BLaw Chapter 33

Corporate stock can be divided into categories called __________, which can be further divided into ___________. a) authorized shares, classes b) classes, series c) equity, assets d) debentures, classes

b

Which of the following statements is correct? a) bonds are long-term debt secured by company assets b) debentures are long-term unsecured debt c) notes are short-term debt and may be secured or unsecured d) all the above are correct

d

A corporate charter is filed with: a) a state's Secretary of State office b) a state's Treasury and/or Revenue Division c) The United States Department of Commerce d) all the above

a

Fashions, Inc. has 12 shareholders. There is no shareholder agreement concerning the board of directors. The company is subject to the Model Act. How many directors is Fashions, Inc. required to have? a) none b) one c) two d) five

a

In incorporating E-prise, the promoter gave an incorrect ZIP Code for the registered agent. All of the other requirements for incorporation were met. E-prise is a(n): a) de jure corporation b) de facto corporation c) corporation by estoppel d) indemnified corporation

a

Incorporation protects: a) shareholders against personal liability for the debts of the company b) anyone involved in management of the business against personal liability for wrongdoing c) the public from wrongdoing by either the shareholders or the management of the corporation d) all of the above are correct

a

Mike is planning on incorporating his business in the state of Delaware. The corporate name of Mike's business must be different from: a) that of any corporation that already exists in Delaware b) that of any limited liability company in Delaware c) the name of any sole proprietorship in Delaware d) all of the above

a

The officers of a corporation are: a) chosen by the board of directors b) appointed by the president of the company c) elected by shareholders d) appointed by the Secretary of State

a

Under most state statutes, a corporation may: a) include in its charter a provision indemnifying directors unless they have engaged in intentional misconduct or bad faith b) include in its charter a provision indemnifying directors under any circumstances in the conduct of their duties for the corporation c) not include in its charter a provision indemnifying directors who engage in negligent conduct of their duties d) not include in its charter any provisions regarding indemnification of directors

a

MegaCorp is incorporated under Delaware law. It is registered to do business in New York. Legally, in New York MegaCorp is known as what kind of corporation? a) domestic b) foreign c) alien d) cumulative

b

MegaCorp occasionally sells products in Michigan. It does not have an office in that state and does not advertise in Michigan. The company's marketing representatives are based in New York but do travel to Michigan once a year to attend a trade show. Which statement is correct? a) MegaCorp must register in Michigan because its sales representatives attend a trad show in Michigan. b) MegaCorp is not required to register in Michigan because it does not have an on going presence in Michigan c) MegaCorp must register in Michigan because its actions qualify as doing business d) Whether MegaCorp has to register in Michigan depends on where its shareholders reside

b

Preemptive rights are: a) not legal in the majority of states b) designed to prevent dilution of a shareholder's ownership in the company c) required to be offered to shareholders by the Model Act d) designed to indemnify managers who act in good faith

b

What is meant by the term "piercing the corporate veil?" a) corporate directors and/or officers may be held personally liable to a person damaged by an act of the corporation b) corporate shareholders may be held personally liable to a person damaged by an act of the corporation c) both of the above d) none of the above

b

MegaCorp is incorporated in the state of Delaware and is registered only in Delaware. Jolene purchased a MegaCorp product from a company's sales representative following a presentation in Michigan. Jolene was seriously injured by the product in Michigan. Under the Model Act, if Jolene sues in Michigan, can MegaCorp defend the suit there? a) MegaCorp may only defend against a lawsuit in Michigan if it first registers by paying back fees, taxes, and penalties b) Yes, MegaCorp can bring or defend against a lawsuit in any state regardless of whether the corporation is registered to business in that state c) Yes, MegaCorp can defend against a lawsuit in Michigan regardless of whether MegaCorp is registered to do business in that state d) No. Jolene must sue and MegaCorp may defend a lawsuit only in Delaware

c

MegaCorp purchased 10,000 shares of its own stock that had previously been owned by private investors. The stock MegaCorp repurchased is called: a) authorized and unissued b) authorized and issued c) treasury stock d) repurchased stock

