TASK
1.Olympic National Agencies was organized with an authorized capitalization of preferred stock and common stock. The articles of incorporation provided for a 7 percent annual dividend for the preferred stock. The articles further stated that the preferred stock would be given priority interests in the corporation’s assets up to the par value of the stock. Subsequently, the shareholders voted to dissolve Olympic. Olympic’s assets greatly exceeded its liabilities. The liquidating trustee petitioned the court for instructions on the respective rights of the shareholders in the assets of the corporation upon dissolution. The court ordered the trustee to distribute the corporate assets remaining after the preference of the preferred stock is satisfied to the common and preferred stockholders on a pro rata basis. Was the court correct in rendering this decision? Explain.
2. The XYZ Corporation was duly organized on July 10. Its certificate of incorporation provides for total authorized capital of $1 million, consisting of ten thousand shares of common stock with a par value of $100 per share. The corporation issues for cash a total of five hundred certificates, numbered 1 to 500 inclusive, representing various amounts of shares in the names of various individuals. The shares were all paid for in advance, so the certificates are all dated and mailed on the same day. The five hundred certificates of stock represent a total of ten thousand five hundred shares. Certificate 499 for three hundred shares was issued to Jane Smith. Certificate 500 for two hundred fifty shares was issued to William Jones. Is the validity of the stock thus issued in any way questionable? Explain. What are the rights of Smith and Jones?
3. Doris subscribed for two hundred shares of 12 percent cumulative, participating, redeemable, convertible, preferred shares of the Ritz Hotel Company with a par value of $100 per share. The subscription agreement provided that she was to receive a bonus of one share of common stock of $100 par value for each share of preferred stock. Doris fully paid her subscription agreement of $20,000 and received the two hundred shares of preferred stock and the bonus stock of two hundred shares of the par value common. The Ritz Hotel Company later
becomes insolvent. Ronald, the receiver of the corporation, brings suit for $20,000, the par value of the common stock. What judgment?
4. The Hyperion Company has an authorized capital stock of one thousand shares with a par value of $100 per share, of which nine hundred shares, all fully paid, were outstanding. Having an ample surplus, the Hyperion Company purchased from its shareholders one hundred
shares at par. Subsequently, the Hyperion Company, needing additional working capital, issued two hundred shares to Alexander at $80 per share. Two years later, the Hyperion Company was forced into bankruptcy.
How much, if any, may the trustee in bankruptcy recover from Alexander?
5. For five years, Henry and James had been engaged as partners in building houses. They owned the equipment necessary to conduct the business and had an excellent reputation. In March, Joyce, who had previously been in the same kind of business, proposed that Henry, James, and Joyce form a corporation for the purpose of constructing medium-priced houses. They engaged attorney Portia, who did all the work required to incorporate the business under the name of Libra Corp.
The certificate of incorporation authorized one thousand shares of $100 par value stock. At the organizational meeting of the incorporators, Henry, James, and Joyce were elected directors, and Libra Corp. issued a total of six hundred fifty shares for its stock. Henry and James each received two hundred shares in consideration of transferring to Libra Corp. the equipment and goodwill of their partnership, which had a combined value of more than $40,000. Joyce received two hundred shares in consideration for promising to work for Libra Corp. in the future, and Portia received fifty shares as compensation for the legal services she rendered in forming Libra Corp. Later that year, Libra Corp. suffered several financial setbacks and in December ceased operations. What rights, if any, does Libra Corp. have against Henry, James, Joyce, and Portia in connection with the original issuance of its shares?
