Question

The preemptive right refers to the right of common stockholders to: Select one: A. Vote on...

The preemptive right refers to the right of common stockholders to:

Select one:

A. Vote on matters requiring the approval of owners

B. Receive dividends before interest is paid to creditors

C. Maintain their proportionate interests in the corporation when additional shares are issued

D. Receive assets before preferred stockholders when the corporation dissolves

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Answer #1

Answer-:

Preemptive rights are a contractual clause giving a shareholder the right to buy additional shares in any future issue of the company's common stock before the shares are available to the general public. Shareholders who have such a clause are generally early investors or majority owners who want to maintain the size of their stake in the company when and if additional shares are offered.

A preemptive right is sometimes called an "anti-dilution provision." It gives the investor the option of maintaining a certain percentage of ownership of the company as it grows.

So, the correct answer is (c). Maintain their proportionate interests in the corporation when additional shares are issued.

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