Leighton wants to buy a new car. He goes to the bank to get a ...

[ssal]

Leighton wants to buy a new car. He goes to the bank to get a loan for the purchase, and signs an agreement to pay 10.00 per month in premiums on a term life insurance policy which names the bank as the recipient of the policy proceeds in the event of his death before the loan is repaid. The bank is a(n):
 A) incidental beneficiary.
  B) creditor beneficiary.
  C) donee beneficiary.
  D) assignee.

Question 2

a. Discuss preemptive rights. b. Are preemptive rights more important in a closely held corporation or in a publicly held corporation? Explain.

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Answer to Question 1

B

Answer to Question 2

a.
Preemptive rights are shareholders' rights to purchase a pro rata share of newly issued stock.



b. Preemptive rights are more important in a closely held corporation than in a publicly traded one. This is because a closely held corporation usually has only a few shareholders. The proportionate share owned by each shareholder is significant in determining who will control the corporation. In the absence of preemptive rights, a shareholder may be unable to prevent a dilution of his ownership interest in the corporation.