In Jurisdictions Where Par Value Shares Are Legally Allowed, the Only

question 2

Multiple Choice

In jurisdictions where par value shares are legally allowed, the only real significance of par value is

• A) to enable the shares to be callable or convertible.
• B) to require the corporation to pay dividends.
• C) to establish the maximum responsibility of a shareholder in the event of insolvency.
• D) to establish the maximum price at which the shares can be sold.

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Definitions:

Newly Issued Stock

Shares that have been recently released by a company to the public for the first time through an initial public offering (IPO) or additional issuance.

Proxy Solicitation

The process by which one shareholder asks another for his or her voting right.

Voting Trust Agreement

A legal agreement where stockholders transfer their shares to a trustee in exchange for voting trust certificates, allowing the trustee to vote on corporate matters.

Cumulative Voting Agreement

An arrangement that allows shareholders in a company to pool their votes towards electing directors, enhancing the voting power of minority shareholders.