Business Law Chapter 36

Front 1

Corporations codes

Back 1

State statutes that regulate the formation, operation, and dissolution of corporations. Courts interpret state corporation statutes to decide individual corporate and shareholder disputes. AS a result, a body of common law has evolved concerning corporate and shareholder rights and obligations.

Front 2

Limited liability of shareholders

Back 2

A general rule of corporate law which provides that generally shareholders are liable only to the extent of their capital contributions for the debts and obligations of their corporation and are not personally liable for debts and obligations of the company.

Front 3

Free transferability of shares

Back 3

Corporate shares are freely transferable by a shareholder by sale, assignment, pledge, or gift unless they are issued pursuant to certain exemptions from securities registration. Shareholders may agree among themselves as to restrictions on the transfer of shares.

Front 4

Perpetual existence

Back 4

Corporations exist in perpetuity unless a specific duration is stated in a corporation's articles of incorporation. The existence of a corporation can be voluntarily terminated by the shareholders or by a corporation's creditors.

Front 5

What happens to existence if there is death, insanity, or bankruptcy of a shareholder, director, or officer of a corporation?

Back 5

Nothing the corporation continues to exist.

Front 6

Board of directors

Back 6

Makes policy decisions concerning the operation of a corporation. The members of the BOD are elected by the shareholders.

Front 7

Officers

Back 7

The directors appoint corporate officers to run the corporation's day-to-day operations.

Front 8

Corporate management

Back 8

Together the BOD and officers make up corporate management

Front 9

Government owned corporations (public corporations)

Back 9

Formed to meet specific governmental or political purpose. Public corporations are formed pursuant to state law.

Front 10

Private corporation

Back 10

Formed to conduct privately owned business. They are owned by private parties, and not by the government. They include small, one-owner corporatons to large multi national corporations

Front 11

Publicly held corporation

Back 11

Have many shareholders. Often large corporations with hundreds or thousands of shareholders and their shares are traded on organized securities markets.

Front 12

Closely held corporation

Back 12

One whose shares are owned by a few shareholders who are often family members, relatives, or friends. Shareholders usually involved in the management of the corp.

Front 13

Professional corporation

Back 13

A corporation formed by lawyers, doctors, or other professionals. Members of these corporations are not usually liable for the torts committed by the corporation's agents.

Front 14

Domestic corporation

Back 14

A corporation is considered domestic in the state in which it incorporated.

Front 15

Foreign corporation

Back 15

A corporation in any state or jurisdiction other than the one in which it was formed.

Front 16

Alien corporation

Back 16

A corporation that is incorporated in another country

Front 17

Incorporator

Back 17

The person or persons, partnerships, or corporations that are responsible for incorporation of a corporation.

Front 18

Articles of incorporation

Back 18

Basic governing document of a corporation. Must be drafted filed and approved by the state before the corporation can be officially incorporated.

Front 19

What must the articles of incorporation include?

Back 19

The name of the corporation
the number of shares they are authorized to issue
The address of the corporation's initial registered office and the name of the initial registered agent
The name and address of the incorporater

Front 20

How can you amend articles of incorporation?

Back 20

1. BOD adopts a resolution recommending the amendment
2. Shareholders vote and approve the change.
BOD may do iwhtout shareholder approval if amendment does not affect rights attached to shares.

Front 21

General purpose corporation

Back 21

MAny companies use a general-purpose clause in their articles of incorp. Such a clause allows the corporation to engage in any cativity permitted by corporation law.

Front 22

Limited purpose clause

Back 22

A corporation may want to limit its purpose by including a limited purpose clause in the articles of incorp. For example a corp may be organized to engage in the business of real estate development.

Front 23

Bylaws

Back 23

A detailed set of rules adopted by the BOD after a corporation is incorporated that contains provisions for managing the business and the affairs of the corporation.

Front 24

What is more detailed bylaws or articles of incorp?

Back 24

Bylaws. They may contain provisions for managing the business and affairs of the corp that are not inconsistent with law or articles of incorp.

Front 25

What do bylaws govern?

Back 25

Internal management structure of a corp. Usually specify time and place of annual shareholder meeting, how special meetings are called, notice for required meetings, vote necessary to enact a corporat matter, ect.

Front 26

WHo can amend bylaws typically?

Back 26

BOD can unless articles of incorp reserve that right for shareholders. Shareholders have absolute right to amend bylaws even though BOD may also amend.

Front 27

Common stock

Back 27

A type of equity security that represents the residual value of a corporation.

Front 28

Common stock bankruptcy

Back 28

No preference. Creditors and preferred shareholders must receive their required interest and dividend payments before common shareholders receive anything.

Front 29

Common stock maturity date

Back 29

No fixed maturity date

Front 30

Preferred stock

Back 30

A type of equity security that is given certain preferences and rights over common stock

Front 31

What voting rights do preferred stockholders have?

Back 31

Typically they do not have the right to vote for election of officers directors ect. Often can vote if there is a merger or if the corp hasn't made the required dividend payments for a certain period of time i.e. 3 years.

Front 32

Redeemable preferred stock

Back 32

Stock that permits a corporation to buy back the preferred stock at some future date.

Front 33

What happens in redeemable preferred stock

Back 33

Terms of redemption are established when shares are issued. Corp's often redeem shares when current interest rate falls below div rate of the preferred shares. Nonredeemable stock is more common

Front 34

Authorized shares

Back 34

Number of shares provided for in the articles of incorporation

Front 35

Issued shares

Back 35

Shares that have been sold by the corporation

Front 36

Unissued shares

Back 36

Authorized but not issued shares. BOD can vote to issue unissued shares at any time without approval or shareholders.

Front 37

Treasury shares

Back 37

repurchased shares. CAnnot be voted by the corp, and div are not paid on these shares. Treasury shares can be reissued by the corporation.

Front 38

Debenture

Back 38

A long term unsecured debt instrument that is based on a corporation's general credit standing. If financial difficulty arises, unsecured debenture holders are treated as general creditors of the corp. Paid only after secured creditor's claims are met.

Front 39

Bond

Back 39

Long term debt security that is secured by some form of collateroal such as real estate, personal property ect. Thus bonds are same as debentures except they are secured.

Front 40

WHat happens if a bondhoder is secured?

Back 40

IF secured in the event of nonpayment of interest, principal, or other specified event the holder can forecolse on the collateral.

Front 41

Note

Back 41

A debt security with a maturity of 5 years or less. CAn be either secured or unsecured.