BUL3310 Unit 14 Quiz

Which of the following section of the Uniform Commercial Code governs the sale of securities Article 2 Article 2A Article 8 Article 9

Article 8

The theory under which courts pierce the corporate veil of corporations whose shareholders do not treat the corporation like a separate legal identity is the ____ theory.

Alter ego

A shareholder who dissents from a merger is entitled to Be paid the fair value of her stock Revoke her dissent within 10 days of the stock appraisal Sue the board of the surviving corporation in a derivative suit. All of the above are shareholder rights.

Be paid the fair value of her stock

To protect instate investors, most states have statutes regulating the sale of stocks and other securities within the state. These state statutes are referred to as ________________laws. Blue sky Asset protection Investment trust White knight

Blue sky

A director would incur personal liability if The corporation failed to withhold taxes from the wages of employees The board declared an illegal dividend The shares of the corporation lost more than 20 of their market value. Both a and b

Both a and b

The rules that govern the corporation, including the number of directors it will have, the method of electing directors, the time and place of shareholder meetings, etc., are found in the corporation's ____ .

By laws

The document that the state issues evidencing that a corporation has been duly formed is the corporation's ____ .

Charter

The merger that is the least likely to raise antitrust issues is a ___________merger. Conglomerate Horizontal Market extension

Conglomerate

The combination of two corporations that results in the dissolution of both corporations and the emergence of a new corporation is a ____ .

Consolidation

Minority shareholders have the best chance of electing directors in a corporation that uses the ____ method of voting.

Cumulative

The kind of voting that calculates the total number of votes a shareholder may cast by multiplying the number of shares he owns by the number of directors to be elected is _________ voting. Proxy Cumulative Non-cumulative Divisible

Cumulative

DEF Corporation, which is incorporated in Maryland, is a ____ corporation in Maryland.

Domestic

The record date on which a dividend is payable is the ___________date. Proxy Activation Ex dividend Issuance

Ex dividend

T or F: Partnerships are required to give notice to creditors when they dissolve, but corporations are not required to give notice of their dissolution.

False

T or F: Shareholders have virtually unrestricted access to corporate books and records

False

A corporation ceases to exist as a legal entity when The directors vote unanimously to dissolve the corporation The shareholders vote unanimously to dissolve the corporation The directors of the corporation notify corporation creditors of the dissolution. The state issues a certificate of dissolution

The state issues a certificate of dissolution

T of F: Shareholders are entitled to notice when a special meeting is called.

True

T or F: A corporation is a person for purposes of the due process clauses of the 5th and 14th Amendments.

True

T or F: A promoter has a fiduciary responsibility toward the prospective corporation.

True

T or F: A shareholder who holds watered stock is potentially liable to the creditors of the corporation should the corporation become insolvent and unable to meet its obligations.

True

T or F: Boards of directors normally have the power to purchase insurance to indemnify directors who are sued personally for corporation-related actions.

True

T or F: Directors are fiduciaries of the corporation and may have liability in both contract and tort.

True

T or F: If a director discovers illegal activity he or she must report the activity or problem, and if the officers of the corporation refuse to take action, the director must resign and notify the appropriate authorities.

True

T or F: In a closely held corporation, shareholders owe each other substantially the same fiduciary duties that partners owe one another.

True

T or F: In most states corporations can have perpetual existence.

True

T or F: Some states use the alter ego theory to require corporations to assume liability for contracts negotiated on their behalf by the promoters.

True

T or F: States have statutes of limitations limiting the time after the dissolution of a corporation when creditors of the corporation may sue former shareholders on corporate debts.

True

T or F: The agreement to purchase stock in a future corporation is a pre-incorporation subscription.

True

T or F: The business judgment rule protects directors who are loyal and careful from liability for business decisions that result in loss to the corporation.

True

T or F: The director's duty of loyalty continues after the director's resignation.

True

Acts of a corporation that goes beyond the powers granted to it by the state or in its charter are ____ acts.

Ultra Vires

The merger that creates the greatest number of antitrust issues is a ____ merger.

Horizontal

Three major U. S. banks have launched a service to process online electronic payments, creating in the process a major competitor of PayPal's. If the banks were to buy out PayPal in the future, this would constitute a ______________________merger. Horizontal Vertical Market product extension Conglomorate

Horizontal

Shares that are issued with a face value are

Par value shares

Dominant shareholders in closely held corporations who exploit their control of the corporation to benefit themselves at the expense of minority shareholders are guilty of

Oppressive conduct

The prerogative of existing shareholders to buy new issues of stock in the same proportion as their current holdings is their ____ right.

Preemptive

When a corporation dissolves, holders of ____ stock have priority in the distribution of corporation assets.

Preferred

Instead of giving shareholders a cash dividend, ABC Corporation gave each shareholder 2 shares of a new stock issue for each share of stock the shareholder already owned. This is an example of a ____ . Super Delegate Dividend Stock Dividend Stock Split Stock Subscription

Stock Dividend

The document that is written evidence of an ownership interest in a corporation is an ____

Stock certificate

Which of the following are not grounds for a state cancelling a corporation's charter? The corporation has not made a profit in 3 years. The corporation did not pay its franchise tax The corporation failed to maintain a registered agent in the state. The corporation has not performed any corporate functions for a long time.

The corporation has not made a profit in 3 years.

Which of the following would not be grounds for dissolving a corporation? A quo warranto proceeding The shareholders are deadlocked in electing a board of directors. Oppressive conduct by a controlling shareholder. The corporation has not made a profit or declared dividends in two years.

The corporation has not made a profit or declared dividends in two years.

T or F: A promoter is an agent of the corporation.

False

T or F: A shareholder's right to dissent from a proposed merger and have his shares purchased by the corporation is the right of preemption.

False

T or F: Any money recovered in a successful derivative suit belongs to the shareholder who initiated the suit.

False

T or F: Courts will allow creditors to pierce the corporate veil of any corporation that has only one shareholder.

False

T or F: Directors and shareholders may vote by proxy.

False

T or F: Directors may vote on matters in which they have a personal interest.

False

T or F: Directors must be compensated for their services.

False

T or F: Minority shareholders have the best chance of electing someone to the board of directors under the straight method of voting.

False

T of F: A director's duty of care under the business judgment rule is a lower standard that that of professional negligence.

False

Stock which has no stated value when it is sold is ____ stock.

No par value

The board of ABC Corporation approved a new issue of Class B voting stock. The stock has no stated value. This stock is an example of __________________stock.

No par value

Preferred stock that is entitled to receive only the stated preferred dividend and no other is ____ preferred stock.

Non-participating

A shareholder who cannot attend a shareholder meeting may give another person the right to vote her shares in that election. This temporary grant of authority is a ____ .

Proxy

States have the power to cancel or revoke the charters of corporations that engage in illegal activities. These forfeiture hearings are called ____ proceedings.

Quo warranto

The person who is designated to receive notices and service of process for a corporation is its

Registered agent

Which of the following statements about the rights and duties of shareholders is false? Shareholders have virtually unrestricted access to corporate books and records Majority shareholders may have fiduciary duties to minority shareholders in closely held corporations. Shareholders must approve changes to the corporate charter. Shareholders are entitled to notice of the annual meeting and all special meetings.

Shareholders have virtually unrestricted access to corporate books and records

Which of the following is FALSE about the name of a corporation? The name must include words like "company" or "corporation" to indicate that the entity has limited liability. The name cannot be deceptively similar to any other corporation incorporated in that state. The name can never be changed once it is registered with the state. States allow corporations to reserve a name for a limited time while the corporation is being formed.

The name can never be changed once it is registered with the state.