BLAW SB2

The MBCA requires notice of all shareholders' meetings to be given not less than ______ days, nor more than _______ days, before the meeting.

10; 50

Suppose Joe is a shareholder and other shareholders of the same class are paid a dividend but Joe is not. What can Joe do?

Joe can sue the corporation to get the same dividend on his shares.

If Joe wishes to file a derivative suit, he must meet two basic requirements ______. (Check the two correct answers)

Joe must have owned shares at the time of the wrong Joe must urge the directors to file a suit by the corporation

Which of the following is correct regarding the payment of dividends?

Property dividends may take the form of shares of stock.

Which of the following is correct regarding the legal effect of a unilateral mistake?

Relief will not be granted if a person's own negligence is the cause of his or her mistake.

Which section of the 1933 Act imposes liability on any person who has violated the timing, manner, and content restrictions on offers and sales of new issues?

Section 12(1)

Generally, courts do not apply preemptive rights to which of the following? (Check all that apply)

Shares issued in exchange for services Shares issued in connection with a merger Treasury shares

True or false: If the corporation was insolvent at the time, the shareholder is liable even if he was unaware of the illegality.

T

To prove fraud, one must prove all the elements of misrepresentation plus which of the following additional elements?

The misrepresentation was knowingly made with scienter

The MBCA provides that a special meeting may be called by any of the following: ______.(Check all that apply)

The president Holders of 10% of the shares entitled to vote The board of directors

Shareholders have two rights at shareholder meetings: ______. (Check the two correct answers)

The right to ask questions The right to propose a resolution

Which of the following involves a corporation purchasing its securities from any willing seller out of unrestricted earned surplus (as required by the MBCA?)

Treasury stock

Which of the following types of contracts are often described as so unfair that they "shock the conscience of the court?"

Unconscionable

Joe contracts with Tom to rake his leaves for $50. Tom rakes Joe's leaves but Joe refuses to pay him. This is

a breach of contract

If the directors propose to eliminate a provision for cumulative dividends on a specific class of preferred stock, the MBCA requires that ________ of the shares of that class must approve.

a simple majority

The MBCA requires approval of any amendment to the articles of incorporation by ________ of the shares entitled to vote, but permits the articles of incorporation to impose a higher requirement.

a simple majority

The burden of proof is on the shareholder to show that the directors ______ their discretion in declaring a ______.

abused; dividend

The 1933 Act has two (2) principal regulatory components, and they are ______. (Check the two that apply)

antifraud provisions registration provisions

The statutes in many states give ______ rights to shareholders who vote against certain transactions.

appraisal

The ______ is/are entrusted with the authority to decide what is the proper amount and form of consideration for the shares.

board of directors

Shareholders may sue the corporation for a ______, which is the basis for the relationship between the corporation and the shareholder.

breach of the shareholder contract

The declaration of dividends is subject to the ______ of the ______.

business judgment; board of directors

Dividends are usually paid in ______.

cash

When a number of people have a right or a claim against the same defendant growing out of essentially the same set of facts, a(n) ______ may be brought by any one of them.

class action

Granting a preemptive right creates difficult problems in large corporations that have several ______.

classes of stock

In a ______ corporation, the original shareholders may require any shareholder who desires to sell to give the corporation or the other shareholders a _________ the shares.

close; right of first refusal to purchase

A corporation must issue at the very least some type of ______ stock, which is a type of equity security.

common

If you own ______ stock and have it ______, you probably have a right to ______.

common; listed in your name; vote

Parties who put their contracts in writing should try to make the writing as ______ and ______ as possible.

complete; unambiguous

Activity-based costing ______.

computes product costs in the same way as traditional costing

Which of the following are not equitable remedies

consequential damages punitive damages

A(n) ________ occurs when two or more corporations become part of a new corporation.

consolidation

Many corporations permit shareholders to ______ their votes.

cumulate

After the directors have voted to pay a lawful dividend, it becomes a(n) ______ of the corporation.

debt

Under certain conditions, a shareholder is permitted to file a(n) ______ lawsuit as a representative of the corporation.

derivative

Directors and officers may be liable to the corporation for failure to act with: _______. (Check the two correct answers)

diligence due care

A shareholder is permitted to bring suit only if the ______. (Check the two correct answers)

directors have a conflict of interest directors refuse to file suit

The main purpose of a public corporation's annual meeting is the ______.

election of directors

To transfer her stock, the owner simply ______ form usually printed on the back of the stock certificate.

endorses the assignment

Unlike ______ securities, ______ securities do not transfer an ownership interest in the corporation.

equity; debt

If a sale of the stock is made on a stock exchange, the purchaser is entitled to the dividend unless the sale occurs on or after the ________ date, which is two (2) business days before the record date for the dividend.

ex dividend

The MBCA requires a corporation to send its latest ______ to any shareholder on request.

