A corporation currently has two classes of common shares; Class A with 1 vote per share and Class B with 10 votes per share.The owners of the Class B shares have recently announced that all of their outstanding shares will be exchanged for Class A shares.Which of the following statements is true?
A)The change will improve the corporate governance of the company.
B)This is an example of convertible preferred shares.
C)The company will pay a lower amount in dividends in the future.
D)The change will decrease the legal capital of the company.

Question

Quizplus · Accepted Answer

By exchanging Class B shares for Class A shares, the voting power in the company will be more evenly distributed, improving the overall corporate governance. This is not an example of convertible preferred shares as the shares being exchanged are common shares. There is no information given indicating that the change will result in lower dividends or decreased legal capital.

A Corporation Currently Has Two Classes of Common Shares; Class