The preemptive subscription right is the right of each shareholder to subscribe, in a capital increase with cash contributions, a number of new shares proportional to the nominal value of those they already hold. It is exercised within a minimum period of one month, it can be sold in the S.A. and only the general meeting can suppress it, with reports.
In the S.L. it is called the preferential assumption right and works the same way for participations (art. 304 of the Spanish Companies Act, LSC). For the issuer, this right decides whether a new investor can enter without the current shareholders waiving it or the general meeting eliminating it. This guide explains when it exists, how it is exercised, how much it is worth and how it is excluded.
When the right exists and when it does not
It exists in capital increases with the issuance of new shares or participations, ordinary or privileged, charged to cash contributions (art. 304.1 LSC). Shareholders also have it over convertible bonds (art. 416 LSC). The law includes it among the minimum rights of the shareholder, together with dividends, voting and information (art. 93 LSC).
| Transaction | Is there a preemptive right? | Rule |
|---|---|---|
| Cash capital increase with new shares or participations | Yes | Art. 304.1 LSC |
| Issuance of convertible bonds (S.A. only; S.L. cannot issue them) | Yes | Arts. 401.2 and 416 LSC |
| Non-cash capital increase or by offsetting credits | No: the law reserves it for cash contributions | Art. 304.1 LSC |
| Capital increase charged to reserves | No: the members receive free allocation rights, transferable in the S.A. | Art. 306.2 LSC |
| Absorption of another company, spin-off or conversion of bonds | No | Art. 304.2 LSC |
Decide the type of contribution before designing the round: it determines whether you have to manage preemptive rights, waivers or a suppression.
How it is exercised: time limits and steps
- Capital increase resolution. The general meeting approves it with the requirements of an amendment to the articles of association: in the S.L., more than half of the votes of the capital; in the S.A., enhanced quorum and majority (arts. 194, 199.a, 201 and 296 LSC).
- Deadline. In the S.L. it is set by the resolution; in the S.A., by the directors. It is never less than one month from the announcement of the offer in the Official Gazette of the Commercial Registry, BORME (art. 305 LSC). In listed companies, the minimum is fourteen days (art. 503 LSC).
- Notice or letter. In an S.L., and in an S.A. when all shares are registered, the notice may be replaced by written communication to each shareholder; the period runs from sending (art. 305.3 LSC).
- Subscription and payment. The premium is paid in full on subscription (art. 298.2 LSC). In an S.A., each share is paid up at least one quarter (art. 296.3 LSC); in an S.L., the nominal value is paid in full (art. 78 LSC).
- Second round in an S.L. Unless the articles provide otherwise, the unsubscribed portion is offered for a maximum of fifteen days to those who exercised their right, pro rata. In the following fifteen days, the directors may allocate it to third parties (art. 307 LSC).
- Incomplete subscription. In an S.L., capital is increased by the amount paid up unless the resolution provides otherwise; in an S.A., only if the issuance so provided (arts. 310 and 311 LSC).
- Deed. The S.A. capital increase deed sets out the conditions of the right, individual waivers and, if any, the exclusion approved by the general meeting (art. 166 of the Regulations of the Commercial Registry, RRM).
Example timetable for an S.L. Capital increase resolution on 1 March 2027 and letter to all shareholders on 3 March. The preferential subscription period ends on 3 April, the second round at the latest on 18 April and allocation to third parties on 3 May. If an external investor expects its stake, it has two months from the letter, not days.
How much the right is worth: formula and example
The theoretical value of the right (VTD) is calculated with a standard financial formula. It is one of the figures that the independent expert must assess in an S.A. when the general meeting proposes to exclude the right (art. 308.2.a LSC).
TVR = (V – E) × N / (A + N)
V is the value per share before the capital increase, E the issue price (nominal plus premium), A the number of old shares and N the number of new shares, in the proportion of the issue.
