A preemptive right means shareholders can purchase their proportional share of ordinary shares issued later by the corporation.

Question

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A preemptive right allows current shareholders to purchase their proportional share of any new ordinary shares that are issued by the corporation before they are offered to the general public. This gives shareholders the opportunity to maintain their proportionate ownership stake in the company and prevent dilution of their holdings.

A Preemptive Right Means Shareholders Can Purchase Their Proportional Share