When can shareholders exercise pre-emptive rights?

Shareholders can exercise pre-emptive rights when new shares are issued, unless these rights have been waived by the Articles of Incorporation. Pre-emptive rights allow existing shareholders the opportunity to purchase additional shares before the company offers them to other investors. This right is essential as it enables shareholders to maintain their proportionate ownership in the company and avoid dilution of their shares.

The Articles of Incorporation may specify parameters around these rights, including whether they can be waived or modified. If the articles state that pre-emptive rights are not applicable, shareholders lose that opportunity when new shares are issued, reflecting the importance of those foundational documents in corporate governance.

The other options do not correctly represent the circumstances under which pre-emptive rights can be exercised. For instance, exercising these rights is not limited to annual stockholder meetings or tied directly to state law or the payment of dividends, which are separate corporate matters.