CPCU 530 - Chapter 9 Questions

Describe how apparent authority (authority by estoppel) applies to partnerships

1. A person who is not partner creates the impression that he is 2. A third party engaged in business with the reasonable belief that the partnership existed 3. The third party changed his legal position due to reliance on representation of partnership

What are the 4 fiduciary duties for directors and officers who manage an employee benefit plan?

1. Act in the participants best interests 2. Use the skill and care of a prudent person in similar circumstances 3. Diversify investments when prudent 4. Comply with plan documents

What are the two stipulations for directors and officers to conduct business?

1. All material facts must be disclosed and voted on by the board and stockholders 2. Contract must be fair to the corporation

What is the Civil Rights Act of 1991?

1. Allows recovery of damages under Title VII and ADA 2. Broadens Section 1981 to include on-the-job discrimination and 3. Shifts the burden of proof to the employer in disparate impact cases

What are the three things directors and officers may not do?

1. Appropriate business opportunities that belong to the corporation 2. Compete against the corporation 3. Use confidential information for financial gain

Describe a corporate merger

1. Board of each corporation must adopt a merger plan 2. 'Disappearing' corporation's shareholders must approve the merger plan, but new corporation need only approve if it substantially increases the number of 3. New corporation takes on all assets and liabilities of both corporations

What are a corporations options after repurchasing some of its shares?

1. Cancellation (remove them from existence) 2. Restore them to unissued status 3. Hold them as treasury stock (stock issued by not outstanding)

What are the two common types of equity securities?

1. Common stock - gives its owners the right to vote on corporate matters and to receive dividends 2. Preferred stock is nonvoting stock

What are the two types of securities used by corporations to raise funds?

1. Debt securities (bonds) - long term debt instruments that pay a set annual interest rate and repay the borrowed amount on a stated date. Bondholders are corporate creditors. 2. Equity securities - Represent the corporations capital stock, IE stockholders' ownership Stockholders are corporate owners.

What are to two types of decisions the board can make?

1. Decisions affecting the corporations structure and form (need to be approved by shareholders) 2. Business decisions (do not need to be approved by shareholders)

What is the 1935 National Labor Relations Act (NLRA) (aka Wagner Act)?

1. Designates the union chosen by the majority of employees as the sole representative of all employees 2. Gives employees the right to be represented by a union and to participate in collective bargaining 3. Protects union employees from employer reprisals 4. Prohibits unfair labor practices by employer and by union

What are the three main types of corporations?

1. Government Corporations - cities, counties, states 2. Charitable (not-for-profit) - Provide services to members, don't earn profit 3. Business for-profit corporations - that exist to make a profit

What are the reasons a corporation may choose to repurchase its stock?

1. Increase earnings per share 2. Make the corporation less attractive to takeover 3. Reduce accumulation of excess cash, and/or increase the market value of the remaining shares

What is the 1932 Norris-La Guardia Act?

1. Lets employees form unions without coercion from their employer, outlaws employment conditional on non-membership, and forbids outlawing of strikes 2. Neutralizes US District Court power to effect injunctions in labor disputes until all possible negotiation has failed

What are the five advantages to incorporation?

1. Limited liability - shareholders bear no liability beyond potential loss of investment 2. Tax advantages - report income only when they receive dividends or sell investments 3. Capital - can raise capital easier 4. Transferability - ownership is freely transferable 5. Perpetuity - corporation exists beyond death of owners

What are the three main ways a corporation may be terminated?

1. Merger - one or more corporations absorbed into existing corporation 2. Dissolution - voluntary or involuntary termination 3. Reorganization - as part of bankruptcy proceedings

What are the three ways a partnership can be dissolved?

1. Partnership agreement 2. Operation of law (death, illegality of purpose, bankruptcy) 3. Court decree (insanity, incapacity, misconduct)

What are the two additional rights of holders of preferred stock?

1. Priority to receive dividends before other common stockholders 2. Payment priority over common shareholders during bankruptcy or liquidation

What is the Vietnam Era Veterans' Readjustment Assistance Act?