financial statements

Directors are required to be shareholders of the corporation: ________.

if the state requires it by statute if the articles of incorporation specify it

The MBCA requires the corporation to permit a shareholder on written request to examine corporate records ______. (Check all that apply)

in person through an agent such as a lawyer

The MBCA prohibits the payment of a dividend that would make the corporation ______.

insolvent

The MBCA allows a proxy to state it is ______ and if it is "coupled with ______."

irrevocable; an interest

A dividend that was paid illegally may be recovered from a shareholder who received it ______ it was illegal.

knowing

Scienter refers to the defendant's ______.

mental state

If no transferee is named in a stock transfer, the certificate and the shares it represents are transferable, although risky, by ______.

mere delivery

A ________ occurs when one corporation is absorbed into another existing corporation.

merger

The purpose of cumulative voting is to give ______ shareholders an opportunity to be represented on the board.

minority

Dividends on ______ stock need not be paid later if they are not earned and paid in the year due.

noncumulative preferred

Most corporations elect directors on the basis that each share is entitled to ______ vote(s) for ______.

one (1); each director

The 1933 Act is primarily a(n) _______ statute, although it does cover fraudulent sales of publicly-sold securities.

one-time disclosure

According to the MBCA, a director must discharge her duties with such care as a(n) _______ would do in a similar position and circumstances

ordinarily prudent person

According to the 1933 Act, the SEC review of the registration statement involves analysis of whether it contains any _______ statements.

per se fraudulent

New amendments to Delaware law now permit the corporation either to maintain a list of all shareholders at its principal place of business or to ______.

post it on an electronic network

Executive compensation committees are now cautioned to: _______. (Pick two correct answers)

practice real oversight meeting with their HR department

A number of states require corporations domiciled there to give their current shareholders an option to purchase their proportionate share of any new issue of stock. This is known as a(n) ______ right.

preemptive

The contract with ______ shareholders usually gives them a preference in dividends over ________ shareholders.

preferred; common

Most states do not permit a(n) ______ preincorporation services to be proper consideration for shares because the services were not technically rendered to the corporation.

promoter's

One of the main reasons that ______ select the ______ form of business is the variety of funding sources available to businesses that operate in that form.

promoters; corporate

Under the MBCA, a shareholder may appoint another person, known as a ______, to vote in her place as long as there is _______.

proxy; a written document appointing the proxy

The 1933 Act is primarily concerned with ______ of securities.

public distribution

Whereas a board's action by remote transmission would not be valid unless it could be: ______, shareholder meetings may now be conducted ______.

reduced to paper form; by conference call

The 1933 Act requires an issuer of the securities to file a(n) ______ with the SEC and to make a(n) ______ available to prospective purchasers.

registration statement; prospectus

Amendments to Delaware's corporation laws now permit directors to dispense with a physical location entirely and allow shareholders to participate in a meeting by ______.

remote communication

Notice of a ______ must be conspicuously placed on the stock certificate to be effective against a purchaser who is unaware of it.

restriction on the right of sale

The MBCA permits paying dividends only out of ______.

retained earnings

If Joe, a shareholder in CORPCO, votes against a proposal to merge CORPCO with ABCCO, but the majority supports the merger, he may have a ______ and demand that the corporation pay him the fair value of his shares.

right of appraisal

If the articles of incorporation have not previously authorized a(n) ______, it cannot be made until they are amended to permit it.

share split

The ______ is a product of the corporate articles and bylaws and any board of directors resolution applicable to the particular stock issue, as well as the corporation statute.

shareholder contract

Under the MBCA, any amendment to the articles of incorporation must be approved by the ________.

shareholders

A director may be held liable for the torts of employees of the corporation if: _______. (Check all that apply)

she participated in the commission of the tort she authorized the commission of the tort

Although rare, ______ meetings of shareholders are typically called to get the approval of a proposal by the directors to merge with another corporation.

special

A ______ is not a dividend; it merely changes the ______ of the shares, not the retained earnings account.

stock split; par value

If a person buys ______ that was fully paid for when issued, he normally has ______ to the corporation or its creditors.

stock; no further liability

A shareholder who did not pay the full ______ for newly issued shares is liable for the balance due.

subscription price

True or false: The notice for the special meeting must give the time and place of the meeting, along with the specific purpose.

t

Waivers of notice may be signed after the meeting according to ______.

the MBCA

Even if the parties have formed an otherwise binding contract, the agreement is unenforceable if ______. (Check all that apply)

-its formation is illegal -its performance is illegal -it is contrary to the public interest

Suppose Carol is a preferred shareholder but the corporation did not pay a preferred dividend that was due. Carol could bring a suit demanding that the dividend be paid. If Carol wins, ______.

the corporation would have to pay the dividend to all the preferred shareholders of the class and likely reimburse her for all her legal expenses

