37

According to the​ _____ doctrine, 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.

piercing the corporate veil

Which of the following is an INCORRECT statement regarding corporate voting​ requirements?

The affirmative vote of the majority of the​ non-voting shares represented at a​ shareholders' meeting constitutes an act of the shareholders for actions other than for the election of directors.

Which of the following is an INCORRECT statement regarding the duty of care of directors and officers of a​ corporation?

The duty of care is not a fiduciary duty.

The piercing the corporate veil doctrine is also called the​ _____ doctrine.

alter-ego

According to the​ _____ rule, directors and officers are not liable to the corporation or its shareholders for honest mistakes of judgment.

business judgement

Directors and officers of a corporation owe a fiduciary duty to act honestly. This​ duty, called the duty of​ _____, requires directors and officers to subordinate their personal interest to those of the corporation and its shareholders.

loyalty

Cumulative voting gives a​ _____ shareholder a better opportunity to elect someone to the board of directors.

minority

The straight voting method is also referred to as​ _____ voting.

noncumulative

If an officer acts​ ______________ and enters into a contract with a third​ person, but the corporation​ _________________ of the​ contract, the corporation has​ ___________ the contract and is bound by it.

outside the scope of his or her​ employment, accepts the​ benefits, ratified

​_____ rights give existing shareholders the option of subscribing to new shares being issued in proportion to their current ownership interests.

preemptive

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.

supramajority

Which of the following is an INCORRECT statement regarding shareholder voting​ trusts?

A voting trust may not authorize the trustee to vote the shares held by the trust at his or her discretion.

​A(n) _____ is a​ shareholders' authorizing of another person to vote the​ shareholder's shares at the​ shareholders' meetings in the event of the​ shareholder's absence.

proxy

The goals of the​ Sarbanes-Oxley Act​ (SOX) of 2002 include all EXCEPT which of the​ following?

replace independent corporate audits with internal audits

Which of the following is an INCORRECT statement regarding​ shareholders' meetings?

Annual​ shareholders' meetings must be held at the times fixed in the articles of organization.

Which of the following is NOT an example of a breach of a​ director's or​ officer's duty of​ care?

a​ director's or an​ officer's failure to realize a profit for the corporation in any given calendar or fiscal year

A right of first​ _____ is an agreement that requires a selling shareholder to offer his or her shares for sale to the other parties to the agreement before selling them to anyone else.

refusal

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.

straight

Negligence usually involves a​ director's or​ officer's failure to do any of the following​ EXCEPT?

usurp a corporate opportunity.

If a​ shareholders' meeting is not held within either​ _____ months of the last annual meeting or​ _____ months after the end of the​ corporation's fiscal​ year, whichever is​ earlier, a shareholder may petition the court to order the meeting held.

​15; 6

Jason is a corporate officer of​ Farmtown, a corporation that produces farming equipment. While still an​ officer, Jason decides to start a new tractor company that would directly compete with Farmtown. Is this​ allowed?

​No, Jason owes Farmtown a duty of loyalty and is not allowed to compete with the corporation.

Which of the following is an INCORRECT statement regarding shareholder voting​ agreements?

Shareholder voting agreements are limited in duration.

Which of the following is an INCORRECT statement regarding a​ corporation's shareholders?

Shareholders have comprehensive management duties.

Shareholders of a corporation generally have​ _____ liability for the debts and obligations of the corporation.

limited

Which of the following is NOT an element that must be shown to prove usurping a corporate​ opportunity?

The opportunity is accompanied by demonstrated proof of profitability.

Which of the following is an INCORRECT statement regarding corporate voting​ requirements?

The record date is set forth in the​ corporation's articles of organization.

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.

business judgment

​_____ 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.

cumulative

Which of the following actions does NOT require​ shareholders' approval?

declaring a dividend

The articles of incorporation of a corporation authorize the corporation to invest in real estate only. If a corporate officer invests corporate funds in the commodities​ markets, the officer is liable to the corporation for any losses suffered because of his or her​ _______.

duty of obedience