TITLE 7
Corporations, Associations, and Partnerships

CHAPTER 7-1.2
Rhode Island Business Corporation Act

PART 7-1.2-601
Shares Issuance and Distributions

SECTION 7-1.2-613


§ 7-1.2-613 Shareholder's preemptive rights.

(a) Except to the extent limited or denied by this section or by the articles of incorporation, shareholders of a corporation incorporated prior to July 1, 2005 have a preemptive right to acquire unissued shares or securities convertible into shares or carrying a right to subscribe to or acquire shares. Unless otherwise provided in the articles of incorporation:

(1) No preemptive right exists:

(i) To acquire any shares issued to directors, officers, or employees pursuant to approval by the affirmative vote of the holders of a majority of the shares entitled to vote on the acquisition or when authorized by and consistent with a plan previously approved by a vote of shareholders; or

(ii) To acquire any shares sold other than for money.

(2) Holders of shares of any class that is preferred or limited as to dividends or assets are not entitled to any preemptive right.

(3) Holders of shares of any class are not entitled to any preemptive right to shares of any class that is preferred or limited as to dividends or assets or to any obligations, unless convertible into shares of that class or carrying a right to subscribe to or acquire shares of that class.

(4) Holders of shares without voting power have no preemptive right to shares with voting power.

(5) The preemptive right is only an opportunity to acquire shares or other securities under terms and conditions that the board of directors may fix for the purpose of providing a fair and reasonable opportunity for the exercise of the right.

(b) The shareholders of a corporation incorporated on or after July 1, 2005 do not have a preemptive right to acquire a corporation's unissued shares or securities convertible into shares or carrying a right to subscribe for or acquire shares except to the extent the articles of incorporation so provide. A statement included in the articles of incorporation that "the corporation elects to have preemptive rights" (or words of similar import) means that the following principles apply except to the extent the articles of incorporation expressly provide otherwise:

(1) The shareholders of the corporation have a preemptive right, granted on uniform terms and conditions prescribed by the board of directors, to provide a fair and reasonable opportunity to exercise the right, to acquire proportional amounts of the corporation's unissued shares upon the decision of the board of directors to issue them.

(2) A shareholder may waive his or her preemptive right. A waiver evidenced by a writing is irrevocable even though it is not supported by consideration.

(3) There is no preemptive right with respect to:

(i) Shares issued as compensation to directors, officers, agents, or employees of the corporation, its subsidiaries or affiliates;

(ii) Shares issued to satisfy conversion or option rights created to provide compensation to directors, officers, agents or employees of the corporation, its subsidiaries or affiliates;

(iii) Shares authorized in articles of incorporation that are issued within six (6) months from the effective date of incorporation; or

(iv) Shares sold otherwise than for money.

(4) Holders of shares of any class without general voting rights but with preferential rights to distributions or assets have no preemptive rights with respect to shares of any class.

(5) Holders of shares of any class with general voting rights but without preferential rights to distributions or assets have no preemptive rights with respect to shares of any class with preferential rights to distributions or assets unless the shares with preferential rights are convertible into or carry a right to subscribe for or acquire shares without preferential rights.

(6) Shares subject to preemptive rights that are not acquired by shareholders may be issued to any person for a period of one year after being offered to shareholders at a consideration set by the board of directors that is not lower than the consideration set for the exercise of preemptive rights. An offer at a lower consideration or after the expiration of one year is subject to the shareholders' preemptive rights.

(c) For purposes of this section, "shares" includes a security convertible into or carrying a right to subscribe for or acquire shares.

History of Section.
(P.L. 2004, ch. 216, § 2; P.L. 2004, ch. 274, § 2; P.L. 2005, ch. 120, § 1; P.L. 2005, ch. 130, § 1.)