2023 New York Laws › BSC - Business Corporation › Article 6 - Shareholders › 622 - Preemptive Rights.

§ 622. Preemptive rights.
(a) As used in this section, the term:
(1) "Unlimited  dividend rights" means the right without limitation as
to amount either to all or to a share  of  the  balance  of  current  or
liquidating  dividends  after  the  payment  of  dividends on any shares
entitled to a preference.
(2) "Equity  shares"  means  shares  of  any  class,  whether  or  not
preferred  as  to  dividends  or  assets,  which have unlimited dividend
rights.
(3) "Voting rights" means the right to vote for the election of one or
more directors, excluding a right so to vote which is dependent  on  the
happening  of  an  event  specified  in the certificate of incorporation
which would change the voting rights of any class of shares.
(4) "Voting shares" means  shares  of  any  class  which  have  voting
rights,  but does not include bonds on which voting rights are conferred
under section 518 (Corporate bonds).
(5) "Preemptive right" means the right to  purchase  shares  or  other
securities  to  be issued or subjected to rights or options to purchase,
as such right is defined in this section.
(b) (1) With respect to any  corporation  incorporated  prior  to  the
effective  date  of  subparagraph  (2)  of  this  paragraph,  except  as
otherwise provided in the certificate of incorporation,  and  except  as
provided  in this section, the holders of equity shares of any class, in
case of the proposed issuance by the corporation  of,  or  the  proposed
granting by the corporation of rights or options to purchase, its equity
shares  of  any class or any shares or other securities convertible into
or carrying rights or options to  purchase  its  equity  shares  of  any
class, shall, if the issuance of the equity shares proposed to be issued
or  issuable  upon exercise of such rights or options or upon conversion
of such other securities would adversely affect the  unlimited  dividend
rights  of  such holders, have the right during a reasonable time and on
reasonable conditions, both to be fixed by the board, to  purchase  such
shares or other securities in such proportions as shall be determined as
provided in this section.
(2)  With  respect  to  any  corporation  incorporated on or after the
effective date of this subparagraph, the holders of  such  shares  shall
not have any preemptive right, except as otherwise expressly provided in
the certificate of incorporation.
(c)  Except as otherwise provided in the certificate of incorporation,
and except as provided in this section, the holders of voting shares  of
any  class  having any preemptive right under this paragraph on the date
immediately prior to the effective date of subparagraph (2) of paragraph
(b) of this section, in case of the proposed issuance by the corporation
of, or the proposed granting by the corporation of rights or options  to
purchase,  its  voting  shares  of  any  class  or  any  shares or other
securities convertible into or carrying rights or  options  to  purchase
its  voting  shares  of  any class, shall, if the issuance of the voting
shares proposed to be issued or issuable upon exercise of such rights or
options or upon conversion of  such  other  securities  would  adversely
affect  the  voting  rights  of  such  holders,  have the right during a
reasonable time and on reasonable conditions, both to be  fixed  by  the
board,  to  purchase such shares or other securities in such proportions
as shall be determined as provided in this section.
(d) The preemptive right provided for in paragraphs (b) and (c)  shall
entitle shareholders having such rights to purchase the shares or  other
securities  to  be offered or optioned for sale as nearly as practicable
in such proportions as would, if such preemptive right  were  exercised,
preserve  the  relative  unlimited  dividend rights and voting rights of

such holders and at a price or prices not less favorable than the  price
or  prices  at  which such shares or other securities are proposed to be
offered for  sale  to  others,  without  deduction  of  such  reasonable
expenses  of  and compensation for the sale, underwriting or purchase of
such shares or other  securities  by  underwriters  or  dealers  as  may
lawfully  be  paid  by  the  corporation.  In  case  each  of the shares
entitling the holders thereof to preemptive rights does not  confer  the
same unlimited dividend right or voting right, the board shall apportion
the  shares or other securities to be offered or optioned for sale among
the shareholders having preemptive  rights  to  purchase  them  in  such
proportions  as  in  the  opinion  of the board shall preserve as far as
practicable the relative unlimited dividend rights and voting rights  of
the  holders at the time of such offering. The apportionment made by the
board shall, in the absence of fraud or bad faith, be binding  upon  all
shareholders.
(e)  Unless  otherwise  provided  in the certificate of incorporation,
shares or other securities offered for sale or subjected  to  rights  or
options  to  purchase  shall  not  be subject to preemptive rights under
paragraph (b) or (c) of this section if they:
(1) Are to be issued by the board to effect a merger or  consolidation
or  offered  or  subjected  to rights or options for consideration other
than cash;
(2) Are to be issued or subjected to rights or options under paragraph
(d) of section 505 (Rights and options  to  purchase  shares;  issue  of
rights and options to directors, officers and employees);
(3)   Are  to  be  issued  to  satisfy  conversion  or  option  rights
theretofore granted by the corporation;
(4) Are treasury shares;
(5) Are part of the shares or  other  securities  of  the  corporation
authorized  in its original certificate of incorporation and are issued,
sold or  optioned  within  two  years  from  the  date  of  filing  such
certificate; or
(6)  Are  to  be  issued  under a plan of reorganization approved in a
proceeding  under  any  applicable   act   of   congress   relating   to
reorganization of corporations.
(f) Shareholders of record entitled to preemptive rights on the record
date  fixed  by the board under section 604 (Fixing record date), or, if
no record date is fixed,  then  on  the  record  date  determined  under
section  604,  and  no  others shall be entitled to the right defined in
this section.
(g) The board shall cause to be given to each shareholder entitled  to
purchase  shares  or other securities in accordance with this section, a
notice directed to him in the manner provided in section 605 (Notice  of
meetings  of  shareholders)  setting forth the time within which and the
terms and conditions upon which the shareholder may purchase such shares
or other securities and also the apportionment  made  of  the  right  to
purchase  among  the  shareholders  entitled  to preemptive rights. Such
notice shall be given personally or by mail at least fifteen days  prior
to  the expiration of the period during which the shareholder shall have
the right to purchase. All shareholders entitled to preemptive rights to
whom  notice  shall  have  been  given  as  aforesaid  shall  be  deemed
conclusively  to  have  had a reasonable time in which to exercise their
preemptive rights.
(h) Shares or other securities which have been offered to shareholders
having preemptive rights to purchase and which have not  been  purchased
by  them within the time fixed by the board may thereafter, for a period
of not exceeding one year following the expiration of  the  time  during
which  shareholders  might  have  exercised  such  preemptive rights, be

issued, sold or subjected to rights or options to any  other  person  or
persons at a price, without deduction of such reasonable expenses of and
compensation  for  the  sale, underwriting or purchase of such shares by
underwriters  or dealers as may lawfully be paid by the corporation, not
less than that at which they were offered to such shareholders. Any such
shares or other securities not so issued, sold or subjected to rights or
options to others during such one year period shall thereafter again  be
subject to the preemptive rights of shareholders.
(i) Except  as  otherwise provided in the certificate of incorporation
and except as provided in this section, no holder of any shares  of  any
class  shall  as  such  holder have any preemptive right to purchase any
other shares or securities of any class which at any time may be sold or
offered for sale by the corporation. Unless otherwise  provided  in  the
certificate  of  incorporation,  holders of bonds on which voting rights
are conferred under section 518 shall have no preemptive rights.