Finance

Question 1

Capital Structure

Answer 1

Refers to long-term investment in the corporation, including stock and long-term debt, such as bonds

• stocks = equity = ownership
• debts = sm you owe someone

Question 2

Authorized Capital

Answer 2

Refers to the # and kinds of shares provided for in the articles of incorp, whether or not actually issued

Question 3

Common Stock

Answer 3

the default stock
- there must be at least 1

Question 4

Preferred Stock

Answer 4

you give it meaning in the articles of incorp
- nature and terms must be stated in the articles of incorporation and set forth or summarized on the stock certificates

usually have a right to be paid a fixed dividend ahead of any dividend payments to holders of common stock

Question 5

Subscription Agreement

Answer 5

A contract where subscriber agrees to purchase a certain # of shares at a specified price.
- FL statute makes preincorporation subscription agmts irrevocable for 6 months, unless the agmt provides otherwise, or all of the subscribers consent to revocation

Question 6

Consideration for Shares

Answer 6

• amount and adequacy of consideration is determined by the board
• possible forms of payment: cash, property, past services, promises to perform services, promissory notes

Question 7

Preemptive Rights

Answer 7

Gives existing shareholders the right, but not the obligation, to purchase new shares from the corporation for cash to maintain their existing ownership %
- shareholders have no preemptive rights UNLESS GRANTED BY THE ARTICLES
- a shareholder may waive his preemptive right and a written waiver is irrevocable

Question 8

Repurchase of shares

Answer 8

When the repurchase is by installment, effect of distribution is measured as of the earlier of: (1) the date money or other property is transferred or debt incurred by the corp; or (2) the date the shareholder ceases to be a shareholder with respect to the acquired shares

Question 9

UCC ARTICLE 8 - Adopted by FL - Investment Securities

Answer 9

An investment security may be either certificated (represented by an instrument issued in bearer or registered form), or uncertificated (not represented by an instrument, but registered on books maintained by issuer)
- a K or mod of a K for the purchase or sale of an investment security is not within SOF
- An issuer has very limited defense against a purchaser for value, except where the cert is not genuine
- seller of a security warrants to a purchaser for value that the transfer is effective & rightful, that the security is genuine and unaltered, and that she knows of no fact impairing its validity
- true owner of a wrongfully transferred security may reclaim it from anyone except a protected purchaser; and may also go against a protected purchaser if the security was transferred bc of an unauthorized indorsement (unless new purchaser has in good faith received a cert or had the transfer registered in her name)

Question 10

Restrictions on Transfer of Stock

Answer 10

Stock is freely transferable
- can restrict transfer of stock so long as restriction is REASONABLE (right of first opp for corp to buy is reasonable v. total ban = unreasonable) and CONSPICUOUS (can tell by looking at stock that it’s restricted)

Question 11

Nonvoting Preferred Stock

Answer 11

still ownership but can’t vote. there’s some instances where they do get to vote:
- when there is a change to corporate structure that affects that stock
- they also have to independently approve it. so common and preferred stockholders need to approve, if not change fails