Final 305

Under section 16 of the Securities Exchange Act of 1934

officers, directors and 10% shareholders are strictly liable for short-swing profits

(T or F) Under section 16 of the Securities Exchange Act of 1934, short swing profits include profits earned by the sale and purchase OR the purchase and sale of securities during a six-month period

True

Tender offers

are publicly advertised offers to shareholders to buy their shares at a certain price

(T or F) If the management of a firm favors acquisition by another firm, it is a friendly takeover

True.

If a target company does not want to be taken over in a hostile takeover, the target may

Try to persuade shareholders that he takeover is not in their best interest. Or Match the tender offer or beat it

Advances

In partnerships, loans by the partners to the partnership; makes the partner a creditor of the partnership

Alter Ego Theory

Theory used for disregarding the corporate protection of limited liability for shareholders; results when individuals treat the corporation’s properties and accounts as their own and fail to follow corporate formalities

Appraisal Rights

Rights of dissenting shareholders after a merger or takeover to be paid the value of their shares before the takeover or merger

Articles of Incorporation

Organizational papers of a corporation; list the company’s structure, capitalization, board structure, and so on

Articles of Limited Partnership

Contract governing the rights and relations of limited partners.

Articles of Organization

Contract governing the rights and relations of limited partners.

Audit Committees

Committee of the board responsible for oversight of company financial statements.

Board of Directors

Policy-setting governing group of a corporation

Business Judgment Rule

Duty of care imposed upon members of corporate boards that require adequate review of issues and information, devotion of adequate time to deliberations, and hiring of outside consultants as necessary for making decisions; the standard does not require foolproof judgment, only reasonable care in making the judgment

Bylaws

Operating rules of a corporation and its board; usually describe the officers and their roles and authority, along with meeting procedures and notices

Common Stock

Type of shares in a corporation that usually have voting rights

Corporate Opportunity Doctrine

A business proposition or investment opportunity that a corporation would have an interest in pursuing; precludes directors from taking a profit opportunity when the corporation would have an interest

Corporate Veil

The personal liability shield; the corporate protection that entitles shareholders, directors, and officers to limited liability; can be pierced for improper conduct of business or fraud

Corporatio

Business entity created by statute that provides limited liability for its owners

Cumulative Preferred Stock

Type of ownership in a corporation that gives the stock owners preference in the distribution of dividends and also guarantees earnings each year; in the event those earnings are not paid, they are carried over or accumulate until they can by paid