LGS 200 Chapter 16
D. the name and address of each incorporator
According to the RMBCA, the articles of incorporation must include which of the following? A. regulations of the affairs of the corporation B. the purpose or purposes for which the corporation is organized C. the period of duration of the corporation D. the name and address of each incorporator E. the limitation or regulation of the powers of the corporation
business judgment
According to the _____ rule, directors and officers are not liable to the corporation or its shareholders for honest mistakes of judgment.
parent; subsidiary
After a share exchange, one corporation (the _____ corporation) owns all the shares of the other corporation (the _____ corporation).
merger
A _____ occurs when one corporation is absorbed into another corporation
Domestic corporation
A corporation doing business in the state in which it was formed
S Corporations
A corporation that has met certain requirements and has elected to be taxed as an _____ for federal income tax purposes -Pays no federal income tax at the corporate level -Income or loss flows to the shareholders and must be reported on the shareholders' individual income tax returns
Corporate bylaws
A detailed set of rules adopted by the board of directors after a corporation is incorporated that contains provisions for managing the business and the affairs of the corporation
Dividend
A distribution of profits of the corporation to shareholders
Piercing the corporate veil
A doctrine that says if a shareholder dominates a corporation and uses it for improper purposes, a court of equity can disregard the corporate entity and hold the shareholder personally liable for the corporation's debts and obligations
Duty of care
A duty of corporate directors and officers to use care and diligence when acting on behalf of the corporation
Duty of loyalty
A duty that directors and officers have not to act adversely to the interests of the corporation and to subordinate their personal interests to those of the corporation and its shareholders
Limited liability of shareholders
A general rule of corporate law which provides that generally shareholders are liable only to the extent of their capital contributions for the debts and obligations of the corporation and are not personally liable for the debts and obligations of the corporation
Shareholders meetings
A meeting of the shareholders of a corporation that must be held by the corporation to elect directors and to vote on other matters (Annual / Special / Proxy)
Organizational meeting
A meeting that must be held by the initial directors of a corporation after the articles of incorporation are filed
transnational
A multinational corporation is also known as a(n) _____ corporation.
Board of Directors
A panel of persons who are elected by shareholders to make policy decisions concerning the operation of a corporation
Registered agent
A person or corporation that is empowered to accept service of process on behalf of a corporation
Common stockholder
A person who owns common stock
Supramajority voting requirement
A requirement that a greater than majority of shares constitutes a quorum of the vote of the shareholders
exchange
A share _____ is a situation in which one corporation acquires all the shares of another corporation, and both corporations retain their separate legal existence.
corporation
Characteristics of a _____: -Free transferability of shares -Perpetual existence -Centralized management -Limited liability of shareholders
Indenture Agreement
Contract between the corporation and a holder of a debt security
minority
Cumulative voting gives a _____ shareholder a better opportunity to elect someone to the board of directors.
Corporate Officers
Employees of a corporation who are appointed by the board of directors to manage the day-to-day operations of the corporation
Common / Preferred
Equity securities can be: -_____ stock -_____ stock
Preferred Stock
Equity security that is given certain preferences and rights over common stock
registered agent
If someone is suing a corporation, the complaint and summons is typically served on the corporation's _____.
D. a cabinet
Most corporations have a minimum of all of the following officers EXCEPT _________. A. a president B. a secretary C. one or more vice presidents D. a cabinet E. a treasurer
charter
The articles of incorporation are also referred to as the corporate _____.
supramajority
The articles of incorporation or the bylaws of a corporation can require a greater than majority of the shares to constitute a quorum of the vote of the shareholders. This is called a _____ voting requirement.
