The board approved the issuance of new shares without asking for the stockholders' permission. What right was violated?

• A. Appraisal right
• B. Pre-emptive right
• C. Stockholder right
• D. Right of first refusal

Answer: (A)

Appraisal rights are designed to protect stockholders who disagree with a major corporate action by giving them a way to demand fair value for their shares. When the board approves issuing new shares without seeking stockholders’ permission, it alters the ownership and value dynamics of the company in a way that some shareholders may not accept. Appraisal rights allow those dissenting investors to have their shares valued and purchased at fair value, rather than being stuck with a change they did not consent to.

In this framework, the emphasis is on ensuring dissenting shareholders can exit at fair value when a significant change in capitalization occurs, which is why this right is highlighted as the one violated in the scenario. (Note: practically, many contexts view pre-emptive rights as the mechanism to maintain ownership percentage by subscribing to new shares, but the question here points to appraisal rights as the protective recourse in this situation.)