Chapter 39: Corporations-Directors, Officers, & Shareholders

The business judgement rule makes a director liable for losses to the firm in most cases.

F

Directors, but not officers, owe a duty of loyalty to the corp.

F (Both do!)

Damages recovered in a shareholder's derivative suit are paid to the shareholder who filed the suit.

F (Paid to the corp.)

Preemptive rights entitle shareholders to bring a derivative suit against the corp.

F (Preemptive rights consist of preferences given to shareholders over other purchasers to buy shares of new corporate issue in proportion to the number of shares that they already hold.)

An officer is a fiduciary of a corp.

T

At a shareholder's meeting, a quorum must be present to vote on resolutions.

T

Generally, shareholders are not personally responsible for the debts of the corporation.

T

Only certain funds are legally available for paying dividends.

T

Shareholders may vote to remove members of the board of directors.

T

The business judgement rule immunizes officers from liability for poor decisions made in good faith.

T

Little Business Corp. invests in intrastate businesses. In Little's state, as in most states, the minimum number of directors that must be present before its board can transact business is

a majority of the number authorized in the articles or bylaws.

Frank is a director of Great Sales Corp. As a director, Frank owes Great Sales a duty of

care and loyalty.

Jill is a shareholder of Kleen Machine Co. As a shareholder, Jill does not have a right to

compensation.

Micro Co. makes and sells computer chips. Like most corps, Mircro's officers are hired by its

directors.

The board of directors of Omega, Inc., announces a cash dividend. A cash dividend may not be paid from

gross profits.

Robin is a director of Standard Distribution Co. Robin has a right to

participation.

The management of National Brands, Inc., is at odds with the shareholders over some recent decisions. The shareholders may file a shareholders derivative suit to

recover damages from management for an ultra vires act.

Pam is a director of Quik Purchasing Corp. Without informing Quik, Pam goes into business with Rapid Buys, Inc., to compete with Quik. This violates

the duty of loyalty.

Don and Eve are officers of First Bank Corp. As officers, their rights are set out in

the officer's employment contracts.

Jeans & Sweats Corp. uses cumulative voting in its elections of directors. Kyla owns 3,000 shares. At an annual meeting at which 3 directors are to be elected, Kyla may cast for any one candidate

9,000 votes.