Articles of incorporation
The basic governing documents of a corporation, which must be filed with the secretary of state of the state of incorporation
resolutions
The board of directors authorizes actions to be taken on behalf of the corporation by adopting _____ at board of directors' meetings.
true
true or false regarding corporate voting requirements? At least one class of shares of stock of a corporation must have voting rights.
true
true or false regarding corporate voting requirements? Only shareholders who own stock as of a set date may vote at a shareholders' meeting.
true
true or false regarding corporate voting requirements? The RMBCA permits corporations to grant more than one vote per share to some classes of stock and less than one vote per share to other classes of stock.
false
true or false regarding corporate voting requirements? The record date is set forth in the corporation's articles of organization.
true
true or false regarding corporate voting requirements? The record date may not be more than 70 days before the shareholders' meeting.
true
true or false regarding corporate management? A corporation usually has a centralized management.
false
true or false regarding corporate management? A corporation usually has a decentralized management.
true
true or false regarding corporate management? Management of a corporation usually consists of a board of directors and officers of the corporation.
true
true or false regarding corporate management? The board of directors makes policy decisions concerning the operation of a corporation.
true
true or false regarding corporate management? The members of the board of directors are elected by the shareholders.
true
true or false regarding corporate shareholders? As separate legal entities, corporations are liable for their own debts and obligations.
false
true or false regarding corporate shareholders? Generally, shareholders have unlimited liability for corporate debts.
true
true or false regarding corporate shareholders? Shareholders do not have personal liability for the corporation's debts.
true
true or false regarding corporate shareholders? The limited liability of shareholders is a general rule of corporate law.
true
true or false regarding corporate shareholders? The limited liability of shareholders means that they are liable only to the extent of their capital contributions.
false
true or false regarding incorporation procedure? A corporation can be in incorporated in more than one state.
true
true or false regarding incorporation procedure? Delaware is considered a state with laws favorable to the internal operations of corporations.
true
true or false regarding incorporation procedure? In choosing a state for incorporation, the incorporators must consider the corporation law of the states under consideration.
true
true or false regarding incorporation procedure? Large corporations generally opt to incorporate in the state with the laws that are most favorable to the corporation's internal operations.
true
true or false regarding incorporation procedure? Most corporations choose the state in which the corporation will be doing most of its business as the state for incorporation.
false
true or false regarding the duration of a corporation's existence? Corporations automatically expire twenty (20) years after the secretary of state's issuance of a certificate of incorporation unless the owners of the corporation expressly petition the secretary of state for a renewal of the corporate charter.
true
true or false regarding the duration of a corporation's existence? Corporations exist in perpetuity unless a specific duration is stated in a corporation's articles of incorporation.
true
true or false regarding the duration of a corporation's existence? The bankruptcy of an officer of a corporation does not affect a corporation's existence.
true
true or false regarding the duration of a corporation's existence? The death of a shareholder does not affect a corporation's existence.
true
true or false regarding the duration of a corporation's existence? The existence of a corporation may be voluntarily terminated by the shareholders.
false
true or false regarding shareholders' meetings? Annual shareholders' meetings must be held at the times fixed in the articles of organization.
true
true or false regarding shareholders' meetings? Any act that can be taken at a shareholders' meeting can be taken without a meeting if all the corporate shareholders sign a written consent approving the action.
true
true or false regarding shareholders' meetings? Special shareholders' meetings may be called by the board of directors.
true
true or false regarding shareholders' meetings? Special shareholders' meetings may be called by the holders of at least 10 percent of the voting shares of the corporation.
true
true or false regarding shareholders' meetings? Special shareholders' meetings may be held to consider important emergency issues such as merger or consolidation of the corporation with one or more other corporations.
true
true or false statement regarding corporate bylaws? Bylaws do not have to be filed with any government official.
true
true or false statement regarding corporate bylaws? In addition to the articles of incorporation, corporations are governed by their bylaws.
true
true or false statement regarding corporate bylaws? The bylaws are much more detailed than are the articles of incorporation.
true
true or false statement regarding corporate bylaws? The bylaws govern the internal management structure of a corporation.
false
true or false statement regarding corporate bylaws? Incorporators, not the initial directors, can adopt the bylaws of the corporation.
