Legal Environment of Business Chapter 15 Vocab

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.

Ultra Vires

A Latin term meaning "beyond the powers" that in corporate law, describes acts of management that are beyond the corporation's express and implied powers to undertake.

Stock Certificate

A certificate issued by a corporation evidencing the ownership of a specified number of shares in the corporation.

Stock Warrant

A certificate that grants the owner the option to buy a given number of shares of stock, usually within a set time period.

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.

Close Corporation

A corporation whose shareholders are limited to a small group of persona, often only family members. In a close corporation, the shareholders' rights to transfer shares to others are usually restricted.

Alien Corporation

A designation in the United States for a corporation formed in another country but doing business in the United States.

Dividend

A distribution to corporate shareholders of corporate profits or income, disbursed in proportion to the number of shares held.

Benefit Corporation

A for-profit corporation that seeks to have a material positive impact on society and the environmental. This new business form is available by statute in a growing number of states.

Corporation

A legal entity formed in compliance with statutory requirements that is distinct from its shareholders-owners.

Outside Director

A member of the board of directors who does not hold a management position a the corporation.

Inside Director

A member of the board of directors who is also an officer of the corporation.

Business Judgment Rule

A rule that immunizes corporate management from liability for decisions that result in corporate losses or damages if the decision-makers took reasonable steps to become informed, had a rational basis for their decisions, and did not have a contract of interest with the corporation.

Bond

A security that evidences a corporate (or governmental) debt.

Shareholder's Derivative Suit

A suit brought by a shareholder to enforce a corporate cause of action against a third party.

Stock

An ownership (equity) interest in a corporation, measured in units of shares.

Venture Capital

Financing provided by professional, outside investors (venture capitalists) to new business ventures.

Private Equity Capital

Funds invested by a private equity firm in an existing corporation, usually to purchase and reorganize it.

Securities

Generally, stocks, bonds, and other items that represent an ownership interest in a corporation or a promise of repayment of debt by a corporation.

Foreign Corporation

In a given state, a corporation that does business in the state without being incorporated therein.

Domestic Corporation

In a given state, a corporation that does business in, and is organized under the law of, that state.

Proxy

In corporate law, a written or electronically transmitted form in which a stockholder authorizes another party to vote the stockholder's shares in a certain manner.

Preemptive Right

Rights that entitle shareholders to purchase newly issued shares of a corporation's stock, equal in percentage to shares already held, before the stock is offered to outside buyers.

Common Stock

Shares of ownership in a corporation that give the owner of the stock a proportionate interest in the corporation with regard to control, earnings, and net assets.

Watered Stock

Shares of stock issues by a corporation for which the corporation receives, as payment, less than stated value of the shares.

Preferred Stock

Stock that has priority over common stock as to payment of dividends and distribution of assets on the corporation's dissolution.

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.

Articles of Incorporation

The document containing basic information about the corporation that is filed with the appropriate governmental agency, usually the secretary of state, when a business is incorporated.

Bylaws

The internal rules of management adopted by a corporation or other association.

Quorum

The number of members of a decision-making body that must be pre-sent before business may be transacted.

Retained Earnings

The portion of a corporation's profits that has not been paid out as dividends to shareholders.