If the articles of incorporation do not explicitly grant preemptive rights, what is the status of those rights?

In corporate law, preemptive rights are the rights that allow existing shareholders to maintain their proportional ownership in a corporation by purchasing additional shares before the shares are offered to other potential buyers. If a corporation's articles of incorporation do not explicitly grant preemptive rights to the shareholders, it is established that these rights do not exist. This means that shareholders are not entitled to buy additional shares before the corporation offers them to outside investors or other parties, which could dilute their ownership percentage.

This principle is grounded in the idea that preemptive rights must be clearly outlined in the governing documents of the corporation because they are not automatically granted. Corporate statutes often provide for this understanding, reinforcing that without specific language in the articles of incorporation, shareholders will not have an implied or assumed right to preemptive shares. Thus, the absence of explicit language equates to the nonexistence of these rights.