BA 333 Class 3

HomeBase Corporation invests in intrastate businesses. In HomeBase's state, as in most states, the minimum number of directors that must be present before its board can transact business is a. all of the directors authorized in the articles b. a majority of the number authorized in the articles or bylaws c. any odd number d. one

B

Jeans & Sweats Corporation uses cumulative voting in its elections of directors. Keno owns 3,000 shares. At an annual meeting at which three directors are to be elected, Keno may cast for any one candidate a. 1,000 votes b. 3,000 votes c. 9,000 votes d. 27,000 votes

C

Perla is a director of Quik Purchasing Corporation. Without informing Quik, Perla goes into business with Rapid Buys, Inc., to compete with Quik. This violates a. the business judgment rule b. the duty of care c. the duty of loyalty d. none of the choices

C

Blaine and Cory want to incorporate to buy, play, sell, and trade video games. The first step in the incorporation procedure is to a. file the articles of incorporation b. hold the first organizational meeting c. obtain a corporate charter d. select a state in which to incorporate

D

Dylan and Evette are officers of Fullfit Clothing Corporation. As officers, their rights are set out in a. international agreements b. state corporation statutes c. the firm's certificate of authority d. the officers' employment contracts

D

The management of Orchards & Vines, Inc., is at odds with the shareholders over some recent decisions. The shareholders may file a shareholders' derivative suit to a. compel dissolution of Orchards & Vines b. compel payment of a properly declared dividend c. enforce a right to inspect corporate records d. recover damages from the management for an ultra vires act

D

T or F: Damages recovered in a shareholder's derivative suit are paid to the shareholder who filed the suit.

F. Any damages recovered in a shareholder's derivative suit are normally paid to the corporation on whose behalf the shareholder or shareholders exercised the derivative right.

T or F: Directors, but not officers, owe a duty of loyalty to the corporation

F. Officers and directors owe the same fiduciary duties to the corporations for which they work. They both owe a duty of loyalty. This duty requires them to subordinate their personal interests to the welfare of the corporation.

T or F: Preemptive rights entitle shareholders to bring a derivative suit against the corporation

F. Preemptive rights consist of preferences given to shareholders over other purchasers to buy shares of a new corporate issue in proportion to the number of shares that they already hold. This allows a shareholder to maintain his or her proportionate ownership share in the corporation. Generally, these rights are granted (or withheld) in the articles of incorporation.

T or F: The business judgment rule makes a director liable for losses to the firm in most cases

F. The business judgment rule immunizes directors (and officers) from liability for poor business decisions and other honest mistakes that cause a corporation to suffer a loss. Directors are not immunized from losses that do not fit this category, however.

T or F: A corporation is liable for the torts of its agents or officers committed within the course and scope of their employment

T

T or F: An officer is a fiduciary of a corporation.

T

T or F: Generally, shareholders are not personally responsible for the debts of the corporation

T

T or F: In some states, a close corporation can operate without formal shareholders' or directors' meetings

T

T or F: Only certain funds are legally available for paying dividends

T

T or F: Shareholders may vote to remove members of the board of directors

T

Daystar Company is a private, for-profit corporation that (1) was formed to market business office software, (2) is owned by ten shareholders, (3) is subject to double taxation, and (4) has made no public offering of its shares. Daystar is a. a close corporation b. a nonprofit corporation c. an S corporation d. a professional corporation

A

Koz is a shareholder of Lil' Biz Company, Inc. A court might "pierce the corporate veil" and hold Koz personally liable for Lil's debts a. if Koz's personal interests commingle with Lil's interests to the extent it has no separate identity b. if Lil' calls too many shareholders' meetings c. if Lil' is overcapitalized d. under no circumstances

A

Responsibility for the overall management of Fashionista Stores, Inc., a corporation, is entrusted to a. the board of directors b. the corporate officers and managers c. the owners of a corporation d. the promoters of a corporation

A

Robin is a director of Sherwood Forest Company. Robin has a right to a. compensation b. dividends c. inspect corporate books and records d. transfer shares

A