Question 1

Corporate securities evidenced by a certificate are negotiable.

Accepted Answer

Corporate securities issued in certificate form can be bought, sold or transferred through transfer of ownership of the certificate, making them negotiable.

Question 2

Upon acceptance of a subscription after incorporation, the subscriber immediately attains the rights, privileges, and liabilities of a shareholder, even though the subscriber has not paid any of the purchase price.

Accepted Answer

According to the Model Business Corporation Act (MBCA), upon acceptance of a subscription after incorporation, the subscriber attains the rights, privileges, and liabilities of a shareholder, including the right to vote and receive dividends, even if they have not yet paid the purchase price.

Question 3

If a corporate stock has a par value, the person subscribing to the stock and acquiring it from the corporation must pay that par value amount.

Accepted Answer

This is because the par value represents the minimum legal value of the stock, and the subscriber must pay at least that amount to acquire the stock. However, stocks with par values are becoming less common in modern corporate structures.

Question 4

Membership in a corporation is based on the ownership of one or more shares of stock of the corporation.

Accepted Answer

Membership in a corporation is based on ownership of stock. The more stock a person owns, the more votes they have in corporate decisions.

Question 5

A preincorporation subscription to stock is generally treated as an offer to the corporation to buy the stock when the corporation is formed and the stock is thereafter issued.

Accepted Answer

A preincorporation subscription is a contract between a subscriber and a corporation that has not yet been formed. When the corporation is formed, the subscriber's offer to buy the stock becomes binding on both parties, and the stock is issued to the subscriber.

Question 6

A contract for the sale of shares must be evidenced in writing and include the price and quantity of the securities.

Accepted Answer

According to the Statute of Frauds, a contract for the sale of shares must be in writing and must include the price and quantity of the securities.

Question 7

A shareholder may make an absolute transfer of stock or may transfer it merely as collateral to secure the payment of a debt.

Accepted Answer

A shareholder can transfer their stock either as an absolute transfer or as collateral to secure debt repayment.

Question 8

Preferred stock is ordinarily nonvoting stock.

Accepted Answer

Preferred stock typically does not come with voting rights.

Question 9

Restrictions on the transfer of stock are valid if they are not unreasonable.

Accepted Answer

Restrictions on the transfer of stock are valid if they are not unreasonable, as long as they do not violate any laws or regulations. Companies may place reasonable restrictions on the transfer of their stock to protect their interests and maintain stability in the marketplace. However, if these restrictions are too severe or unreasonable, they may be considered invalid and unenforceable.

Question 10

Each shareholder owns a proportionate share of the property of the corporation.

Accepted Answer

The answer of Each shareholder owns a proportionate share of...

Question 11

Shares can exist for only as long as the shareholder is alive.

Accepted Answer

Shares can be inherited by the shareholder's beneficiaries or can be transferred to someone else during their lifetime. Therefore, shares can exist beyond the shareholder's lifetime.

Question 12

Under the RMBCA, a preincorporation subscription agreement is irrevocable for six (6) months unless the subscription agreement provides a longer or shorter period, or all of the subscribers agree to revocation.

Accepted Answer

Under the Revised Model Business Corporation Act (RMBCA), a preincorporation subscription agreement is generally irrevocable for six months unless the agreement provides for a longer or shorter period or all of the subscribers agree otherwise.

Question 13

Shares of stock that have been issued to stockholders in a corporation are said to be outstanding.

Accepted Answer

Shares of stock that have been issued and are currently held by stockholders are called outstanding shares.

Question 14

A provision giving a corporation the right to purchase a shareholder's shares on the death of the shareholder is invalid.

Accepted Answer

A provision giving a corporation the right to purchase a shareholder's shares on the death of the shareholder is valid, as long as it is included in the corporation's articles of incorporation or bylaws and complies with applicable laws and regulations.

Question 15

Shares of stock may not be acquired through subscription but may be acquired through a transfer of existing shares from a shareholder or from the corporation.

Accepted Answer

The answer of Shares of stock may not be acquired...

Question 16

All shares must have a par value of at least one dollar per share.

Accepted Answer

Shares can have a par value less than one dollar, and some shares may even have no par value at all. The par value is set by the company and can vary.

Question 17

To correctly transfer shares of stock, a delivery from the owner of the shares directly to the transferee is required.

Accepted Answer

To transfer shares of stock, the owner must typically deliver the shares to a brokerage account in the name of the transferee. This can be done electronically, through a transfer agent, or by endorsed stock certificates. Direct delivery from the owner to the transferee is not necessary.

Question 18

No writing is required for a contract by which a broker agrees with a customer to buy or sell securities for the customer.

Accepted Answer

A contract between a broker and a customer to buy or sell securities can be made orally, without the need for written documentation. However, it is recommended to have a written agreement to avoid any disputes or misunderstandings in the future.

Question 19

Preferred stock cannot have priority over common stock with respect to dividends.

Accepted Answer

Preferred stock typically has priority over common stock with respect to dividends, meaning that preferred stockholders will receive their dividends before or instead of common stockholders.

Question 20

The two most common instruments used to provide the capital structure of a corporation are stocks and bonds.

Accepted Answer

Stocks and bonds are both commonly used to provide the capital structure of a corporation. Stocks represent ownership in the company and can provide potential for capital gains and dividends, while bonds represent debt owed by the company and provide fixed interest payments to the bondholders.

Quiz 45: Shareholder Rights in Corporations