Unit 14 Chapter 30 & 31

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

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 Ultra vires Quo warranto Promotion of justice

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

State statutes that govern the sale of investment securities within the state are known as ___________laws. Blue sky Red herring Asset protection Investment trust

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 Articles of incorporation Charter State incorporation code

By laws

The document that the state issues evidencing that a corporation has been duly formed is the corporation's ____ . By laws Articles of incorporation Charter Certificate of authority to do business

Charter

The combination of two corporations that results in the dissolution of both corporations and the emergence of a new corporation is an ____ . Merger Consolidation Purchase of assets Bulk Transfer

Consolidation

Minority shareholders have the best chance of electing directors in a corporation that uses the ____ method of voting. Proxy Cumulative Non-cumulative Straight

Cumulative

Preferred stock whose unpaid dividends accrue and are paid when earnings are available is __________________ preferred stock. Participating Non-participating Cumulative Convertible

Cumulative

The method of voting that gives minority shareholders the best chance of electing someone to the board of directors is ______________ voting. Cumulative Consolidated Proxy Supermajority

Cumulative

The suit that a shareholder would bring against the officers of a corporation to enjoin ultra vires acts or acts that impair corporate assets is a __________suit. Direct Derivative Proxy Peremptory

Derivative

DEF Corporation, which is incorporated in Maryland, is a ____ corporation in Maryland. Foreign Domestic Alien Native

Domestic

The person appointed by a corporation to receive service of process is the receiver.

False

Under most state corporation statutes, shareholders are entitled to be paid dividends whenever an earned surplus exists. True False

False

Which of the following is not required for a foreign corporation to get a certificate of authority to do business? File a copy of its Articles of Incorporation with the secretary of state. File a copy of its bylaws with the secretary of state. Have a registered agent and registered office for service of process All of the above are required.

File a copy of its Articles of Incorporation with the secretary of state.

ABC Corporation, which is incorporated in Delaware, has its corporate offices and main manufacturing plant in Ohio. ABC is classified as a _______________corporation in Ohio. Domestic Foreign Native Alien

Foreign

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

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.

Stock that a corporation buys back from its shareholders is ____________. Watered Treasury Recalled Participating

Treasury

A cash dividend is a transfer of retained earnings to capital. True False

True

A corporation is a person for purposes of the due process clauses of the 5th and 14th Amendments. True False

True

A director's duty of care is that of a normally prudent businessperson in the management of his or her own affairs. True False

True

A promoter has a fiduciary responsibility toward the prospective corporation. True False

True

A shareholder who has not fully paid the corporation for an original issue of stock may become liable to a creditor of the corporation for the unpaid balance. True False

True

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 False

True

Boards of directors normally have the power to purchase insurance to indemnify directors who are sued personally for corporation-related actions. True False

True

Directors are fiduciaries of the corporation and may have liability in both contract and tort. True False

True

Directors have personal liability if the corporation fails to withhold social security taxes from employee wages. True False

True

If a directo discovers illegal acticity 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 False

True

In a closely held corporation, shareholders owe each other substantially the same fiduciary duties that partners owe one another. True False

True

In a closely held corporation, shareholders owe each other substantially the same fiduciary duties that partners owe one another. True False

True

In most states corporations can have perpetual existence. True False

True

In most states corporations can have perpetual existence. True False

True

Officers of a corporation are responsible for carrying out the policies set by the board of directors. True False

True

Registered agents have liability on the pre-incorporation contracts of the corporation. True False

True

Shareholders are entitled to notice when a special meeting is called. True False

True

Shareholders have a right to vote on major changes to the corporation, such as mergers and dissolutions. True False

True

Shareholders may vote on matters in which they have a personal interest. True False

True

Some states use the alter ego theory to require corporations to assume liability for contracts negotiated on their behalf by the promoters. True False

True

Some states use the alter ego theory to require corporations to assume liability for contracts negotiated on their behalf by the promoters. True False

True

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 False

True

The agreement to purchase stock in a future corporation is a pre-incorporation subscription. True False

True

The business judgment rule protects directors who are loyal and careful from liability for business decisions that result in loss to the corporation. True False

True

The director's duty of loyalty continues after the director's resignation. True False

True

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

Ultra Vires

The Articles of Incorporation for ABC Corporation specifically forbids the corporation from making personal loans to its officers or directors. Despite this, the board approved a personal loan to the President of the corporation. This action by the board is ______________. Ultra vires Peremptory A Malum in se A Malum prohibitum

Ultra vires

PaperCo makes paper products from recycled materials. If PaperCo acquires the recycling plant from which it buys most of its raw materials, the acquisition would be a ______________merger. Horizontal Vertical Conglomerate Market product extension

Vertical

The merger of a corporation with one of its suppliers is a _____________merger. Conglomerate Market extension Horizontal Vertical

Vertical

Alice bought 10,000 shares of ABC Corporation that had a par value of 10 a share. To pay for her shares, Alice gave ABC 45,000 in cash and a piece of real property that she said was worth 55,000. In fact, the land appraised for only 20,000. The stock that Alice bought from ABC Corporation is ______________ stock. Treasury Watered Non-par Non-participating

Watered

Courts will not allow a merger of corporations if the only purpose is to get rid of minority shareholders.

