Pg 9 Flashcards
What are things that you shouldn’t include in the articles of incorporation?
Bylaws and minutes of meetings because you don’t want these to become part of the public record.
Do you need to do periodic filings as a corporation?
Many states ask for this with the secretary of the state to ensure that the corporation is still operating, in good standing, and then they pay a fee
What do you have to put in the articles of incorporation with regard to shares and classes of stock?
You must state the maximum number of shares that the corporation will offer.
Do all shares have to be issued to shareholders?
No, for example a corporation could transfer shares to an investor in exchange for a valuable consideration. And any shares that are not issued are kept in reserve in case a corporation needs to issue more stock to raise money or wants to use it to reward key employees
What is the difference between authorized but unissued shares and issued and outstanding shares?
- authorized by unissued: shares that are kept in reserve by the corporation
– issued and outstanding: shares that have actually been issued
What rights does common stock have?
Voting rights and they are entitled to take the residue, which means what is left over, after the bills are paid
What does it mean to have dividend preference?
Holders of this are entitled to be paid a dividend before the common shareholders are paid theirs. This means it is preferred over the common stock. Although preferred shareholders don’t usually have voting rights
What is a tricky thing about preferred shares?
They can be subject to a corporation’s right of redemption (corporation has the right to call in the outstanding shares and redeem them on the terms in the contract)
What does it mean for someone to have a preemptive right with regard to shares or classes of stock?
This is the right to buy a proportionate share of any future issue of corporate securities in order for the existing shareholder to maintain his relative position within the ownership of the firm
What is the difference between a power and purpose?
– Purpose: if you can put it into this sentence, it is a purpose. “To engage in the business of……“
– Power: things like being sued or suing
Once you file your articles of incorporation with the secretary of state, that becomes a public record, which essentially means what?
That it can be accessed by anyone. So you must be very careful what you put in there because anyone can read it. It’s a good idea to save most things for bylaws. Plus the articles of incorporation is hard to change later
What is the purpose of every corporation?
To engage in any lawful business unless a more limited purpose is set forth in the articles of incorporation
In California there is a presumption that all articles of incorporation include what clause?
An “all purpose“ clause. This means that every corporation has the purpose of engaging in lawful business
If the articles of incorporation don’t state a specific purpose clause, the corporation is given what purpose?
A general purpose of perpetual duration and the power to do all things necessary and convenient to carry out the business and its affairs.
What are things that a corporation has the power to do?
- sue and be sued – have a corporate seal and use it - make and amend the bylaws – manage the business - buy, lease, or deal with any interest in property – dispose of a property interest – acquire shares in another entity - make contracts - borrow and lend money – do business – elect and appoint directors, officers, and agents – establish pension plans – make donations to charity