false
true or false? Corporations are not separate legal persons.
true
true or false? Corporations can be held civilly and criminally liable for violations of law.
true
true or false? Corporations can enter into and enforce contracts.
true
true or false? Corporations can hold title to and transfer property.
true
true or false? Corporations can sue or be sued in their own names.
true
true or false? The board of directors have authority over control of the corporation.
true
true or false? The board of directors have authority over formulating policy decisions that affect the management.
true
true or false? The board of directors have authority over operation of the corporation.
true
true or false? The board of directors have authority over supervision of the corporation.
false
true or false? The board of directors have authority over voting rights.
false
true or false? The duty of care is not a fiduciary duty.
true
true or false? The duty of care requires corporate directors and officers to use care and diligence when acting on behalf of the corporation.
true
true or false? The goals of the Sarbanes-Oxley Act (SOX) of 2002 include eliminate conflicts of interest.
true
true or false? The goals of the Sarbanes-Oxley Act (SOX) of 2002 include improve corporate governance rules.
true
true or false? The goals of the Sarbanes-Oxley Act (SOX) of 2002 include instill confidence in investors that management will run public companies in the best interests of all constituents.
true
true or false? The goals of the Sarbanes-Oxley Act (SOX) of 2002 include instill confidence in the public that management will run public companies in the best interests of all constituents.
false
true or false? The goals of the Sarbanes-Oxley Act (SOX) of 2002 include replace independent corporate audits with internal audits.
true
true or false? To meet the duty of care, directors and officer must discharge their duties in a manner they reasonably believe to be in the best interests of the corporation.
true
true or false? To meet the duty of care, directors and officer must discharge their duties in good faith.
true
true or false? To meet the duty of care, directors and officer must discharge their duties with the care that an ordinary prudent person in a like position would use under similar circumstances.
C
A(n) _____ corporation is a corporation that does not qualify to or does not elect to be federally taxed as an S corporation.
promotor
A(n) _____ is a person who organizes and starts a corporation, negotiates and enters into contracts in advance of its formation, and finds the initial investors to finance the corporation.
proxy
A(n) _____ is a written document signed by a shareholder that authorizes another person to vote the shareholder's shares.
Corporations
_____ are the most dominant form of business organization in the United States, generating more than 85 percent of the country's gross business receipts.
Delaware
_____ has the most advanced corporation law in the United States.
Annual
_____ shareholders' meetings are held to elect directors, choose an independent auditor, and take other actions.
Cumulative
_____ voting is a system in which a shareholder can accumulate all of his or her votes and vote them all for one candidate or split them among several candidates.
business judgment
After conducting considerable research and investigation, the directors of a major automobile company decide to produce large and expensive sport-utility vehicles (SUVs). Three years later, when the SUVs are introduced to the public for sale, few of them are sold because of the public's interest in buying smaller, less expensive automobiles due to an economic recession and an increase in gasoline prices. In this case, the directors are protected by the _____ rule.
Common Stock
An equity security that represents the residual value of a corporation
Issued shares
Authorized shares that have been sold by a corporation
tender
A _____ offer is an offer that an acquirer makes directly to a target corporation's shareholders in an effort to acquire the target corporation.
chancery
Delaware has a special court—the court of ____—that hears and decides business cases.
Shareholders
Owners of a corporation who elect the board of directors and vote on fundamental changes in the corporation
shareholders
Owners of corporations are called _____.
Equity securities:
Representation of ownership rights in a corporation
Debt Securities
Securities that establish a debtor-creditor relationship in which the corporation borrows money from the investor to whom a _____ is issued
limited
Shareholders of a corporation generally have _____ liability for the debts and obligations of the corporation.
Cumulative voting
Shareholders: A system in which a shareholder can accumulate all of his or her votes and vote them all for one candidate or split them among several candidates
Straight voting
Shareholders: A system in which each shareholder votes the number of shares he or she owns on candidates for each of the positions open
Corporation codes
State statutes that regulate the formation, operation, and dissolution of corporations
Only Experimental Vehicle Corporation is liable.
