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Question 1Q

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Intermediate Accounting (Kieso)
Found in: Page 809

Short Answer

In the absence of restrictive provisions, what are the basic rights of stockholders of a corporation?

The fundamental rights of each shareholder (unless restriction to the contrary) are to share proportionally.

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Step by Step Solution

Definition of restrictive Provision

Restrictive Provision can be expressed as banning, restriction, or further condition reasonably be anticipated to have a Surviving Corporation Material Adverse Effect.

Basic rights of stockholders of a corporation

  1. The Profit and loss should be shared proportionately
  2. Management should be shared proportionately, i.e., the voting rights for directors.
  3. Corporate assets upon liquidation should also be shared proportionately.
  4. If there is the issue of new stock of the same class should be shared proportionately, it is called the preemptive right.

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