Stock and Other Corp. Securities Flashcards
What are the two types of Shares in a Corp?
Common Shares: a basis ownership interest and can vote on corp. governance matters, no special conditions
Preferred shares: have preference over other stock with regards to distribution; may have special voting rights.
What is a debt security?
it creates a debtor-creditor relationship between the corporation and outside creditors lending funds to the corp. upon the premise to repay.
The debt obligation may be secured (a bond) or unsecured (a debenture) and may be registered or to bearer. It can also have special features such as the option to be converted into equity securities.
What are the two traditional types of securities by which a corp secures financing?
- Equity Securities such as stock, which carry ownership and control interests in the Corp. (ie, voting rights, distribution rights)
and - Debt securities (such as bonds), which do not have ownership interests in the corporation and convey rights to creditors.
When may a corporation issue stock?
If the articles of incorporation authorize the issuance, then the corp, may sell or trade its stock to an investor.
Unless otherwise specified in the articles of inc. the issuance of stock must be authorized by the B of Ds.
The articles of inc. may reserve this power to the shareholders.
What are issued and outstanding shares?
A corp. may issue as many shares as allowed under the articles of inc. Issued shares are considered outstanding until they are reacquired, redeemed, converted, or canceled by the corp.
What is a fractional share? and what rights does a fractional share holder have?
C may issue a “scrip” that represents a fractional share; when a holder acquires enough scrip to equal a full share, he may exchange the scrip for a full share.
A fractional share holder has the rights of a full SH, however, they the fractional SH my not exercise any SH rights unless the scrip specfically allows for such rights.
What are possible conditions on a “scrip”
The BD may place conditions on a scrip including, but not limited to:
If not exchanged for full shares by a specific date, the scrip will become void; and
The shares for which the scrip may be exchangeable may be sold by the corp. and the consideration received given to the scrip holders,
What are unauthorizes shares?
Shares not authorized in the articles are void. Any amount paid for these shares by their purchaser is recoverable.
Form of shares and certificate requirements?
Shares may but do not have to be represented by certificates.
Certificate must states name of C, that it is incorporated in VA, name of SH, number and class of shares.
Within a reas. time after issuing shares without certificates, the corp. must deliver a written statement with the same info. that would have been included on certificate. (So basically you have to send a certificate either way eventually).