Suppose American Hover Car Company, a U.S. corporation incorporated under the laws of Delaware, forms a subsidiary corporation called Experimental Vehicle Corporation, an Indian corporation formed under the laws of India, to develop and test hover cars in India. American Hover Car Company is the parent corporation, and Experimental Vehicle Corporation is the subsidiary corporation. If an employee of Experimental Vehicle Corporation negligently injures an Indian citizen while on a test drive, what is the liability?
hostile; offeror; target
Suppose that Technology Incorporated wants to acquire Digital Corporation. Technology Incorporated makes a tender offer directly to the shareholders of Digital Corporation to acquire their shares of Digital Corporation. This is a _____ tender offer in which Technology Incorporated is the tender _____ and Digital Corporation is the _____ corporation.
business judgment
Suppose that after conducting considerable research and investigation, the directors of a major automobile company decide to produce large and expensive sport-utility vehicles (SUVs). Three years later, when the SUVs are introduced to the public for sale, few of them are sold because of the public's interest in buying smaller, less expensive automobiles due to an economic recession and an increase in gasoline prices. Because this was an honest mistake of judgment on the part of corporate management, their judgment is shielded by the _____ rule.
Jaime, Madara, and Jose each lose their initial investment of $100,000.
Suppose Jaime, Madara, and Jose form IT Inc., a corporation, and each contributes $1,000,000 capital. The corporation borrows $1 million from State Bank. One year later, IT Inc. goes bankrupt and defaults on the $1 million loan owed to State Bank. At that time, IT Inc.'s only asset is $50,000 cash, which State Bank recovers. What are the financial implications for Jaime, Madara, and Jose have?
piercing the corporate veil
The doctrine of _____ is often used by unpaid creditors who are trying to collect from shareholders a debt owed by the corporation.
Fiduciary Duties of Directors and Officers
The duties of care and loyalty owed by directors and officers to their corporation and its shareholders
loyalty
The duty of _____ is a duty that directors and officers have not to act adversely to the interests of the corporation and to subordinate their personal interests to those of the corporation and its shareholders.
Sarbanes-Oxley Act
The goals of the _____ are to improve corporate governance rules, eliminate conflicts of interest, and instill confidence in investors and the public that management will run public companies in the best interests of all constituents
they are liable only to the extent of their capital contributions
The limited liability of shareholders means that ________.
Quorum
The number of directors necessary to hold a board meeting or transact business of the board
Authorized shares
The number of shares provided for in a corporation's articles of incorporation
authorized
The number of shares provided for in the articles of incorporation is called ____________ shares.
noncumulative
The straight voting method is also referred to as _____ voting.
B. The subsidiary corporation is organized under the laws of the home country.
Which of the following is an INCORRECT statement regarding an international subsidiary corporation? A. A subsidiary corporation is a separate legal entity. B. The subsidiary corporation is organized under the laws of the home country. C. The parent corporation usually owns all or the majority of the subsidiary corporation. D. A multinational corporation can conduct business in another country by using an international subsidiary corporation. E. There is a liability shield between the parent corporation and its international subsidiary corporation.
C. A corporation has the same identity as its shareholders.
Which of the following is an INCORRECT statement regarding the corporation as a legal person? A. A corporation can sue in its own name. B. A corporation can be found criminally liable for violations of law. C. A corporation has the same identity as its shareholders. D. A corporation can hold title to property. E. A corporation can enter into contracts.
straight
Unless otherwise required by a corporation's articles of incorporation or by corporate law, voting for the election of directors is by the _____ voting method.
Debenture / bond / note
What are the three classifications of debt securities?
