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1How are corporations financed?
How are corporations financed?2May a business issue stock before it formally incorporates?
May a business issue stock before it formally incorporates?3Promoters were in the process of incorporating their new business. The corporation would own and manage a music venue and surrounding restaurants a...
Promoters were in the process of incorporating their new business. The corporation would own and manage a music venue and surrounding restaurants and bars. To secure capital for when the corporation was formed, the promoters issued shares of stock through subscriptions. However, after just three months, the promoters believed that they had undervalued the corporation. The promoters wanted to revoke the subscriptions and reissue the shares at a much higher price. The subscriptions did not address revocation, and the subscribers refused to agree to the revocation. Are the promoters entitled to revoke the subscriptions?4May a corporate entity issue new stock or repurchase its stock?
May a corporate entity issue new stock or repurchase its stock?5What are the two main types of capital stock?
What are the two main types of capital stock?6Typically, does a share of preferred stock entitle the shareholder to receive dividends?
Typically, does a share of preferred stock entitle the shareholder to receive dividends?7Are corporations limited to issuing only common stock and preferred stock?
Are corporations limited to issuing only common stock and preferred stock?8What is treasury stock?
What is treasury stock?9May a corporation issue stock in exchange for something other than cash?
May a corporation issue stock in exchange for something other than cash?10What is par value?
What is par value?11If a corporation is issuing new stock, may it set the value of that stock below par value?
If a corporation is issuing new stock, may it set the value of that stock below par value?12What is watered stock?
What is watered stock?13A board of directors was interested in issuing additional shares of a corporation. A local investor was interested in acquiring 1,000 shares for $5...
A board of directors was interested in issuing additional shares of a corporation. A local investor was interested in acquiring 1,000 shares for $50,000. Under the proposed note, the investor would make payments for two years until the $50,000 was repaid. The board wanted to accept the investor’s offer. However, one board member was unsure whether the board could accept an unsecured promissory note instead of cash for the shares.Can the board accept the investor’s offer?14A corporation wished to hire a famous artist to paint a number of murals in its new offices. The artist was willing to paint the murals for $50,000...
A corporation wished to hire a famous artist to paint a number of murals in its new offices. The artist was willing to paint the murals for $50,000. The corporation did not have the necessary funds available in cash. A director suggested paying the artist $25,000 and issuing the artist 1,000 shares of the corporation, valued at $30 per share. The artist agreed to do the work for these terms.Can the board of directors issue 1,000 of the corporation’s shares to the artist as partial payment for the artist’s services?15A corporation was incorporated in a par-value state and set a par value for its stock. When first incorporated, the board of directors set par valu...
A corporation was incorporated in a par-value state and set a par value for its stock. When first incorporated, the board of directors set par value at $20 per share. A few years after incorporating, the majority shareholder was experiencing financial distress, and the corporation agreed to repurchase all her shares. Shortly thereafter, the corporation encountered an unexpected liquidity crisis and needed to resell most of these shares. A new investor approached the board and offered to purchase 10,000 shares for $18 per share.Can the board accept this offer?16What is a preemptive right?
What is a preemptive right?17What is the purpose of preemptive rights?
What is the purpose of preemptive rights?18If a shareholder has a preemptive right to buy additional shares of a corporation before new shares are offered to the public, may the shareholder ...
If a shareholder has a preemptive right to buy additional shares of a corporation before new shares are offered to the public, may the shareholder waive that preemptive right without receiving any consideration?19The board of directors of a corporation had continuing, significant disagreements with a group of disgruntled shareholders. The corporation had 100...
The board of directors of a corporation had continuing, significant disagreements with a group of disgruntled shareholders. The corporation had 100,000 outstanding common shares. The board voted to issue 25,000 additional common shares to a new investor. The disgruntled shareholders believed that the new issuance was an attempt to dilute and diminish their voting influence within the corporation. To avoid this dilution, each of the disgruntled shareholders wanted to exercise a preemptive right to purchase some of the 25,000 new shares in proportion to the shareholder’s current holdings. The articles of incorporation did not address the issue of preemptive rights.Do the disgruntled shareholders have preemptive rights to purchase a proportional amount of the new issuance?20When a corporation was initially formed, its articles of incorporation gave its shareholders preemptive rights. However, the corporation’s board la...
When a corporation was initially formed, its articles of incorporation gave its shareholders preemptive rights. However, the corporation’s board later decided to eliminate those rights. The board argued that the rights were delaying the corporation’s efforts to issue shares and suppressing share value. The board sent each shareholder a proposed agreement waiving the shareholder’s preemptive rights. However, the shareholders were not offered any consideration in exchange for signing the waiver agreement. Even without consideration, convinced by the board’s argument, all shareholders signed the waiver agreement.Do the corporation’s shareholders still have any preemptive rights?21What is a corporate distribution?
What is a corporate distribution?22What are dividends?
What are dividends?23Must a corporate distribution always be in the form of a dividend?
Must a corporate distribution always be in the form of a dividend?24May a corporation make distributions to its shareholders if, after the distribution, the corporation’s total assets will be less than its total lia...
May a corporation make distributions to its shareholders if, after the distribution, the corporation’s total assets will be less than its total liabilities?25A corporation had been struggling to pay its bills and had defaulted on several already. To try to signal strength to the market, the corporation e...
A corporation had been struggling to pay its bills and had defaulted on several already. To try to signal strength to the market, the corporation entered into a share-repurchase agreement for the repurchase of 10,000 shares of its own common stock. Some of the corporation’s creditors objected to this course of action.Is the share repurchase permissible?26Generally, may a corporation may reacquire its own previously issued stock?
Generally, may a corporation may reacquire its own previously issued stock?27What are shareholder appraisal rights?
What are shareholder appraisal rights?28What types of corporate actions may trigger a shareholder’s ability to exercise an appraisal right?
What types of corporate actions may trigger a shareholder’s ability to exercise an appraisal right?29If a shareholder exercises an appraisal right, does the shareholder received a predetermined value for the shareholder’s shares?
If a shareholder exercises an appraisal right, does the shareholder received a predetermined value for the shareholder’s shares?30What two actions must a shareholder take to exercise her appraisal rights?
What two actions must a shareholder take to exercise her appraisal rights?31Almost all of a corporation’s shareholders voted to change the corporation’s state of incorporation from Delaware to Nevada. A few shareholders vot...
Almost all of a corporation’s shareholders voted to change the corporation’s state of incorporation from Delaware to Nevada. A few shareholders voted against the change, arguing that Delaware case law was more developed and favorable to the corporation. The articles of incorporation and bylaws were silent on the issue of appraisal rights.Can this group of dissenting shareholders exercise its appraisal rights?