Bus 250 Test 3 Schafer Ch. 33 Hypotheticals

Marcus owns common stock in XO, an oil and energy company that is about to be liquidated. Is Marcus guaranteed to be paid in the process of dissolution? a. Yes, because Marcus owns common stock. b. Yes, because owners of common stock are paid first in liquidation. c. No, unless Marcus has voting rights. d. No, unless there are assets remaining after all creditors and preferred stockholders are paid.

D

Zoom-Bot has common stock and cumulative preferred stock shareholders. The company is issuing dividends for the first time in three years. How will the dividend funds be divided by the shareholders? a. All common shareholders will be paid for this year's dividend amount and any remaining funds will go towards the payment of all previously unpaid dividends for preferred shareholders. b. All common shareholders will be paid for all previously unpaid dividends along with this year's dividend amount and any remaining funds will go towards the payment of this year's dividend to cumulative preferred shareholders. c. All cumulative preferred shareholders will be paid for this year's dividend amount and any remaining funds will go towards the payment of all previously unpaid dividends for common shareholders. d. All cumulative preferred shareholders will be paid for all previously unpaid dividends along with this year's and any remaining funds will go towards the payment of this year's dividend to common shareholders.

D

George is president of Plumbers, Inc. He signs a contract with Susan, which calls for Susan to perform some services and receive $10,000. Susan performs, but Plumbers does not pay. Which of the following, if true, will grant Susan the right to recover from George personally? a. George was also the controlling shareholder of Plumbers at the time that the contract was signed. b. George commingled personal assets with corporate assets. c. Plumbers has no insurance. d. Plumbers is a de facto corporation.

B

MegaCorp has five directors and 1,050 shares of voting stock. Jessica would like to purchase enough stock to elect herself to the board of directors. How many shares of MegaCorp stock will Jessica need to own to secure a place on the board of directors? a. 176 shares regardless of the type of voting MegaCorp uses. b. 526 shares if MegaCorp uses cumulative voting and 176 shares if MegaCorp uses regular voting. c. 176 shares if MegaCorp uses cumulative voting and 526 shares if MegaCorp uses regular voting. d. 526 shares if MegaCorp uses regular voting and Jessica cannot own enough shares to guarantee that she can elect a particular candidate to the board under cumulative voting.

C

Michi Corp.'s board of directors has determined that the insolvent company will not be able recover financially and it is best to terminate the corporation. The board unanimously votes to dissolve and makes a recommendation to dissolve to the shareholders, but only 40 percent of the shareholders vote to approve dissolution. The shareholders insist that Michi is simply mismanaged and can be saved if the board appoints a new CEO. May the Michi board request a court to order dissolution of the company? a. Yes, because Michi is insolvent. b. Yes, because Michi's board of directors and shareholders cannot resolve a conflict over corporate management. c. Yes, because a court may dissolve a corporation if it is insolvent or if its directors and shareholders cannot resolve a conflict over corporate management. d. No. The court does not have the power to override a shareholder vote regarding dissolution.

C

The Resolution Trust Corp. (RTC) sued the directors of the Commonwealth Savings Corp. (CSC) seeking to recover from them personally $200 million that the bank lost in bad real estate loans. The directors approved the loans after state and federal regulatory agencies had issued reports criticizing the bank's loan practices, but the loans did not violate any laws. CSC's charter stated that the purpose of the corporation "is to engage in any lawful activity for which corporations may be organized." Under Texas law, RTC could recover for CSC directors' negligence only if their acts were ultra vires. Will RTC be able to recover from the directors? a. Yes, because the directors had reason to believe the loans were not safe. b. Yes, because the CSC's purpose statement is too vague to be upheld in court. c. No, because there is no indication that the board acted without authority or illegally. d. No, if CSC sold the loans in the ordinary course of business.

C

Wayne borrows money from Phyllis, who in good faith represents herself as an agent for Retail Lender, Inc. Wayne learns that Retail was never incorporated due to a significant error in Phyllis' incorporation paperwork. If Phyllis sues to recover the loan amount, can Wayne avoid liability based on the fact that Retail does not exist? a. No, because Retail is a de jure corporation. b. No, because Retail is a de facto corporation. c. No, because Retail is a corporation by estoppel. d. Yes, because Wayne borrowed money from the non-existent Retail, not Phyllis.

C

Denise was a promoter for a proposed corporation, EVR-Young Corp. As promoter, she signed a three-year lease to rent office space from Landlord. She signed her name and indicated below her signature she is signing as "promoter for EVR-Young Corp., a company yet to be incorporated." EVR-Young never files incorporation documents with the state. Is Denise personally liable for the lease? a. Yes, she remains liable as the promoter on a contract for which there has been no novation. b. No, because EVR-Y was never formed. c. No, because Denise was acting as EVR-Y's agent. d. It depends on whether the lessor knew that she was acting as an agent of EVR-Young Corp.

A

Hannah owns non-voting stock shares in Asset Management, Inc., but would like to vote at the next shareholders meeting. What tool could help Hannah gain the authority to vote in shareholder meetings? a. Conversion Rights b. Dividend Rights c. Pre-emptive Rights d. Redemption Rights

A

Isabel, Wesley, Gina, and Lucas worked together intensively to form an environmentally conscious corporation named Icon Corp. They are the only shareholders. Is there anything the group can do to avoid having Icon shares sold to someone who does not share their vision for the environment? a. Yes, they can sign a shareholder agreement. b. Yes, they can convert their shares to a different class of stock. c. No, because once a corporation is formed its shares may be sold freely. d. No, unless they paid more than par value for their shares.

A