An S.A. has 100,000 shares with a fair value of €12 and issues 25,000 new shares at €8: one new share for every four old shares. A shareholder has 20,000 shares, 20%.
| Concept | Calculation | Result |
|---|---|---|
| Value of the company before the capital increase | 100,000 × 12 € | 1,200,000 € |
| Money coming in | 25,000 × 8 € | 200,000 € |
| Value per share after | 1,400,000 / 125,000 | 11.20 € |
| Theoretical value of the right | (12 – 8) × 1 / (4 + 1) | €0.80 per old share |
| New shares they can subscribe | 20,000 / 4 | 5,000, for €40,000 |
| If you do not subscribe or sell | 20,000 / 125,000 | 16% and €16,000 less in value |
| If you sell your rights at theoretical value | 20,000 × 0.80 € | €16,000 of income |
That is what the right is for: whoever does not put in money can offset the economic dilution by selling it. If the general meeting excludes it and issues below real value, that loss falls on the shareholders. That is why the law requires that, when excluding it, nominal value plus premium correspond to real value (art. 308.2.c LSC).
If an individual sells, the amount is taxed as a capital gain in the year of the sale, whether or not the shares are admitted to trading (art. 37.1.a and b of the Personal Income Tax Law), and is subject to withholding (art. 75.1.d of the Personal Income Tax Regulations).
Who can buy the rights
In an S.A., the rights are transferred on the same terms as the shares from which they derive (art. 306.2 LSC). If your articles restrict the transfer of shares, the restriction also applies to the rights. In an S.L., only those who could freely acquire interests may buy them, unless the articles open the door to others under the regime for the transfer of interests (art. 306.1 LSC).
Do not confuse it with the right of first refusal, which applies when a shareholder sells existing interests or shares. In an S.L., in the absence of an article provision, sale to third parties requires the company's consent, and the shareholders attending the general meeting have a preferential right to buy (art. 107 LSC). It is usually completed in the shareholders' agreement with tag along and drag along clauses.
How to exclude the right: individual waiver or suppression
There are two ways for a specific investor to come in. The first is for each shareholder to waive their right, which the capital increase deed records (arts. 166 and 198 RRM). The second is for the general meeting to exclude it, in whole or in part, when the company's interest requires it (art. 308.1 LSC). Exclusion requires:
- A report from the directors with the value of the shares or participations, the detailed justification of the proposal, the consideration and the persons who will receive the securities.
- In the S.A., in addition, a report from an independent expert, different from the company's auditor and appointed by the Commercial Registry. It values the shares at fair value, calculates the theoretical value of the right and judges whether the data in the directors' report are reasonable.
- A notice of meeting that includes the proposal, the type of issue and the right of the members to examine the reports and receive them free of charge.
- That nominal value plus premium correspond to the real value in the report of the directors (S.L.) or of the expert (S.A.) (art. 308.2 LSC).
In an S.L., the majority rises to two thirds of the votes of the capital (art. 199.b LSC); in an S.A., the reinforced quorum and majorities for the capital increase itself are sufficient (arts. 194 and 201 LSC). Listed companies have their own regime, with a mandatory expert if the issuance exceeds 20% of capital (art. 504 LSC).
| Aspect | Individual waiver | Elimination by the general meeting |
|---|---|---|
| Who decides | Each shareholder, individually | The general meeting, by supermajority |
| Reports | art. 308 does not apply | Directors and, in the S.A., an independent expert |
| Price | Without the real value rule of art. 308.2.c; never below nominal value (art. 59.2 LSC) | Nominal value plus premium equal to the actual value |
| When it fits | Few shareholders, all in agreement | Many shareholders or some opposed |
An SME with three shareholders who sign the waiver avoids the reports under art. 308. An S.A. with forty shareholders will hardly gather forty waivers: exclusion is the route, and the appointment of the expert by the registrar sets the general meeting timetable.
