Key Terms
Study Guide
Chapter 18.4 (Fundamentals of Business Law)
Director
A person appointed or elected to sit on a board that manages the business of a corporation and supervises its officers.
Board of Directors
The collective body of directors elected by shareholders.
Officers
Individuals elected by the board who are responsible for daily operations. Common titles: president, chief operating off
Proper purpose
One that protects both the corporation's and the shareholder's interests. The inspection cannot be against the corporati
Quorum
The minimum number of shareholders (usually a majority) who must be present to conduct business and take a vote. Bylaws
Proxy
A person authorized to vote on another shareholder's behalf when that shareholder cannot attend in person.
Common stock
One vote per share, generally.
Preferred stock
Owners typically do NOT have voting rights in exchange for higher or preferential dividends.
Preemptive Right
A shareholder's privilege to purchase newly issued stock before it is offered to the public.
Purpose
Prevents dilution of existing ownership interests.
Amount
Shareholders may buy in proportion to their current holdings.
Timing
Must be exercised within 30 to 60 days of being offered. After that window, remaining shares go to the public.
Derivative Suit
A lawsuit brought by a shareholder on the corporation's behalf against a third party, because the corporation itself fai
Procedural requirement
Before filing, the shareholder must show they first attempted to get officers and directors to act. Only after they refu