You have inherited some money from your uncle. You are deciding how to invest that money and are considering buying shares in a corporation. There are so many corporations to choose from .You have heard that a corporation must issue a prospectus but are unsure as to what this means.

a. Explain the purpose of a prospectus and generally what information should it disclose. ( 2 marks)

b. Once you have chosen the corporation to invest in, you need to decide what type of share to buy, common shares or preferred shares. Explain one fact about common shares and one fact about preferred shares.( 2 marks)

c. Give one reason as to which type of share you would choose. ( 1 mark)

d. You also have a question about dividends. You have heard from a friend of yours who is a shareholder in ABC Corporation, which is a very profitable corporation that in spite of their success, the directors of the corporation refused to declare a dividend as they wanted to invest the money into research and development. Your friend and the other shareholders are angry and are considering raising an action for non-payment of the dividend. Explain if your friend is likely to be successful .( 1 mark)

e. Explain if it is true that once you become a shareholder, you have an obligation not to compete with the corporation? ( 1 mark )