stock/corp securities Flashcards
1
Q
Director
A
-are selected by the shareholders at the annual shareholders’ meeting if a quorum is present.
2
Q
Vacancy on BoD
A
- when there is a vacancy on the board of directors, including a vacancy created by an increase in the number of directors, either the shareholders or the directors may fill the vacancy.
- When the vacancy leaves the board of directors without a quorum, the directors remaining may elect a replacement director by a majority vote.
3
Q
stock (equity)
A
- represents ownership in a corp
- common stock
- preferred
4
Q
debt
A
- bonds
- loan obligations
5
Q
stock issuance
A
- the Board authorizes the issuance of stock
- valid consideration must be given
- board sets the price for which the shares will be issued
6
Q
par value
A
- the minimum price for which a corp can issue its shares
- corp is NOT required to designate a par value
- if it does, cannot be issued for less than par value
7
Q
watered stock
A
- occurs when corp receives consideration that is worth less than par value
- SH is liable for the difference
8
Q
no par stock
A
- stock that does not have a par value
- therefore no minimum issue price for which stock can be issued
9
Q
treasury stock
A
-previously issued stock that the corp repurposes is said to be held in the corp’s treasury
10
Q
payment of consideration
A
- SH payment of full amount due for shares discharges SH’s liability
- Sh’s liab limited to share ownership
- SH is subject to PCV actions
11
Q
stock subscriptions
A
- a person’s promise to purchase shares once corp comes into existence
- merely an offer subject to revocation at any time prior to acceptance
- promise becomes enforceable K once corp is formed and is accepted by corp
12
Q
pre-emptive rights
A
- gives current Sh the right to purchase any traditional shares the corp issues
- SH may waive if chooses
- allows SH to maintain their % ownership in the corp
13
Q
Pre-emptive rights do not apply
A
- stock issued for service or property
- stock sold or granted as a form of compensation (to directors, etc)
- shares within 6 months of formation
- when preferred shares or non-voting shares are issued
- shares with preemptive rights not acquired within the first year of their offering
14
Q
Distrubution
A
- transfer of cash to current SH, usually in the form of dividends
- generally at the board’s discretion as to when and amount
- prohibited when corp is insolvent or paying the dist would cause corp to become insolvent
15
Q
director liab for unlawful distributions
A
- Directors involved in approving dist are liable for the portion that exceeds the lawful amount
- all culpable directors are J&S liable
- paying directors have right of contribution from other culpable directors
- director is not liable for an unlawful distribution if the director exercised ordinary care and made a good faith reliance on financial reports and records used to determine the company’s net worth
