The preemptive right gives shareholders the right ________.
A) to caste one vote for each share owned at the annual meeting of the company
B) to give up their vote to another party if they do not attend the annual meeting
C) to maintain their proportionate ownership in the corporation when new common stock is issued
D) to sell their share of stock at a premium in the event of liquidation

Question

Quizplus · Accepted Answer

The preemptive right allows shareholders to maintain their proportionate ownership in the corporation when new common stock is issued. This means that shareholders have the right to purchase new shares of stock in the company before the general public, and in proportion to their current ownership. Option A is incorrect because it refers to voting rights, not the preemptive right. Option B is incorrect because there is no provision for shareholders to give up their vote to another party if they do not attend the annual meeting. Option D is incorrect because the preemptive right does not provide for selling shares at a premium in the event of liquidation.

The Preemptive Right Gives Shareholders the Right ________