When shareholders are granted preemptive rights,they obtain the right:
A)to elect members to the board of directors.
B)to share proportionally in regular and liquidating dividends.
C)of first refusal for their proportionate percentage of new shares offered.
D)to receive dividends prior to any preferred shareholders.
E)to resell their shares to the issuer at any time at a predetermined price.

Question

Quizplus · Accepted Answer

Preemptive rights give shareholders the option to purchase their proportionate percentage of new shares that may be offered by the company before they are offered to the public. This right of first refusal helps limit dilution of their ownership in the company. It does not give them the right to elect directors, receive dividends prior to preferred shareholders, or force the issuer to repurchase their shares at a predetermined price.

When Shareholders Are Granted Preemptive Rights,they Obtain the Right