If you are a shareholder, your right to vote at a shareholders' meeting depends on ______. (Check all that apply)

the corporation's bylaws the incorporation statute the corporation's articles of incorporation

Shareholders are required to approve unusual or extraordinary corporate transactions, such as ______. (Check all that apply)

the sale of all corporate assets a voluntary dissolution a merger

Shareholders have the right of an owner to be informed about: _______ at the shareholder meeting.

their investment

A shareholder has a right to sell or give away her shares unless ______.

there is a valid restriction

Directors and officers may be liable to the corporation if: _______.

they act outside the scope of the corporation's authority

True or false: Today, courts are much more willing to find negligence on the part of corporate directors and officers.

true

A(n) ________ of a stock issue agrees to market it to investors and usually guarantees to sell the entire issue at an agreed-on price.

underwriter

A corporation may not pile up ______ in the treasury or pay ______ to management.

unneeded cash; unreasonably high salaries

A vice president typically has no authority by: _______.

virtue of the office itself

In situations where property is traded for stock and the property is overvalued, the stock is said to be ______.

watered stock

All but which of the following states require corporations formed in the state to have an annual meeting?

Delaware

Which of the following arises when a corporation retains all or part of its operating profit rather than paying it out in dividends?

Earned surplus

Under the MBCA, a director will not have _______ unless he refuses to vote for the proposed course of action and makes this choice clear to the other board members by having it appear in the minutes.

dissented

Any director who attends a board meeting is deemed to have approved the board's actions unless she ______.

dissents

In a startup corporation, initial funds and property may come from the following sources: ______. (Check all that apply)

diverse types of investors the sale of corporate securities directly from the promoters

Although shareholders are the owners of the corporation, in a public corporation their principal function at an annual meeting is to ______.

elect directors

Under the MBCA, shareholder approval is required for ______ stock option plans. (Check the two correct answers)

employee director

Directors and officers are not prohibited from __________ with the corporation.

entering into transactions

Certain corporate officers have what is called _______ authority, that is authority by virtue of their office.

ex officio

Fraud in the ______ involves misstatements about the content or legal effect of something usually contained in a ______ contract.

execution; form

As a result of the recent scandals, boards are being pushed to be proactive in the _______ process.

executive pay-setting

Officers can contractually bind the corporations based on the following types of authority: _________. (Check all the correct answers)

express apparent implied

True or false: According to the MBCA, the same person cannot hold two or more offices at the same time.

false

True or false: Most of the world shares the United States' notions and traditions of agency at will.

false

Both officers and directors owe the corporation a(n) _______ duty.

fiduciary

Before a director enters a contract with the corporation, the director should make a(n) ________ of her interest and disclosed all _________ of the transaction, including her interest in it.

full disclosure, material facts

Unlike the rest of the world, the United States ______ what terms may be included in an agency agreement.

has few restrictions on

Buyers have an insurable interest in goods at the moment the goods are ______.

identified to the contract

An agreement that induces or compensates a public servant to deviate from her duties is ______.

illegal

A vice president has considerable ________ authority to manage an area of business if she has the appropriate title.

implied

The MBCA provides that a corporation must have: _______. (Check the correct answers)

Secretary President Treasurer

The fiduciary duties that officers and directors owe the corporation include all of the following: _______. (Check all that apply)

The duty to act within the powers of the corporation The duty to act with loyalty and good faith The duty to act diligently and with due care

Transactions entered into by directors or officers are voidable only if: _________.

they are unfair to the corporation

Unlike _______, corporate _______ are agents of the corporation.

directors, officers

Which of the following would meet E-SIGN's definition of a digital signature?

A password used to enter a website A PIN number used to access an ATM

Which of the following arises regardless of whether the seller has made express promises as to the quality of the goods?

An implied warranty

If a director is found guilty of a crime, the corporation may voluntarily indemnify her if she: _______. (Check two correct answers.)

acted in a manner she believed to be in the corporation's best interests had no reasonable cause to believe her conduct was unlawful

The original statute of frauds was adopted because at the time, when parties filed suit for a breach of contract case: ______.

both parties could not testify in their own cases

The test for determining the existence of a mutual mistake is a(n) ______ one.

objective

Select all that apply No sensible legal system would enforce contractual agreements that ______. (Check all that apply)

-undermine its authority -undermine its basic objectives

A company incurred the following: Total manufacturing costs of $500,000, total production department costs of $300,000, and total production order costs of $275,000. It used a total of 50,000 direct labour hours and 100,000 machine hours, and 2,750 production orders were placed. Use activity-based costing to calculate the activity rate for production orders.

100

Which section of the Uniform Commercial Code (UCC) serves as a statute of frauds for contracts for the sale of goods?

2-201

(they are called independent agents throughout much of the world) are permitted to work according to their own methods. They are under the control of their principals as to the result that is to be achieved, but not as to the means used to accomplish that result.

