Chapter 10 Flashcards
What were the 2 major corporations?
East India Company
Hudson Bay Company
What invention lead to to more corporations being created and why?
James Watts creates the Locomotive
- improves transportation (railroads)
- corporations can meet more customers
Articles of Incorporation?
- corporation’s own constitution
- details how they will operate
-Articles of Corporation laws vary from State to State
Derivative Action?
- law suit filed by shareholders
- against someone who has financially harmed corporation
- shareholders can only file if Board of Directors chose not to take action on person when shareholders asked them
2 reasons a share-holders proposal may be rejected?
- proposal is repetitive
- proposal is Rarely Successful (b/c only hold small number of shares)
What does SEC have to do under the Securities Exchange Act of 1934 regarding a proxy solidification?
What about if there is no Proxy Solidification?
- disclose certain information about nominees for Board of Directors
- Disclose the matter actually being voted on
- Disclose consequences of each decison
- Disclose the interest of the party soliciting the proxy vote in the first place
No Proxy
- give notice of shareholder’s meeting
- tell agenda of meeting
Securities for Expense bond
- share holders have to put up money
- when corporation is suing defendant
- money is for defendant’s legal fees in case corporation loses case and has to pay them
Difference between Directors and Managers of a corporation?
Directors
-conduct overall strategy of corporation
Managers
- conduct legal activities
- conduct day to day business activities
- OFTEN are members of BOD
Council of Institutional Investors? (CII)
-hold corporate executives accountable for their actions
Duty of Due Care
- executives should always act to protect corporations interest
- doesn’t mean it’s the ethical RIGHT decision
Corporate Opportunity Doctrine
- before Corporate executive can turn down business opportunity
- have to disclose potential deal to corporation
- cannot act alone
What did the “33 Act” regulate?
What does the “34 Act” regulate?
33 Act
-SEC regulates initial sale of stock to public
34 Act
-resale of stock on Secondary Market
What’s a prospectus?
- “look us over, buy us”
- registration detailing the stock to be sold later (initial public offering)
What’s a Red Herring?
-“Red = STOP”, “Fish = something is fishy”
- is prospectus that hasn’t been given final approval
- printed in red by Brokers
-Brokers try to convince their buyers to buy it
If you want to sell stock to the public, what are the 2 things you are required to do?
Prospectus
-your stock, what’s in it and all that
Regulation S-K
- documents showing proof
- to back up what you said in prospectus
