Question

To submit a shareholder proposal, a shareholder must have owned (for the past year) __________ percent or __________ in market value of the voting stock of the corporation.

1) 5; 5,000
2) 3; 1,000
3) 1; 2,000
4) 1; 5,000

Answer 1

The requirement to submit a shareholder proposal is owning $2,000 in market value or 1% of the company's securities for at least one year. In The Darkroom Windowshade Company case, investors 1 and 2 combined do not have a majority and therefore cannot unilaterally control the company's decisions.the right answer is 3)

Step-by-step explanation:

To address the student's question about the requirements to submit a shareholder proposal, according to the U.S. Securities and Exchange Commission's (SEC) Rule 14a-8, a shareholder must have continuously owned at least $2,000 in market value, or 1% of the company's securities, for at least one year prior to submitting the proposal. Therefore, the correct answer is option 3) 1; 2,000.

For the scenario involving The Darkroom Windowshade Company, to change the company's top management, a majority vote is required. The minimum number of investors needed would be those who collectively own more than 50% of the voting stock. Investors 1 and 2 together own 38,000 shares (20,000 + 18,000), which is less than the required majority of 50,001 shares for a decisive vote. Therefore, they cannot be certain of always getting their way in how the company is run without additional support from other investors.