true

The party who signs the application for a corporate charter is the incorporator.

true

The merger of two businesses in the same field that reduces the number of competitors is a _________________merger Conglomerate Vertical Horizontal Consolidation

Horizontal

The merger that creates the greatest number of antitrust issues is a ____ merger. Conglomerate Horizontal Market extension Vertical

Horizontal

The merger that creates the greatest number of antitrust issues is a _____________merger. Conglomerate Horizontal Market extension Vertical

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 Conglomerate

Horizontal

When ABC Corporation was formed, the directors authorized an issue of 1,250,000 shares at $1,000 a share. These shares are classified as _______________stock. Treasury Watered Par value No par value

Par value

Shares that are issued with a face value are Par value shares No par shares Treasury shares Non-certificated

Par value shares

Shares that are issued with a face value are Par value shares No par shares Treasury shares Non-certified

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 Ultra vires acts Quo warranto acts Oppressive conduct Unfair trade practices

Oppressive conduct

Tom was the minority shareholder in a closely held corporation. Despite massive profits, no dividends were ever declared. The corporation did, however, pay extremely large salaries and bonuses to the officers of the corporation, who were also the majority shareholders. The majority shareholders of this corporation are guilty of _______________. Ultra vires acts Quo warranto acts Oppressive conduct Embezzlement - Wrong

Oppressive conduct

The prerogative of existing shareholders to buy new issues of stock in the same proportion as their current holdings is their ____ right. Buy and sell Redemption Subscription Preemptive

Preemptive

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

Preferred

When a corporation dissolves, holders of ___________ stock have priority in the distribution of corporation assets. Preferred Common Treasury Participating

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 warrant Charter Stock certificate Proxy statement

Stock certificate

In a successful derivative suit, any money awarded in the judgment will go to The corporation The plaintiff shareholder The plaintiff shareholder and the corporation will share the money equally. There can be no award of money because only equitable remedies are available in derivative suits.

The corporation

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.

The "weighted average method" refers to a way of voting for directors that protects the rights of minority shareholders. A way of distributing dividends in closely held corporations A way of determining the fair value of a shareholder's stock when the shareholder dissents from a merger. A way of resolving antitrust issues when competitor corporations merge. - WRONG

?

The dividend that a corporation pays on its common stock must be __________ the dividend that it pays on its preferred stock. Greater than Less than ( WRONG ) Equal to The dividend on common stock may be any of the above.

?

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

?

Which of the following statements about promoters is true? A promoter is allowed to sell property he owns to the corporation if the sale is approved by the board of directors after full disclosure. A promoter is allowed to accept a commission from a third party whose property he sells to the corporation. A promoter cannot be held liable on pre-incorporation contracts with third parties. A Promoter is an agent of the corporation even before the corporation comes into existence.

A promoter is allowed to sell property he owns to the corporation if the sale is approved by the board of directors after full disclosure.

A corporation incorporated in Delaware and doing business in New Jersey is a foreign corporation in New Jersey. True False

False

A director's duty of care under the business judgment rule is a lower standard that that of profesioal negligence. True False

False

A shareholder's right to dissent from a proposed merger and have his shares purchased by the corporation is the right of preemption.

False

Any money recovered in a successful derivative suit belongs to the shareholder who initiated the suit. True False

False

Article 2A of the Uniform Commercial Code governs the sale of securities. True False

False

Both shareholders and directors may vote by proxy. True False

False

Courts will allow creditors to pierce the corporate veil of any corporation that has only one shareholder. True False

False

Directors and shareholders may vote by proxy. True False

False

Directors may vote on matters in which they have a personal interest. True False

False

Directors must be compensated for their services. True False

False

Once a corporation has been dissolved and the remaining assets of the corporation have been distributed to the shareholders, a creditor of the corporation may be able to sue the former shareholders on the corporate debt. True False

False

Partnerships are required to give notice to creditors when they dissolve, but corporations are not required to give notice of their dissolution. True False

False

Shareholders have virtually unrestricted access to corporate books and records True False

False

State laws regulating the sale of securities within the state are called red herring laws.

False

Stock that is issued and then repurchased by a corporation is watered stock.

False

Stock warrants are not transferable and cannot be sold on any stock exchange.

False

The merger of two corporations that results in the surviving corporation expanding its products or markets is a _____________merger. Conglomerate Market extension Horizontal Vertical

Market extension

The combination of two corporations that results in the absorption of one corporation into another is a(n) _____________. Merger Consolidation Purchase of assets Bulk transfer

Merger

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. Watered No par Par value Preferred

No par

Stock which has no stated value when it is sold is ____ stock. Watered No par value Par value Restricted

No par value

Preferred stock that is entitled to receive only the stated preferred dividend and no other is ____ preferred stock. Participating Non-participating Cumulative Non-cumulative

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 an ____ . Warrant Proxy Assignment Delegation

Proxy

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

Quo warranto

The person who is designated to receive notices and service of process for a corporation is its General agent Special agent Registered agent Factor

Registered agent

What happens when a court pierces the corporate veil? Shareholders become personally liable for the debts of the corporation. The court revokes the corporate charter. The promoter becomes liable for the debts of the newly formed corporation The court requires that the corporation be more substantially capitalized.

Shareholders become personally liable for the debts of the corporation.

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.