Issuance of Stock Flashcards
What is a subscription?
A written offer to buy stock from a corporation.
Can a pre-incorporation subscription be revoked?
Not for 6 months or all other subscribers let you revoke or the subscriptions says it is ok.
Are post-incorporation subscriptions revocable?
Yes, until the corporation accepts the offer.
What is par stock?
Stock that must be sold at a minimum price (par)
What is treasury stock?
Stock a corporation issued and then reclaimed.
Who determines the value of stock?
The board.
Is the board’s determination of stock conclusive?
Yes, if it was made in good faith.
What is water?
The difference between he par value and the actual price the stock sold for.
Who is liable to pay for water?
The directors and the people who bought the stock at below par value.
Does par apply to transactions on the secondary market (outside of issuances)?
No.
What is a pre-emptive right?
The right of a shareholder of common stock to maintain her percentage of ownership by buying stock whenever there is a new issuance of stock for money.
Pre-emptive rights only exist if _______.
They are included in the articles of incorporation.
When must the board issue dividends?
It can declare dividends at its discretion. Shareholders have no rights to dividends until the declaration has been made.
When will a court disturb a boards refusal to declare a dividend?
When the refusal occurred in bad faith. The shareholder seeking the dividend has the burden of proving bad faith.
