Subscription is the process by which a company offers its shares for subscription to the public or to a specific class of investors, in consideration for payment of their value, thereby resulting in the formation or increase of the company’s share capital. The significance of subscription lies in providing the necessary financing for the company’s activities without resorting to borrowing, while distributing risks among a broader base of investors.
Second: The Impact of Subscription on Existing Shareholders
Upon a capital increase, the issuance of new shares may have a direct impact on the rights of existing shareholders. The most significant of these effects include:
Dilution of Ownership Percentage:
If an existing shareholder does not participate in the subscription, their percentage ownership in the share capital is diluted, which may adversely affect their ability to exercise check here control and influence decision-making within the company.
Exercise of Pre-Emption (Preferential Subscription) Rights:
The Egyptian legislator has sought to protect existing shareholders by granting them pre-emptive rights to subscribe to newly issued shares, each in proportion to their existing shareholding, unless the Extraordinary General Assembly resolves otherwise in accordance with the applicable legal controls.