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20 Cards in this Set
- Front
- Back
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limited liability for shareholders is one of the advantages of corporate organization. Sometimes, however, individuals -such as shareholders, directors, and officers, can be personally liable for ----------
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corporate obligations
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shareholders personal liability is limited to what?
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the amount of their investment in the corporation.
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what is an example of a shareholder being liable for more than the amount of investment?
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if a shareholder has not paid for his shares, or paid for them with over valued property.
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what are some reasons the corporate veil of limited liability protecting share holders in a corporation be pierced?
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inadequate capitalization and alter ego theory
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must put in enough money in the corporation to meet the risks of doing business
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inadequate capitalization
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means that owners and managers of the corporation have not treated the corporation as a separate entity but have used the structure more as a personal resource.
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alter ego theory
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although corporations have the benefit of limited liability, they have the detriment of ------ ------
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double taxation
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not only does the corporation pay taxes on its earnings, but shareholders must also report their dividend income on their ------------, and pay --------------- on their dividend income.
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separate returns, individual taxes
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one way to resolve the problem of the cost of double taxation is the --------
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s corporation
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a corporation might be owned by a million shareholders, but its operation will be controlled by the hands of a few know as
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board of directors
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the directors of a corporation usually set up an -------- --------- composed of three board members to handle the more routine matters of running the corporation so that board meetings are not required as frequently.
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executive meeting
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officers and directors of corporations are --------- of the corporation, which means they are to act in the best interests of the corporation and not profit at the corporation's expense
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fiduciaries
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officers and directors are protected by the ----------------- a standard of corporate behavior under which it is understood that officers and directors can make mistakes, but they are required to show that their decisions were made after careful study and discussion.
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business judgment rule
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officers and directors of corporations are also required to follow the ------------- ---------- -----------, under which officers and directors may not take an opportunity for themselves that the corporation might be interested in taking.
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corporate opportunity doctrine
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corporations can no longer make loans to officers and directors because of ---------------- and must have a written code of ethics for financial officers.
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sarbanes-oxley
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Lawyer’s new duties to company and officers
Board Membership-majority must be independent |
sarbanes-oxley
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Majority of Independent Directors
Only Independent Directors on Audit and Compensation Committees No Loans to Officers Codes of Ethics for Financial Reporting |
rules for sarbanes oxley for boards in a corporation.
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Must investigate issues raised
Must notify CEO of investigation Must report material violations to CEO Must go to independent directors if problem is not resolved |
lawyers duties under sarbanes oxley
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someone who has not been an officer, employee, or manager of the corporation during any of the past three years; who is not related to anyone in company; who is not under any type of consulting or rumuneration arrangement with the company; and who is not principal or owner of a company that does business with the board or company.
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independent
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shareholders have the opportunity to express their views at the annual meeting in a corporation by electing ----------- who represent their interests.
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directors
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