Subscription Privilege

Subscription Privilege - A subscription privilege is the privilege or right of a company's existing shareholders or their transferees to keep their level of investment in the company by being given the opportunity to buy any future shares of common stock issued by the company. This is done privately before the shares become public so that they can retain their interest. They can buy these new shares on a pro rata basis. The existing shareholders will receive a subscription warrant which will indicate how many shares are available and the existing shareholders can purchase them at a lower cost than the public would be able to. Also there are no brokerage fees involved. The procedure is known also as a preemptive right, or subscription right and is only allowed by certain State laws if these preemptive rights were detailed in the company's charter.