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41 Cards in this Set

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Corporations codes
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.
Limited liability of shareholders
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.
Free transferability of shares
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.
Perpetual existence
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.
What happens to existence if there is death, insanity, or bankruptcy of a shareholder, director, or officer of a corporation?
Nothing the corporation continues to exist.
Board of directors
Makes policy decisions concerning the operation of a corporation. The members of the BOD are elected by the shareholders.
Officers
The directors appoint corporate officers to run the corporation's day-to-day operations.
Corporate management
Together the BOD and officers make up corporate management
Government owned corporations (public corporations)
Formed to meet specific governmental or political purpose. Public corporations are formed pursuant to state law.
Private corporation
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
Publicly held corporation
Have many shareholders. Often large corporations with hundreds or thousands of shareholders and their shares are traded on organized securities markets.
Closely held corporation
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.
Professional corporation
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.
Domestic corporation
A corporation is considered domestic in the state in which it incorporated.
Foreign corporation
A corporation in any state or jurisdiction other than the one in which it was formed.
Alien corporation
A corporation that is incorporated in another country
Incorporator
The person or persons, partnerships, or corporations that are responsible for incorporation of a corporation.
Articles of incorporation
Basic governing document of a corporation. Must be drafted filed and approved by the state before the corporation can be officially incorporated.
What must the articles of incorporation include?
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
How can you amend articles of incorporation?
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.
General purpose corporation
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.
Limited purpose clause
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.
Bylaws
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.
What is more detailed bylaws or articles of incorp?
Bylaws. They may contain provisions for managing the business and affairs of the corp that are not inconsistent with law or articles of incorp.
What do bylaws govern?
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.
WHo can amend bylaws typically?
BOD can unless articles of incorp reserve that right for shareholders. Shareholders have absolute right to amend bylaws even though BOD may also amend.
Common stock
A type of equity security that represents the residual value of a corporation.
Common stock bankruptcy
No preference. Creditors and preferred shareholders must receive their required interest and dividend payments before common shareholders receive anything.
Common stock maturity date
No fixed maturity date
Preferred stock
A type of equity security that is given certain preferences and rights over common stock
What voting rights do preferred stockholders have?
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.
Redeemable preferred stock
Stock that permits a corporation to buy back the preferred stock at some future date.
What happens in redeemable preferred stock
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
Authorized shares
Number of shares provided for in the articles of incorporation
Issued shares
Shares that have been sold by the corporation
Unissued shares
Authorized but not issued shares. BOD can vote to issue unissued shares at any time without approval or shareholders.
Treasury shares
repurchased shares. CAnnot be voted by the corp, and div are not paid on these shares. Treasury shares can be reissued by the corporation.
Debenture
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.
Bond
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.
WHat happens if a bondhoder is secured?
IF secured in the event of nonpayment of interest, principal, or other specified event the holder can forecolse on the collateral.
Note
A debt security with a maturity of 5 years or less. CAn be either secured or unsecured.