The preemptive right in a tokenized issuance
A capital increase with tokenized shares is an ordinary capital increase. The preemptive right exists all the same: for new investors to subscribe from day one, the general meeting must exclude it or the shareholders must waive it. Otherwise, they can only buy rights or subscribe the shares left over at the end of the period, if the resolution so provides. Since interests in an S.L. are not securities, this route requires an S.A. (art. 92.2 LSC). Three points change in practice:
- Who holds the right. It belongs to whoever appears in the ERIR register, the entity responsible for managing the registration and record, on the reference date to be set in the agreement (arts. 8.4 and 13 of the Law 6/2023). The company may require the ERIR to identify its shareholders (art. 25.6 of the Royal Decree 814/2023).
- Announcement. The letter that replaces the announcement requires that all shares be registered shares (art. 305.3 LSC), a category that the law associates with certificates (art. 23.d LSC). With shares in an ERIR, the prudent thing is to publish in the BORME.
- Transfer. If the token can only be transferred to verified investors, the consistent approach is to apply the same restriction to the rights, because they are transferred under the same conditions as the shares (art. 306.2 LSC). Define in the issuance document whether the rights are recorded and how they are exercised (art. 7 of Law 6/2023).
To set the price, apply what is explained in the share premium and in the valuation for issuance. The full process is in capital increase, and the cost comparison in tokenized equity vs classic capital increase.
To continue: how to call the general meeting and draft the minutes and how a capital reduction is carried out.
If you need a law firm to prepare the transaction, at HokenFi's partner law firms you can request proposals from the platform.
Are you preparing a capital increase that eliminates the preemptive right to open it to new investors? Take the issuance diagnostic (2 min) or request a proposal.
This content is informative and educational. It does not constitute legal, tax, or investment advice. Check the current version of each regulation in the BOE and on EUR-Lex.
HokenFi is a software and infrastructure provider; it does not provide regulated services (CASP, ESI, EAF, or ERIR). This article is informative and does not constitute financial or legal advice.
Frequently asked questions
What is the preemptive subscription right?
It is the right of each shareholder to subscribe, in a capital increase with cash contributions, a number of new shares proportional to the nominal value of those they already hold (art. 304 LSC). It serves to prevent dilution of their stake. In a limited liability company it is called the preferential right of assumption and works the same way. It also exists in the issuance of convertible bonds (art. 416 LSC).
What does Article 93 of the Capital Companies Act establish?
It lists the minimum rights of every shareholder: to share in the company profits and in the assets resulting from the liquidation, the preferential assumption or subscription right in the creation of participations or the issuance of shares or convertible bonds, to attend and vote at general meetings and challenge resolutions, and the right to information. The law itself then regulates the cases in which they are limited.
What is the deadline for exercising the preemptive subscription right?
At least one month from the publication of the offer notice in the BORME. In the private limited company, and in the public limited company with all registered shares, the notice may be replaced by a letter to each shareholder and the period runs from dispatch (art. 305 LSC). In listed companies, the minimum is fourteen days (art. 503 LSC).
How is the theoretical value of the preemptive subscription right calculated?
Using the formula VTD = (V – E) × N / (A + N), where V is the value per share before the capital increase, E the issue price, A the old shares and N the new shares in the issue ratio. If a share is worth €12 and a new one is issued at €8 for every four old shares, the right is worth €0.80 per old share.
What is the difference between a preemptive subscription right and a preferential acquisition right?
The preemptive subscription right applies when the company issues new shares or participations in a capital increase. The preferential acquisition right applies when a shareholder wants to sell those they already hold: in the private limited company, in the absence of a provision in the articles of association, the sale to third parties requires the company's consent and the shareholders have a preferential right to buy (art. 107 LSC).
When can the preemptive subscription right be eliminated?
When the company's interest requires it and the general meeting resolves it (art. 308 LSC). A report from the directors is required; in the public limited company, another from an independent expert appointed by the Commercial Registry; mention it in the notice of meeting; and that the nominal value plus premium corresponds to the real value. In the private limited company, two thirds of the votes of the capital are required (art. 199.b LSC).
