BLaw 2 - Ch. 37 Quiz

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

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. Correct: - A voting trust agreement must be in writing. - A voting trust agreement cannot exceed ten years. - A voting trust must be filed with the corporation and is open to inspection by shareholders of the corporation. - A voting trust is an arrangement whereby shareholders transfer their stock certificates to a trustee.

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. Correct: - 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. - Special​ shareholders' meetings may be called by the holders of at least 10 percent of the voting shares of the corporation. - Special​ shareholders' meetings may be called by the board of directors. - 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.

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

Preemptive

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

Shareholder voting agreements are limited in duration. Correct: - Two or more shareholders may enter into an agreement that stipulates how they will vote their shares for the election of directors or other matters that require a shareholder vote. - Shareholder voting agreements do not have to be filed with the corporation. - Shareholder voting agreements can be revocable. - Shareholder voting agreements can be irrevocable.

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

Shareholders have comprehensive management duties. Correct: - A​ corporation's shareholders own the corporation. - Shareholders have the right to vote regarding fundamental changes in the corporation. - Shareholders have the right to vote in an election of corporate directors. - Shareholders are not agents of the corporation.

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. Correct: - The corporation must prepare a​ shareholders' list that contains the names and addresses of the shareholders as of the record date and the class and number of shares owned by each shareholder. - Unless otherwise provided in the articles of​ incorporation, if a majority of shares entitled to vote are represented at a meeting in person or by​ proxy, there is a quorum to hold the meeting. - The​ shareholders' list must be available for inspection at the​ corporation's main office. - Once a quorum is​ present, the withdrawal of shares does not affect the quorum of the meeting.

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. Correct: - 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. - 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. - To meet the duty of​ care, directors and officer must discharge their duties in good faith. - The duty of care requires corporate directors and officers to use care and diligence when acting on behalf of the corporation.

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. Elements: - The corporation has the financial ability to take advantage of the opportunity. - The corporate officer or director took the corporate opportunity for himself or herself. - The opportunity was presented to the director or officer in his or her corporate capacity. - The opportunity is related to or connected with the​ corporation's current or proposed business.

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. Correct: - 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. - Only shareholders who own stock as of a set date may vote at a​ shareholders' meeting. - The record date may not be more than 70 days before the​ shareholders' meeting. - At least one class of shares of stock of a corporation must have voting rights.

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. Correct Examples: - a​ director's or an​ officer's failure to attend board meetings on a regular basis - a​ director's or an​ officer's failure to make a reasonable investigation of a corporate matter - a​ director's or an​ officer's failure to properly supervise a subordinate who causes a loss to the corporation through embezzlement and such - a​ director's or an​ officer's failure to keep adequately informed about corporate affairs

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

business judgement

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 judgement

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

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

limited

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

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

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

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

usurp a corporate opportunity. Correct: - Keep adequately informed about corporate affairs. - Properly supervise a subordinate who cause a loss to the corporation through embezzlement. - Attend board meetings on a regular basis. - Make a reasonable investigation of a corporate matter.

​_____ 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. Does Require shareholders' approval: - amending the articles of incorporation - voluntary dissolution of the corporation - merging with another corporation - sale of substantially all of the​ corporation's assets outside the course of ordinary business.

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

alter ego

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

​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

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

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

replace independent corporate audits with internal audits

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.