A preemptive right is
A)the right to vote in the election of directors and to establish corporate policies
B)the right to share in the profits when a dividend is declared
C)the right to maintain a proportionate interest in the ownership of the corporation by purchasing a proportionate share of additional capital stock should such stock be issued
D)the right to share in the distribution of the assets of the corporation should it be liquidated

Question

Quizplus · Accepted Answer

A preemptive right is the right of existing shareholders to maintain their proportionate ownership in a corporation by purchasing a proportionate share of any new stock issued. This means that if a company issues additional shares of stock, existing shareholders have the right to buy enough shares to maintain their percentage of ownership in the company. This helps prevent dilution of the value of their shares. Options A, B, and D are not correct because they do not relate to preemptive rights.

A Preemptive Right Is