This is an extract of our Financial Structure Of The Corporation document, which we sell as part of our Corporations Outlines collection written by the top tier of Georgetown University Law Center students.
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Financial Structure of the Corporation A. Corporate Securities i. Equity Securities a) (1) Common Stock
? Residual interest in profits/assets of corporation after claims by creditors and preferred stockholders have been satisfied
? Although common stockholders are last in line with respect to distribution of income and liquidation, they are generally first in line with respect to control
? Primary beneficiary of fiduciary duties
? Usually have the exclusive power of electing directors b) (2) Preferred Stock
? Stock is classified as preferred stock when the articles assign to it economic rights senior to those customarily assigned to common stock
? If no attribute is assigned to a class of stock with respect to its voting rights, right to dividends, or rights to redemption or in liquidation, courts generally will presume that "stock is stock"
? Most Courts have taken the position that the only protections to which holders of preferred stock are entitled to are those spelled out in the articles/certificate
? It is all essentially PER CONTRACT
? Generally, the liquidation preference is behind other creditors but ahead of common stock
? Preferred stock almost always has dividend rights senior to those of common stock
? May be voting or non-voting
? Cumulative: If a dividend is not paid when due, the right to receive that dividend accumulates and all accrued dividend arrearages must be paid before any dividends can be paid on common stock
? Participating: Receive dividends whenever they are paid on common stock
?????Blank Check Preferred: Rights to dividends, liquidation preferences, redemption rights, voting rights, and conversion rights can be set by the board at the time of issuance c) Authorized Stock: Articles/Certificate specifies how many shares of the common/preferred the corporation is authorized to issue
?????Doctrine of Preemptive Rights
?????Traditional Rule: A shareholder had an inherent right to maintain his interest in a corporation by purchasing a proportionate share of any new stock issued for cash
? Modern Rule: Modern statutes provide corporations with the option of avoiding preemptive rights (almost all corporations do this)
? MBCA SS 6.30(a): "The shareholders of a corporation do not have a preemptive right to acquire the corporation's
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