Investing in Corporation

Question 1

Stock Types

Answer 1

Common & Preferred

Question 2

Common Stock

Answer 2

Corp must issue stock entitled to vote & stock that reps ownership in corp

Question 3

Preferred Stock

Answer 3

Stock given priority w/ dividends & during liquidation

Question 4

Issuance of Stock

Answer 4

Stock sold/traded to investor

Question 5

Authorization of Stock

Answer 5

Must be authorized in articles & by BoD, SH approval required to sell more than authorized maxS

Question 6

Consideration

Answer 6

Can be many, tangible or intangible property, future services as long as deemed adequate by BoD acting in good faith

Question 7

Par Value Stock

Answer 7

Min price for which stock can be sold by corp

ONLY applies when stock 1st sold by corp

Question 8

Watered Stock

Answer 8

Sold under par value
If sold under par, BoD liable
SH may be liable if has knowledge

Question 9

Stock Subscriptions

Answer 9

Agreement to by stock before formation, irrevocable for 6 months

Absent agreement subscriber doesn’t have unilateral right to cancel subscription

Question 10

Stock Rights/Options/Warrants

Answer 10

BoD has authority to issue & dictate terms

Question 11

Preemptive Rights

Answer 11

If BoD issues new shares, rights of SHs to purchase additional shares to maintain proportional ownership

Must be authorized in articles

Question 12

Preemptive Right Definition

Answer 12

Right to buy enough stock to maintain ownership percentage if more stock sold

Waiver in righting irrevocable