The Preemptive Right Is Important to Shareholders Because It

question 78

Multiple Choice

The preemptive right is important to shareholders because it

• A) Allows management to sell additional shares below the current market price.
• B) Protects the current shareholders against dilution of ownership interests.
• C) Is included in every corporate charter.
• D) Will result in higher dividends per share.
• E) The preemptive right is not important to shareholders.

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Definitions:

Responsible Person Doctrine

A legal principle that holds an individual in a business or enterprise accountable for ensuring compliance with tax laws and regulations.

Acting in Good Faith

A principle of honesty and fairness in dealings, implying the absence of fraud, deceit, or intent to deceive in a transaction or interaction.

Leveraged Buyout (LBO)

A takeover-resistance strategy in which a group within the target corporation buys all the corporate stock held by the public, thereby turning the company into a privately held corporation.

Outstanding Corporate Stock

Shares of a corporation that have been issued and are currently owned by shareholders.