BUL 3330 - Unit 10

The consideration received for shares must in fact equal par value by an objective standard at the time the shares were issued

true value rule

Corporation X purchases the assets of Company Y. A creditor of Y sues X. -X is never liable. -X is liable if the acquisition was fraudulently made to escape liability. -X is liable if it agreed to assume Y's debts -Two of the above

Two of the above

In exercising his appraisal rights a shareholder must do all of the following except - File a notice with the corporation, prior to the vote, that he intends to demand the fair value of his shares - Vote in favor of the merger -Demand payment within the time set - All of the above

Vote in favor of a merger

Same facts as in Problem 4 above, except that Gloria makes the contract in the name of the corporation to be formed. -The corporation is liable if formed. -The corporation is liable if formed and if it adopts the contract. -Gloria is not liable. - Gloria is liable absent a novation. Gloria is an agent by estoppel.

- Gloria is liable absent a novation.

The attorney general of a state may seek dissolution of a corporation for all of the following except - When a majority of shareholders request such action be undertaken by the attorney general -Failure of the corporation to pay taxes -Fraud in procuring incorporation -Failure to maintain a registered agent for more than 30 days

- When a majority of shareholders request such action be undertaken by the attorney general

The doctrine of ultra vires does not retain force in -A shareholder suit seeking an injunction -A conveyance of property -A derivative suit against managers for ultra vires acts -An action to dissolve or enjoin brought by the attorney general of a state

A conveyance of property

Shareholder action by the shareholders of both corporations is not required in -A merger -A consolidation. -A sale of assets -All of the above

A sale of assets

Which of the following can be delegated by the board of directors to a committee? -The declaration of dividends -A resolution of merger -Amending the by-laws -An audit

An audit

Debt Securities

Bonds

The tendency of the courts not to second guess decisions made by corporate management is called the -Corporate opportunity doctrine - Business judgment rule -Ultra vires doctrine -Exercise of preemptive rights

Business judgment rule

Which statement is true? - Corporations are citizens for diversity jurisdiction purposes and enjoy the right against self-incrimination. - Corporations have First Amendment rights and are citizens for purposes of the Privileges and Immunities clause. - Corporations do not have the right against self-incrimination nor the right to be free from unreasonable search and seizure. - Corporations are citizens of the state of their incorporation and the state in which the corporation has its principal place of business.

Corporations are citizens of the state of their incorporation and the state in which the corporation has its principal place of business.

Prohibited from distributing income to members, directors, or officers

Correct A. non-profit corporation

Corporate profits not distributed to shareholders as dividends

Correct A. retained earnings

Persons who are midwives of the corporation

Correct B. promoters

Shares sold for the price set by the board of directors

Correct C. no-par

A characteristic of a corporation but not a partnership

Correct C. perpetual life

A governmental entity

Correct D. public corporation

Are usually irrevocable and limited to ten years duration

Correct D. voting trusts

Owed by promoters to the corporation and others

Correct E. fiduciary duty

In the absence of fraud, the judgment of the Board of Directors as to value of consideration received for shares is conclusive

Correct F. good faith rule

May be irrevocable for six months

Correct F. preincorporation stock subscriptions

An entity operated as a corporation and formed in good faith

Correct G. de facto

No further distribution is made to the preferred shareholders after payment of the preferred dividend

Correct G. nonparticipating shares

A corporation with a small number of shareholders

Correct H. closely-held

Excess of net assets over stated capital

Correct H. surplus

A contract between the state and the corporation

Correct I. charter

Shares re-acquired by the company

Correct I. treasury

The most frequent type of dividend

Correct J. cash dividend

A corporation formed in a good faith attempt to comply with an incorporation statute and which operates as a corporation is best described as -De jure -De facto -Corporation by estoppel -Close corporation

De facto

A company's retained earnings are -Stated capital -Earned surplus -Capital surplus -Required to be distributed to shareholders

Earned surplus

A "long arm statute" permits state courts to exercise personal jurisdiction over foreign corporations regardless of the sufficiency of contacts the corporation has with the state. (TF)

False

A corporate shareholder who commits a tort is not personally liable because corporations provide limited liability for their owners. (T/F)

False

A corporation can be dissolved only if all shareholders vote to do so. (TF)

False

A corporation doing business in a state in which it is not chartered is always a domestic corporation. (T/F)

False

A court will under no circumstances order a board of directors to declare a dividend, because that function is always discretionary. (TF)

False

A creditor may never bring an action to dissolve a corporation. (TF)

False

A director must own at least 5 percent of all outstanding shares to entitle him to inspect corporate books and records. (TF)