E. same identity as owner(s)
Which of the following is NOT a characteristic of a corporation? A. perpetual existence B. free transferability of shares C. centralized management D. separate legal entity E. same identity as owner(s)
C. shareholder liability
Which of the following is NOT a major provision of the Sarbanes-Oxley Act? A. CEO certification B. reimbursement of bonuses C. shareholder liability D. prohibition on personal loans E. penalties for tampering with evidence
E. "sliding-scale" cap on nominal damages
Which of the following is NOT a major provision of the Sarbanes-Oxley Act? A. CFO certification B. reimbursement of incentive pay C. bar from acting as a director D. bar from acting as an officer E. "sliding-scale" cap on nominal damages
C. issuing new shares of stock
Which of the following is NOT a transaction approved by the board of directors that requires a shareholder vote? A. amending the articles of incorporation B. sale of substantially all of the corporation's assets outside the course of ordinary business operations C. issuing new shares of stock D. voluntary dissolution of the corporation E. merger
D. ultra vires
Which of the following is NOT a type of officer authority? A. express B. those given in the bylaws C. implied D. ultra vires E. apparent
a director's or an officer's failure to realize a profit for the corporation in any given calendar or fiscal year
Which of the following is NOT an example of a breach of a director's or officer's duty of care? A. a director's or an officer's failure to realize a profit for the corporation in any given calendar or fiscal year B. a director's or an officer's failure to keep adequately informed about corporate affairs C. a director's or an officer's failure to attend board meetings on a regular basis D. a director's or an officer's failure to make a reasonable investigation of a corporate matter E. a director's or an officer's failure to properly supervise a subordinate who causes a loss to the corporation through embezzlement and such
D. The same individual may NOT simultaneously hold more than one office in the corporation.
Which of the following is NOT true about corporate officers? A. The duties of each officer are specified in the bylaws of the corporation. B. Officers have the express authority granted to them, as well as implied authority and apparent authority, to bind a corporation to contracts. C. The bylaws or the board of directors can authorize duly appointed officers the power to appoint assistant officers. D. The same individual may NOT simultaneously hold more than one office in the corporation. E. The same individual may simultaneously hold more than one office in the corporation.
C. A merger occurs when one corporation is absorbed into another corporation.
Which of the following is a correct statement regarding a merger? A. The corporation that continues to exist is called the merged corporation. B. The shareholders of the merged corporation do not receive stock or securities of the surviving corporation. C. A merger occurs when one corporation is absorbed into another corporation. D. The surviving corporation gains none of the rights, privileges, powers, duties, obligations, or liabilities of the merged corporation. E. The corporation that ceases to exist is called the suspended corporation.
C. Today, most corporations are formed pursuant to general corporation laws of the federal government.
Which of the following is an INCORRECT statement regarding corporations? A. Corporations are the most dominant form of business organization in the United States. B. Owners of corporations are called shareholders. C. Today, most corporations are formed pursuant to general corporation laws of the federal government. D. Corporations generate more than 85 percent of the country's gross business receipts. E. Corporations range in size from one owner to thousands of owners.
B. A corporation cannot be voluntarily dissolved.
Which of the following statements about voluntary dissolution is NOT true? A. If the corporation has not commenced business or issued any shares, it may be dissolved by a vote of the majority of the incorporators or initial directors. B. A corporation cannot be voluntarily dissolved. C. For a voluntary dissolution to be effective, articles of dissolution must be filed with the secretary of state of the state of incorporation. D. A corporation is dissolved on the effective date of the articles of dissolution. E. A corporation can be voluntarily dissolved if the board of directors recommends dissolution and a majority of shares entitled to vote (or a greater number, if required by the articles of incorporation orbylaws) votes for dissolution as well.
Closely held
_____ corporation: A corporation owned by one or a few shareholders
Publicly held
_____ corporation: Has many shareholders - securities are usually traded on national stock exchanges
Revised Model Business Corporation Act
_____: A 1984 revision of the MBCA -Arranges the provisions of the act more logically -Revises the language to be more consistent -Makes substantial changes in the provisions