c

Once a provision is in the corporate charter, it can only be changed by: a) a vote of the shareholders b) filing an amendment with the Secretary of State c) Both a and b are necessary to change a corporate charter d) neither a nor b is necessary to change a corporate charter. The board of directors merely needs to file a change of charter form

c

The executives of Jornaginn Corporation have decided they need to sell 50,000 additional shares of stock to finance their expansion plans. The executives: a) cannot sell that many shares unless they were authorized initially in the corporate charter b) can sell as many shares as the market will bear c) are limited by the number of shares authorized in the corporate charter, but this number can be increased by amending the charter and paying a fee d) can sell the shares only if the shares have a par value which is close to the current market price

c

Wizardry Corporation's purpose clause in its charter states, "To operate a home-cleaning service business." After a few years of successful operation, Wizardry is offered the challenge of landscaping a neighboring business. If Wizardry accepts the offer, it would be violating its charter under: a) the de jure doctrine b) the de facto doctrine c) the ultra vires doctrine d) an estoppel theory

c

In Delaware, lawsuits involving corporations are tried in a special court called: a) corporate court b) CEO's court c) common court d) chancery court

d

Carey decided to incorporate her business under the name yStar Inc. Before yStar was incorporated, Carey signed a contract in the name of yStar, Inc. to have some office space remodeled. Which statement is correct? a) yStar is liable on the contract because the contract was signed in its name b) yStar becomes liable on the contract as soon as it is incorporated c) yStar is liable on the contract if the contractor knows that the corporation does not yet exist d) yStar will be liable on the contract only if the corporation adopts the contract

d

Defining a corporation with such information as the corporate name, the number and type of authorized shares of stock, identification of the purpose and the agent, is done through the: a) charter b) articles of incorporation c) certificate of organization d) All of the above. All of these terms are used to identify the same document.

d

Fashions, Inc. has 12 shareholders. The company is subject to the Model Act. What officers is Fashions, Inc. required to have? a) a president, secretary, and treasurer b) a president and a secretary, and they can be the same person c) a president, at least one vice-president, a secretary, and a chief financial officer d) whatever officers are described in the corporate bylaws

d

Hank owns 100 shares of cumulative preferred stock in Wayside Transport, Inc. Kelsey owns 50 non-cumulative preferred shares, and Oleg owns 120 shares of common stock. Wayside does not pay dividends in 2007. In 2009: a) Hank and Kelsey must receive their 2009 dividends before Oleg is paid any 2009 dividends b) Oleg cannot receive any 2009 dividends until Hank is paid for the 2007 dividends c) Kelsey cannot receive the dividends Wayside could not afford to pay in 2007. She will just lose them d) All of the above

d

Laurie is incorporating her business. Laurie's home state is Wisconsin. Business will be conducted in California, Michigan, Pennsylvania, and Virginia. Laurie : a) must incorporate the business in Wisconsin, the home state b) must incorporate the business in Wisconsin, California, Michigan, Pennsylvania and Virginia c) must incorporate in Delaware d) can incorporate the business in any state

d

The directors of MegaCorp learn that an outsider is planning on buying enough voting stock to get herself elected to the board of directors. MegaCorp, which has cumulative voting, quickly puts together a vote of shareholders to eliminate the company's cumulative voting procedure. The shareholders vote to do away with cumulative voting. The outsider, Dawn, who wanted to get herself elected to MegaCorp's board, claims that the company has committed an illegal act. Is she right? a) Yes. The US Supreme Court has ruled that a publicly held corporation that purposefully sets about to eliminate cumulative voting to prevent a person from getting herself elected to the board has acted illegally b) Yes, but only if the company is incorporated in a state that has adopted the Model Act c) No, provided the company did not change its cumulative voting provision solely from the purpose of preventing a particular person from taking advantage of that right d) No. Under the Model Act, regardless of MegaCorp's motives, it had the right to act as it did

d