False

A merger need not be approved by the shareholders. (TF)

False

A public corporation is the same as a publicly-held corporation. (TF)

False

A stock split and a stock dividend are synonymous (TF)

False

Bankruptcy terminates the existence of a corporation. (TF)

False

Corporations are citizens for purposes of the Privileges and Immunities Clause of the U.S. Constitution (TF)

False

Holders of common stock generally do not enjoy voting rights. (TF)

False

If an investor undertakes activities, no matter how small, the investment is never a security. (TF)

False

In both a merger and a sale of assets, the acquiring corporation always assumes the debts of the selling or merged corporation. (TF)

False

Ousting incumbent management is not a "proper purpose" to allow a shareholder to inspect corporate books and records. (TF)

False

Proxies are generally not revocable. (TF)

False

The RMBCA provides that a director's contract with the corporation is void (TF)

False

The power to manage a corporation is generally vested in the shareholders. (TF)

False

Ultra vires acts are always criminal. (TF)

False

The board of directors of corporation X declares a dividend which is, in all respects, legal and proper. The dividend is not paid and shareholder Sam decides to sue. -His suit would be a derivative action. -His suit would be a direct action. -He cannot sue because the board's action was discretionary. -He can sue if he owns five percent or more of the outstanding shares.

His suit would be a direct action.

Gloria acts as a promoter for a corporation to be formed. She contracts with Betty to rent office space for the corporation. The contract is in Gloria's name. -If the corporation is formed, Gloria is automatically relieved of liability. -If the corporation is formed and adopts the contract, Gloria is relieved of liability. - If the corporation is formed and adopts the contract, Gloria is liable unless a novation is given. - The corporation is liable. Gloria has no liability.

If the corporation is formed and adopts the contract, Gloria is liable unless a novation is given

Which statement about a corporation is false? - Its stock is generally freely transferable. - Shareholders generally enjoy limited liability. - It is always considered to be a person. - It has centralized management.

It is always considered to be a person.

Dividends paid out of the net current earnings and those of the immediately preceding year, both years taken as a single period, even if the balance sheet shows a negative earned surplus are known as -Preferred dividends -Cumulative dividends -Nimble dividends -None of the above

Nimble dividends

Which statement is true? - Par value stock may be sold for any price the directors establish. - No par stock generally has its value established in the articles of incorporation. - Participating shares provide for further dividend distributions after the preferred dividend is paid. - Redeemed shares are usually not allowed to be reissued unless the articles allow reissuance.

Participating shares provide for further dividend distributions after the preferred dividend is paid.

Prohibits states from discriminating against non-citizens

Privileges and Immunities clause

Richard is a director of RBA Corporation. He is sued for negligently performing his duties as a director. The suit is a derivative action. Under the RMBCA -The corporation must reimburse Richard whether he is found to be negligent or not. -The corporation may pay a fine but can not pay attorney's fees. - The corporation can indemnify Richard if he is found negligent, with court approval. -Whether Richard is found negligent or not is irrelevant to the issue of indemnification.

The corporation can indemnify Richard if he is found negligent, with court approval.

Shareholders may successfully seek judicial dissolution of a corporation for all of the following reasons except -The corporation is not very profitable -The shareholders are deadlocked and unable to elect directors -The directors are deadlocked and the company is being irreparably injured and the shareholders are unable to break the deadlock -Corporate assets are being misapplied

The corporation is not very profitable

Which of the following is not a normal right of a common stockholder? -The right to ratable participation in earnings. -The right to ratable participation in the distribution of net assets on liquidation. -Preemptive rights. -The right to cumulative dividends.

The right to cumulative dividends.

A merged company goes out of existence, whereas a company which sold its assets does not necessarily terminate (TF)

True

A stock purchaser may pay for his stock in something other than cash. (TF)

True

A subchapter S corporation can avoid double taxation. (TF)

True

Chapter 11 of the Bankruptcy Reform Act concerns reorganization. (TF)

True

Corporations are liable for the torts of agents, while the agent is in the scope of employment. (TF)

True

Corporations can be discriminated against by states based upon whether the corporation is foreign or domestic. (TF)

True

Generally, preferred shares of stock do not have voting rights. (TF)

True

Officers are removed by the board of directors, while directors are removed by the shareholders (TF)

True

Once a statement of intent to dissolve is filed with the secretary of state, a corporation cannot carry on its business, except to wind up its affairs. (TF)

True

The RMBCA provides that the articles of incorporation may decree a quorum for shareholder meetings, but it may not be less than one-third of the total shares. (TF)

True

The right to buy stock to prevent dilution of other normal rights

preemptive right