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B Law 2 Unit 3 Ch 29

Corporate Formation, Merger, and Termination

TermDefinition
corporation A legal entity formed in compliance with statutory requirements that is distinct from its shareholder-owners.
dividend A distribution of corporate profits to the corporation’s shareholders in proportion to the number of shares held.
retained earnings The portion of a corporation’s profits that has not been paid out as dividends to shareholders.
holding company A company whose business activity is holding shares in another company.
domestic corporation In a given state, a corporation that is organized under the law of that state.
foreign corporation In a given state, a corporation that does business in that state but is not incorporated there.
alien corporation A corporation formed in another country but doing business in the United States.
close corporation A corporation whose shareholders are limited to a small group of persons, often only family members.
S corporation A close business corporation that has most corporate attributes, including limited liability, but qualifies under the Internal Revenue Code to be taxed as a partnership.
articles of incorporation The document containing basic information about the corporation that is filed with the appropriate state official, usually the secretary of state, when a business is incorporated.
bylaws The internal rules of management adopted by a corporation at its first organizational meeting.
ultra vires Acts of a corporation that are beyond its express and implied powers to undertake. (The Latin phrase means “beyond the powers”.)
piercing the corporate veil The action of a court to disregard the corporate entity and hold the shareholders personally liable for corporate debts and obligations.
commingle To put funds or goods together into one mass so that they are mixed to such a degree that they no longer have separate identities, as when personal and corporate interests are mixed together to the extent that the corporation has no separate identity.
securities Generally, stocks, bonds, or other items that represent an ownership interest in a corporation or a promise of repayment of debt by a corporation.
stock An ownership (equity) interest in a corporation, measured in units of shares.
bond A security that evidences a corporate (or government) debt.
bond indenture The agreement between the issuer of a bond and the bondholder that sets out the terms and features of the bond issue.
common stock Shares of ownership in a corporation that give the owner a proportionate interest with regard to control, earnings, and net assets; lowest in priority with respect to payment of dividends and distribution of the corporation’s assets on dissolution.
preferred stock Stock that has priority over common stock as to payment of dividends and distribution of assets on the corporation’s dissolution.
venture capital Financing provided by professional, outside investors to new business ventures.
private equity capital Funds invested by a private equity firm in an existing corporation, usually to purchase and reorganize it.
merger The legal combination of two or more corporations in such a way that only one corporation (the surviving corporation) continues to exist, having acquired all of the assets and liabilities of the other corporation.
consolidation The legal combination of two or more corporations in such a way that the original corporations cease to exist, and a new corporation emerges with all their assets and liabilities.
share exchange A transaction in which some or all of the shares of one corporation are exchanged for some or all of the shares of another corporation, but both corporations continue to exist.
short-form (parent-subsidiary) merger A merger that can be accomplished without the approval of the shareholders of either corporation because one company owns at least 90 percent of the outstanding shares of each class of stock of the other corporation.
appraisal right The right of a dissenting shareholder, who objects to a merger or consolidation of the corporation, to have his shares appraised and to be paid the fair value of those shares by the corporation.
target corporation The corporation to be acquired in a corporate takeover.
takeover The acquisition of control over a corporation through the purchase of a substantial number of the voting shares of the corporation.
tender offer An offer made by one company directly to the shareholders of another (target) company to purchase their shares of stock.
dissolution The formal disbanding of a corporation, which can take place by (1) an act of the state, (2) an agreement of the shareholders and the board of directors, (3) the expiration of a time period stated in the certificate of incorporation, or (4) a court order.
receiver In a corporate dissolution, a court-appointed person who winds up corporate affairs and liquidates corporate assets.
Created by: leighg2011