Preemptive rights are

Question

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Preemptive rights are designed to prevent dilution of a shareholder's ownership in the company. This means that if the company issues additional shares of stock, existing shareholders have the right to purchase a proportional amount of the new shares before they are offered to the public. This helps to maintain the proportionate ownership of each shareholder in the company. Preemptive rights may or may not be legal in all states and may or may not be required to be offered to shareholders by the Model Act, depending on the specific laws and regulations of each jurisdiction. They are not designed to indemnify managers who act in good faith.

Preemptive Rights Are