Law310 Question 5

Feb 3rd, 2012
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The bond covenant is a legally binding contract between the stock issuer and the purchaser which defines the interest rate, the date of maturity, and the terms and conditions established when stocks were purchased.

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Law310 Question #5NameClassDateProfessorLaw310 Question #5 When A Chief Financial Officer of a Fortune 500 Company deliberated treated $4 billion in operating expenses as assets he committed an act of corporate fraud. The CFO made it appear as if the company had made a four million dollar profit when in fact the company was working in the negative. Because the fortune five hundred company is publically owned it created a 95% drop and millions of dollar in bond covenants were breached. The bond covenant is a legally binding contract between the stock issuer and the purchaser which defines the interest rate, the date of maturity, and the terms and conditions established when stocks were purchased.#1 The corporation may have to file for bankruptcy protection under US bankruptcy laws when stock loses its value or the company is going out of business. The US Securities and Exchange Commission regulate the company's ability to file bankruptcy. Bankruptcy protection comes in the form of filing a Chapter 7 or a Chapter Eleven. A Chapter 7 involves a trustee being appointed in order to liquidate all of the company's assets while the Chapter 11 allows the corporation to reorganize their debt in order to make it more manageable and save the company. #2 A group of stockholders can file a class action lawsuit aginst the fortune 500 company based on the violation of federal security laws. One provision that allows for the class action lawsuit,

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