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Design Management Class Notes_234365260-AC-306-Class-Notes-Chapter-15-Solutions

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Chapter 15: Stockholders' Equity I. The Corporate Form of Organization A. State Laws Governing Corporations 1. If you want to incorporate your business in a particular state, you submit your articles of incorporation to that state. The state then issues a Corporate Charter, recognizing your company as a separate legal entity subject to state law. a) Each state has its own laws regarding the incorporation of businesses. Businesses may "shop" these laws when deciding where to incorporate, e.g., Gulf Oil moved to Delaware, where the Board of Directors can approve certain tactics against takeovers without shareholder approval. 2. Since state laws differ with regard to stockholders’ equity requirements; in this chapter we therefore have to focus on what is “typical.” B. The System of Capital Accumulation 1. Characteristics of Stock a) Shares of stock represent ownership units (certificates of title) in the net assets of the corporation. b) Stockholders’ Ledger: The list of current shareholders, which is maintained by the corporate registrar. c) Transfer Agent: Responsible for the transfer of shares. 2. Typical Rights of the Common Stockholder a) Right to share in profits (distributed as dividends) in proportion to the shares held. b) Right to vote for the board of directors and other matters at the annual meeting. Proxy votes do not require physical attendance at the meeting, but are mailed in. c) Right to maintain ownership proportion upon new issuances of stock, referre ...
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