Sarbanes Oxley Act: Chapter 36 Flashcards
Do shareholders have the right to manage the corporate business?
No, directors do
Inside Directors
officers in the corporation, who will typically control their company’s board
Outside Directors
Independent Directors; do not work for the company and have traditionally played a lesser role
Do shareholders have the right to inspect and copy the corporation’s minute book, accounting records, and shareholder lists?
Under Model Act; if acting in good faith and with a proper purpose such as aiding themselves in managing and protecting her investment
How many classes of stock with voting rights must a corporation have?
one; common have right to vote, preferred do not generally
Proxy
(1) a person whom the shareholder designates to vote in his place (2) the written form (typically a card) that the shareholder uses to appoint a designated voter
Quorum
the number of voters that must be present for a meeting to count
Proxy Statement
When a public company seeks proxy votes from its shareholders, it must include a proxy statement. This statement contains information about the company, such as a detailed description of management compensation
Annual Report
Each year, public companies must send their shareholders an annual report that contains detailed financial data
How often do publicly traded companies have shareholder meetings?
Annually normally
Record Date
to vote at a shareholders meeting, a shareholder must own stock on the record date
Who has a great deal of influence over Executive’s pay?
Executives, Directors
Merger
an acquisition of one company by another
When are shareholders asked to approve sale of assets?
when sale involves “all or substantially all” of the company’s assets
voluntary vs involuntary dissolution
corporation cannot voluntarily dissolve without shareholder approval, state or a court can involuntarily dissolve it
5 things corporations need shareholder approval for
mergers, sale of assets, dissolution, amendments to the charter, amendments to the bylaws
What happens if a private corporation decides to undertake a fundamental change, according to the Model Act?
many state laws require the company to buy ack the stock of any shareholders who object to this decision
Who has a fiduciary duty to minority shareholders?
anyone who owns enough stock to control a corporation
Minority shareholders
shareholders who do not own enough stock to control their corporation
right to monitor
meaning the right to receive information and the right to vote on proposals put to them by the board
SOX (SOA): Rule 404
requires each company to adopt effective financial controls
SOX: who certifies their company’s financial statements?
CEOs and CFOs
SOX: All members of what committee must be independent?
A board’s audit committee
SOX: Can a company make personal loans to its directors or officers?
No
SOX: What must a CEO and CFO do if a company has to restate its earning?
they must reimburse the company for any bonuss or profits they have received from selling company stock within a year of the release of the flawed financials
SOX: Rules about ethic codes?
Each company must disclose if it has an ethics code and, if it does not, why not.
SOX: Is it a felony to interfere with a federal investigation into fraud
Yes
SOX: In investigations, who is protected?
whistleblowing employees
SOX: PAOB? oversees what?
Public Accounting Oversight Board oversees auditing of public companies
derivative lawsuit
brought by shareholders to remedy a wrong to the corporation, brought in the name of the corporation and all proceeds of the litigation go to the corporation
strike suits
a lawsuit without merit that defendants sometimes settle simply to avoid the nuisance of litigation
“make demand”
shareholders must notify the board that the corporation has been wronged and ask the board to bring suit in the name of the corporation directly
SLC
Special Litigation Committee appointed by the board after shareholderers make demand