Blank 1: Independent Blank 2: contractors or contractor

True or false: Generally, a director who dissents to an action by the board of directors will be personally liable if the board failed to abide by its duties to the corporation.

False

Which of the following may be used only upon a two-thirds vote of shareholders?

Capital surplus

What was the original common law position regarding whether a party to a contract has a duty to disclose to the other party all of the material facts she knows about the subject of the contract?

Caveat emptor

Which of the following are issued to represent the corporate stock but are not actually the stock; instead, they are merely evidence of ownership?

Certificates

Which of the following is correct regarding misrepresentation?

It can result from an honest mistake or negligence on the part of the misrepresenter.

Which of the following is the arbitrary value assigned to the shares in the articles of incorporation?

Par value

Why does the statute of frauds require that an executor's promise to personally pay a decedent's debts be in writing to be enforceable?

To prevent fraud

A court may refuse to enforce a contract of __________ as contrary to public policy

adhesion

Shareholders can remove a director for cause: _______.

at any time

Parties contractual duties to perform arise

at the time the contract is formed

The Magnuson-Moss Warranty Act requires the seller to make the written warranty terms available to the buyer ______ the sale.

before

According to the common law, a director who receives improper notice can sign the notice waiver _______. (Check all that apply)

before the meeting during the meeting

If a document has the _________, there is a presumption that the document has been properly authorized.

corporate seal

If someone is in breach of contract, they are liable for ____________ to the other party

damages

Corporations have the power to borrow money necessary for their operations by issuing ______.

debt securities

Courts do not allow a person who claims to have been victimized by a misrepresentation to cancel the contract unless he or she can show some ______ as a result of the misrepresentation.

determinant

If a director prevails on the merits of the suit again her, ________ and the corporation must reimburse her for ________.

indemnification is mandatory, all her costs and expenses

In order to strengthen the deterrence element of tort and criminal law, all states place some limitations on the ability of corporations to ________ .

indemnify officers and directors from their actions

If a party recklessly but honestly misrepresents a fact in contract negotiations, the contract _______.

is binding unless the fact was material

A director cannot be removed without cause unless: ________. (Check all the answers that are correct)

it is permitted by the articles it is permitted by statute

As part of her duty to account for funds and property, an agent must account for any ___ she received in the course of her responsibilities. (Check all that apply)

kickbacks secret profits bribes

The reason behind the idea of mistake is that mistake may prevent the ______ required by contract law.

meeting of the minds

Debt securities create a debtor-creditor relationship and can arise in the form of ______. (Check all that apply)

notes debentures bonds

How can express conditions be created

oral statements written statements

According to the MBCA, officers and directors are not liable to the corporation if they act with the common sense, practical wisdom, and informed judgment that could be expected from a(n) ________.

ordinarily prudent person

A customer has a claim of misrepresentation if a salesperson gave the customer misinformation about a product and the customer ______.

purchased the product without doing an inspection and the inspection would not have revealed the misrepresentation

Remedies for breach of contract are intended to ___.

put the injured party in the same position it would have been in if the contract had been performed

A principal may become liable through _______ authority for a(n) ______ act that was done by an agent.

ratification, unauthorized

A board meeting is deemed to be properly called if ______. (Check all the correct answers)

reasonable notice has been given improper notice has been given but all directors attend in any case improper notice has been given but the directors waived notice

A corporate _________ is also called "clerk" in some states.

secretary

When a buyer rightfully revokes acceptance of the goods, the risk of loss is on the ______.

seller to the extent that it is not covered by the buyer's insurance

One of the outcomes of the recent corporate compensation scandals is for directors: ______. (Pick two correct answers)

spend more time in the board challenge the CEO

If a stock has no par value, the board of directors may assign a ______ when the shares are issued.

stated value

The MBCA requires shareholder approval of ______. (Check all that apply)

stock option plans for officers corporate loans to officers

A person can become a shareholder by ______. (Check all that apply)

subscribing to shares in an existing corporation buying newly issued shares sold by a stockbroker subscribing to shares in a new corporation

A corporation may be liable for an employee's ______ even when the corporation has: _______.

torts, instructed the employee to avoid the act

A corporation is liable for all _______ committed by its employees while acting in _______.

torts, the course and scope of their employment

The _______ binds the corporation on receipts, checks, and endorsements.

treasurer

The _______ has charge of the funds of the corporation.

treasurer

True or false: A contract that cannot be performed without committing a tort is illegal.

true

Both the Restatement and the UCC have adopted commercial impracticability as an excuse for failing to perform a contract.

trueeeeeeeee

If an officer enters into a(n) _______ transaction, he will not be liable if he justifiably believed it to be within the scope of the corporation's business.

ultra vires

Options represented by certificates are known as ______.

warrants