Existing shareholders:
A) may or may not have a pre-emptive right to newly issued shares.
B) must purchase new shares whenever rights are issued.
C) are prohibited from selling their rights.
D) are generally well advised to let the rights they receive expire.
E) can maintain their proportional ownership positions without exercising their rights.

Question

Quizplus · Accepted Answer

Existing shareholders may or may not have a pre-emptive right to newly issued shares, depending on the company's articles of association. This means that they may have the option but not the obligation to purchase newly issued shares before they are offered to the general public. Therefore, option A is the best choice. Options B, C, and D are incorrect because they assume that existing shareholders are required to purchase or hold onto new shares, which is not the case. Option E is partially correct, as existing shareholders can maintain their proportional ownership positions without exercising their rights, but it does not take into account the possibility that they may choose to exercise their rights to purchase new shares.

Existing Shareholders