BUL CH 14

A bond holder is a _________of the corporation; and a shareholder is a ______of the corporation. a. Owner-----------------Creditor b. Creditor-------------Owner c. Owner----------------Beneficiary d. Beneficiary----------Owner

B

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 ____ . a. Warrant b. Proxy c. Assignment d. Delegation

B

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

B

DEF Corporation, which is incorporated in Maryland, is a ___________corporation in Maryland. a. Foreign b. Domestic c. Alien d. Native

B

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 ____ . a. Super Delegate Dividend b. Stock dividend c. Stock split d. Stock subscription

B

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

B

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

B

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

B

Suits by the state to determine if a corporate charter should be cancelled or forfeited are _______________ proceedings a. Ultra vires b. Quo warranto c. Assessment d. Criminal

B

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. a. Watered b. No par c. Par value d. Preferred

B

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

B

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. a. Proxy b. Cumulative c. Non-cumulative d. Divisible

B

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

B

What is the name of the doctrine that makes it a breach of a director's duty of loyalty to take for himself a business prospect that should have been offered to the corporation? a. The responsible corporate officer doctrine b. The corporate opportunity doctrine c. The business judgment doctrine d. The privileges and immunities doctrine.

B

The certificate issued by a corporation that gives the owner the right to buy a stated number of shares at a stated price is a __________________. a. Bond b. Stock warrant c. Stock certificate d. Preliminary prospectus

B Stock certificate shows that the person has ownership

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

B (most likely)

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 a. Ultra vires acts b. Quo warranto acts c. Oppressive conduct d. Unfair trade practices

C

Pat agreed to purchase 250 shares of Pamco Company five months before the corporation came into existence. This agreement is an _______________ a. Shareholders trust b. Shareholders proxy c. Pre-incorporation subscription d. Preemptive preference

C

The document that is written evidence of an ownership interest in a corporation is an ____ a. Stock warrant b. Charter c. Stock certificate d. Proxy statement

C

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

C

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. a. Treasury b. Watered c. Par value d. No par value

C

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

C

Which of the following section of the Uniform Commercial Code governs the sale of securities a. Article 2 b. Article 2A c. Article 8 d. Article 9

C

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

Charter

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

D

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

D

Which of the following situations would justify piercing the corporate veil? a. The majority shareholder loans money to the corporation b. All the shares of a corporation are held by one person c. All the shares of a corporation are held by another corporation. d. The corporation was formed with the intent of defrauding another party or violating a statute.

D

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

D

The corporate merger that raises the greatest number of anti-trust issues is a _________merger; the corporate merger that raises the fewest number of anti-trust issues is a __________merger. a. Vertical ---------------------Conglomerate b. Horizontal----------------Vertical (not this one) c. Horizontal----------------Conglomerate d. Vertical -------------------Horizontal

D???

Directors and shareholders may vote proxy

False SH can, D cannot

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

False; Appraisal?

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

True

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

True

A promoter has a fiduciary responsibility toward the prospective corporation.

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

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

True

Corporations must include the terms "corporation" or "company" or "incorporated" or "limited" in their names.

True

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

True

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

True

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

True

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

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

True

In most states corporations can have perpetual existence.

True

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

True

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

True

Shareholders may dissent from both stock-for-stock mergers and cash-for-stock mergers.

True

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

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

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

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

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

True

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

True

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

True SH can, directors can't

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 Watered stock - stock for which the full par value has not been paid; SH liable for the unpaid amount

Shares that are issued with a face value are

a. Par value shares b. No par shares c. Treasury shares d. Non-certified A

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

A

If a plaintiff shareholder cannot show that a director's decision was made in violation of his duties of loyalty or care, the court will allow the decision to stand under the __________rule. a. Business judgement b. Entire fairness c. Corporate governance d. Unocal

A

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

A

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 ____ . a. By laws b. Articles of incorporation c. Charter d. State incorporation code

A

The stock John owns in DEF Corporation has the following characteristics: the stock is entitled to a specified dividend and, if there are not sufficient earnings to pay the dividend, the dividends accrue and are paid when earnings are available. This stock is classified as a. Preferred cumulative b. Common cumulative c. Preferred participating d. Preferred non-cumulitive.

A

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. a. Alter ego b. Ultra vires c. Quo warranto d. Promotion of justice

A

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. a. Blue sky b. Asset protection c. Investment trust d. White knight

A

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

A

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

A

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

False

A shareholder's desire to discover why a dividend was not paid is not a "proper purpose" for allowing the shareholder access to the corporation's records.

False

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

False

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

False

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

False

Directors must be compensated for their services

False

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

False

Participating preferred stock allows holders to trade their preferred shares for common shares when the trading price reaches a specified target.

False

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

False

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

False

Shareholders have virtually unrestricted access to corporate books and records

False

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

False