BUL QUIZ 11 Bailey

A shareholder has 120 days after dissenting from a merger to change his or her mind and keep the stock. True False

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. 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. True False

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 have no personal liability for illegally declared dividends. 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

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

True

The surviving corporation in a merger assumes the liabilities and obligations of the merged corporation. True False

True

Shareholders are taxed on the value of the stock they receive in stock dividends True False

false

State laws regulating the sale of securities within the state are called blue sky laws. True False

true

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

False

A corporation incorporated in Delaware and doing business in New Jersey is not a foreign corporation in New Jersey. True False

False

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

True

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.

A way of determining the fair value of a shareholder's stock when the shareholder dissents from a merger.

Stock that a corporation buys back from its shareholders is treasury. Most state corporation statutes require that the money to repurchase shares come from Accumulated profits or surplus A special stock subscription A new issue of preferred shares A new issue of debt instruments

Accumulated profits or surplus

Smith's Inc. is a closely held corporation in which Joe Smith is the President and owns 80% of the corporation's stock. The corporation was undercapitalized when it was formed, and for the past seven years Joe has regularly taken funds from the corporate account to pay his own personal expenses and debts. Should Smith's Inc. not have sufficient funds to pay a creditor, the creditor may hold Joe personally liable for the corporation's debt under the _____________theory. Ultra vires Alter ego Oppressive conduct Investment trust

Alter ego

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

Corporate bond holders Have an equity interest in the corporation. Are entitled to receive dividends when dividends are declared. Participate in the distribution of corporate assets when the corporation dissolves. Are entitled to be paid a specified rate of interest for a set period of time.

Are entitled to be paid a specified rate of interest for a set period of time.

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

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

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

Which of the following statements is correct about shareholders' voting rights? Shareholders are entitled to notice when a special meeting is called. A quorum of shareholders must be present to conduct business. A shareholder's vote will be counted only if the shareholder is personally, physically present at the meeting when the vote is take. Both a and b are correct.

Both a and b are correct.

Directors have which of the following fiduciary duties? The duty of loyalty The duty of due care The duty to obey instructions Both a and b are duties of directors

Both a and b are duties of directors

The legal principle that assumes that directors act with due care and in the good faith belief that their actions are in the best interests of the corporation is the ____________________rule. Business judgment Director indemnity Good faith and fair dealing Entire fairness

Business judgment

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 merger of two corporations who are neither competitors nor related as customer and supplier is a _______________merger. Conglomerate Market extension Horizontal Vertical

Conglomerate

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

Conglomerate

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

Creditor-------------Owner

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 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

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

Ex dividend

In a closely held corporation, the majority shareholders have a statutory duty to purchase the stock of a minority shareholder who has died. True False

False

In a consolidation, one corporation (A) assumes the assets and liabilities of another corporation (B), and corporation B ceases to exist. True False

False

In a merger, two or more existing corporations A and B combine so that a third corporation C results. True False

False

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

False

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

Pre-incorporation stock subscriptions are merely offers to purchase stock and are not normally binding on the purchaser. True False

False

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

False

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

False

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

False

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

False

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

False

The articles of incorporation are drawn up at the first organizational meeting of the corporation. True False

False

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

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 bylaws 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

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

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

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. Vertical ---------------------Conglomerate Horizontal----------------Vertical Horizontal----------------Conglomerate Vertical -------------------Horizontal

Horizontal----------------Conglomerate

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 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

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

Oppressive conduct

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

The document that is written evidence of an ownership interest in a corporation is a(n)______________. Stock warrant Charter Stock certificate Proxy statement

Stock certificate

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

Pre-incorporation subscription

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

Preferred

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 Preferred cumulative Common cumulative Preferred participating Preferred non-cumulative

Preferred cumulative

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

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

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

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 _____________. Stock dividend Stock repurchase Stock split Stock subscription

Stock dividend

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

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 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

ABC Corporation has been dissolved. After paying all its creditors, ABC will make a cash distribution to its shareholders. Of the following, which shareholders will have priority in the distribution? Shareholders who own un-exercised warrants. Shareholders who own preferred stock Owners of common stock who had title to the shares 180 days before the last ex-dividend date. All current owners of common stock.

Shareholders who own preferred stock

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

True

Mike owned 10,000 shares in Texas Equipment that had a par value of 10. As part of a financial reorganization, Texas Equipment now records Mike as having 20,000 shares with a par value of 5. This is an example of a _____________. Stock dividend Stock repurchase Ex dividend split Stock split

Stock split

The method of voting for directors in which each shareholder casts as many votes as he or she has shares is the _______________method. Straight Cumulative Derivative Absolute

Straight

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? The responsible corporate officer doctrine The corporate opportunity doctrine The business judgment doctrine The privileges and immunities doctrine.

The corporate opportunity doctrine

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 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.

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

The corporation was formed with the intent of defrauding another party or violating a statute.

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 Equal to The dividend on common stock may be any of the above.

The dividend on common stock may be any of the above.

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.

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.

One method for determining a fair value of the stock of a shareholder who dissents from a proposed merger is the __________________. Promotion of justice rule The 80% rule The weighted average method The ex post facto method.

The weighted average method

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

Treasury

Which of the following statements about treasury stock is false? Treasury stock can be resold only at par value. It is stock that the corporation acquired by gift or by purchasing from shareholders. Most states require that corporations purchase treasury shares only with accumulated profits or surpluses. Creditors of the corporation or the state itself may block the purchase of treasury stock.

Treasury stock can be resold only at par value.

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

True

A corporation officer may be personally liable to the injured third party if he or she aided the corporation in violating a copyright or infringing on a patent. True False

True

A receiver is an officer of the court who takes possession of property involved in a lawsuit for the benefit of the ultimate owner. 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

Corporations normally have the power to make charitable contributions. True False

True

Courts have great discretion in deciding whether to order the dissolution of a corporation when the shareholders or directors are deadlocked. True False

True

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

True

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

Most states consider a shareholder attempt to oust management to be a proper purpose for allowing the shareholders access to corporation books and papers. True False

True

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

True

Once a cash dividend is declared, it becomes a debt of the corporation. True False

True

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

True

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

True

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

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

Which of the following statements about corporate bonds is true? Bond holders are creditors of the corporation Bond holders have the right to vote for directors Bonds pay a stated rate of interest. a and c

a and c

A creditor who succeeds in holding a shareholder liable for the debts of an existing corporation is said to have "pierced the corporate veil." True False

true

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

vertical