Let us be clear, the right of pre-emption applies to the right to acquire the existing shares of another shareholder (unlike preferential rights which are a form of dilution protection that gives a shareholder the right to maintain its shareholding in proportion to ownership in respect of shares issued in the future). Instead of getting shares, a founder or investor can also grant a loan to the company that could be converted into shares at a later stage – this is called a convertible loan. A loan must be repaid in front of other shareholders (including any interest) and can effectively give them the power to take control of the business in order to repay the loan and perhaps even sell the company`s assets to another company related to that shareholder. This can be contrasted with the equity that occurs when shares are received for cash. In addition, provisions prohibiting debauchery do not prevent a former principal of the company from working for a competitor, just as a non-compete clause is generally a form of debt financing by shareholders. These are usually the most promising debt securities issued by a company. Since it is subordinated to other priority loans, other more “priority” creditors therefore have priority rights over the repayment of the debt owed by the company. Shareholder loans can also have long maturities with low or deferred interest payments.. . . .