If a corporate charter includes a provision for preemptive rights, the original stockholders
A) must sell their stock to the company.
B) get first option to buy additional issues of common stock.
C) may purchase existing treasury stock.
D) cannot utilize cumulative voting procedures.

Question

Quizplus · Accepted Answer

Preemptive rights give existing stockholders the first option to buy additional issues of common stock before they are offered to the public. They are intended to protect the proportional ownership interests of existing stockholders and can help prevent dilution of their ownership stakes. Therefore, option B is the correct answer. The other options are incorrect as they do not relate to preemptive rights.

If a Corporate Charter Includes a Provision for Preemptive Rights