Corporate Shareholder Preemptive-Rights Requirements in Rhode Island

At a glance

Requirements one by one

The incorporation date selects the starting rule

Rhode Island General Laws § 7-1.2-613(a) gives shareholders of a corporation incorporated before July 1, 2005 a preemptive right in unissued shares and the specified convertible, subscription, and acquisition securities. The statute and the articles may limit or deny that right.

For a corporation incorporated on or after July 1, 2005, § 7-1.2-613(b) reverses the default. No statutory right exists unless the articles provide it. A statement that the corporation elects preemptive rights, or words of similar import, activates subsection (b)'s package except where the articles expressly provide otherwise.

The older regime has its own class limits and exclusions

The pre-July 2005 branch describes the right as an opportunity on board-fixed terms and conditions that provide a fair and reasonable exercise opportunity. It does not state a proportional-allocation formula, fixed notice content, delivery method, exercise period, record date, holder-waiver procedure, or outside-issuance window.

That branch excludes nonmoney sales. It also excludes shares issued to directors, officers, or employees when a majority of voting shares approves the acquisition or when the issuance follows a previously shareholder-approved plan. Preferred or dividend- or asset-limited holders receive no right, holders generally receive no right in preferred or limited shares or obligations unless the stated conversion or acquisition connection exists, and nonvoting holders receive no right in voting shares (§ 7-1.2-613(a)(1)-(5)).

The modern election supplies a different default package

Under § 7-1.2-613(b)(1), the modern shorthand election gives shareholders proportional amounts on uniform board-prescribed terms designed to provide a fair and reasonable exercise opportunity. The section fixes no particular notice form, delivery method, response period, or record date.

A shareholder may waive the modern right. A written waiver is irrevocable even without consideration (§ 7-1.2-613(b)(2)). The modern exclusions cover compensation shares, shares satisfying compensation conversion or option rights, article-authorized shares issued within six months after incorporation, and shares sold for something other than money. Separate voting and distribution-preference rules limit which classes receive rights in which shares (§ 7-1.2-613(b)(3)-(5)).

Modern declined shares may be issued to another person for one year after the shareholder offer, at board-set consideration no lower than the preemptive-right consideration. A lower-price offer or an offer after the year expires is again subject to the right (§ 7-1.2-613(b)(6)). The older branch states no corresponding outsider window.

Reacquired shares and amendments require separate checks

Section 7-1.2-601 permits a corporation, subject to its articles and the distribution limits, to acquire, hold, transfer, or dispose of its own shares. Redeemable shares are canceled when redeemed or purchased; other reacquired shares may be canceled by board resolution. Upon filing the cancellation statement, canceled shares become authorized but unissued unless the articles bar reissue. A right that applies to unissued shares can therefore reach those restored shares, while § 7-1.2-613 does not expressly call held, uncanceled shares unissued.

An article amendment limiting or denying an existing preemptive right gives the affected class a separate vote under § 7-1.2-904, even when the articles do not otherwise give that class a vote on the amendment. A differently affected series is treated as a separate class; similarly affected classes or series may be grouped under subsection (b).

What trips people up

• The 2005 line changes the entire starting point. The relevant date is the corporation's incorporation date, not the date of the current issuance or a later amendment.
• The two regimes are not mirror images. The older branch does not import the modern proportional formula, written-waiver rule, four-exclusion package, or one-year outsider window.
• Cancellation changes reacquired-share status. Section 7-1.2-601 ties the return to authorized-but-unissued status to filing the cancellation statement, unless the articles make the shares nonreissuable.

Common questions

Does every Rhode Island shareholder automatically have a preemptive right?

No. The corporation's incorporation date and current articles must be checked. The statutory default applies only to corporations incorporated before July 1, 2005; a corporation incorporated on or after that date must opt in through its articles.

Does Rhode Island prescribe how many days a shareholder has to respond?

Section 7-1.2-613 states no fixed number of days for either regime. The board's terms must provide a fair and reasonable opportunity, subject to the governing article provisions.

Does the modern written waiver need consideration?

No. Section 7-1.2-613(b)(2) says a waiver evidenced by a writing is irrevocable even though it is not supported by consideration. The writing's actual scope still must be read before applying it to another issuance.

Are convertible securities within the statutory right?

Yes. Section 7-1.2-613 covers securities convertible into shares and securities carrying a right to subscribe for or acquire shares, subject to the applicable regime, articles, class rules, and exclusions.

Statutes and sources

• R.I. Gen. Laws § 7-1.2-613 — formation-date defaults, article control, covered securities, allocation, board terms, exclusions, class limits, modern waiver, and outsider issuance. Official Rhode Island General Laws text, accessed August 31, 2026.
• R.I. Gen. Laws § 7-1.2-601 — acquisition, holding, disposition, cancellation, and authorized-but-unissued status of reacquired shares. Official Rhode Island General Laws text, accessed August 31, 2026.
• R.I. Gen. Laws § 7-1.2-904 — affected-class and series voting when an amendment limits or denies an existing preemptive right. Official Rhode Island General Laws text, accessed August 31, 2026.