Question

1. Under the RMBCA, corporate existence begins when the articles of incorporation are filed with the secretary of state. (True or False)

2. Restrictions on sales of stock are always valid. (True or False)

3. Preferred stock is ordinarily nonvoting stock. (True or False)

4. If Tom Jones signs an agreement to purchase Jane Brown's shares in ABC Corp., the stock sales contract is called an indenture. (True or False)

5. Following GAAP and GAAS is persuasive but nor conclusive evidence of meeting standards for the accounting profession. (True or False)

Answer 1

1. True

Under The Revised Model Business Corporation Act, unless a delayed effective date is specified, the corporate existence begins when the articles of incorporation are filed with the secretary of state. The filing of the articles of incorporation acts as conclusive proof that the incorporators satisfied all standard conditions to incorporation.

2. False

Though the restrictions on sales of stock are valid, a public trading facility may allow the emerging business to part company with VC investors to cash-out at a much greater market price than the price at which they have initially invested. So it is not necessary that it is always valid.

3. True

Preferred stocks do not give shareholders voting rights.

4. False

Indenture means a legal and binding agreement between two or more parties, which generally involves debt agreements, real estate, or bankruptcy. As stock sales don't fall under this category the stock sales contract cannot be called an Indenture.

5. True

Following GAAP and GAAS is persuasive but not conclusive evidence of meeting standards for the accounting profession. The general norm is that any profession are persuasive but not conclusive evidence of professional performance.