the pre-emption purchase price will be equal to the “fair market price" of the shares, in which case a formula or mechanism allowing for the determination of such price must also be included.

If the parties disagree on the results of the application of the formulae or other price determination mechanism, the price should be determined by a third party independent expert.

Exercise of a pre-emption right
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