1. Prohibits employers from terminating employees who leave to serve in the military 2. Requires employers with federal contract of $25,000 or more to implement affirmative action plans for Vietnam vets

What is the Rehabilitation Act of 1973?

1. Prohibits employers with government contracts over $2,500 from discriminating against handicapped persons who could do the job with reasonable accommodation 2. Employers with 50 or more employees and contracts of $50,000 or more must prepare a written affirmative action program

What is the Occupational Safety and Health Act (OSHAct)?

1. Provides employee workplace safety and health standards 2. Applies to all employers engaged in business affecting interstate commerce. 3. Does not apply to gov employers, self-employed, family farms, or workers covered by other federal laws

What are the four exceptions to the employment-at-will doctrine?

1. Public Policy - IE refusing to commit unlawful act 2. Implied-contract - breach of promise not to discharge 3. Covenant of good faith and fair dealing - implied promise to deal fairly 4. Statutory Exceptions - discriminatory acts

What are the two types of harassment claims?

1. Quid pro quo - job advancement or conditioned upon sexual requests 2. Hostile environment - sexual work environment to such an extent that it is oppressive

What are eight provisions typically contained in corporate bylaws?

1. Shareholder meetings 2. Directors 3. Officers 4. Indemnification of directors, officers, and agents 5. Stock 6. Corporate Seal 7. Procedures for transfer or dissolution 8. Procedures for amendment of bylaws

What are the powers and duties of stockholders?

1. Stockholders bear no liability beyond potential loss of investment 2. Stockholders have no fiduciary responsibility and may vote their self interests 3. But a majority of stockholders may not frustrate the interests of minority stockholders.

What is the purpose of the National Labor Relations Board?

1. To prevent and resolve unfair labor practices by employers and unions 2. To determine whether employees want union representation for collective bargaining

What are the two ways to establish a collective bargaining relationship?

1. Union collects authorization from at least 50% of the employees and asks the employer for recognition, or 2. Union collects authorization from at least 30% of employees and petition the NLRB to hold an election to certify the union

What is the Immigration Reform and Control Act (IRCA)?

1. prohibits employers from hiring aliens not authorized to work in the US 2. bars employment discrimination based on national origin and citizenship status 3. Requires employers to verify citizenship of all employees

What is a hostile takeover?

A hostile takeover can be accomplished through a tender offer - made by the prospective acquirer of a corporation to that corporations shareholders in an attempt to buy their shares to take control of a corporation that does not agree to a merger or share exchange. Once the acquiring corporation has enough shares or proxies it can elect its own board of directors or vote for a merger

Describe a partnership's relationship to third parties

A partner has the authority to contractually bind the partnership and all partners. The partner acts as agent for his partnership and partners and is subject to the rules of agency

What is a limited partnership?

A partnership that includes at least one limited partner who has no right to bind the partnership or participate in its management but can: - contributes tangible assets to the partnership - bears liability for partnership obligations only up to the value of this invested capital - shares in the profits/losses

What is a bona fide occupational qualification?

A qualification that is reasonable necessary to the business. Race and color are never BFOQs

What is a corporation?

A separate legal business entity that can own assets, conduct business, incur debts, extend credit, be sued, and perform the functions of any other type of enterprise.

What is the Equal Pay Act (EPA)?

Act prohibits sex discrimination in wages for work that requires equal skill, effort, responsibility, and working conditions.

What is the Employee Polygraph Protection Act of 1988?

Addresses the disclosure of private facts obtained from credit reporting agencies in background checks

What is the National Labor Relations Board (NLRB)?

Administers the National Labor Relations Act (NLRA)

What is the Employment-at-will Doctrine?

Allows employer to terminate an employee at any time, for any reason, unless violates contractual limitation/statute/bargaining agreement

What does Chapter 11 of the Bankruptcy Reform Act allow?

Allows the corporation to restructure its debt

What is the Older Workers Benefit Protection Act?

Amends ADEA to prohibit discrimination against older workers in employment benefits

What is the Consolidated Omnibus Budget Reconciliation Act (COBRA)?

Amends ERISA to require an employer with 20 or more employees (not churches or fed gov) that sponsors a group health plan to offer a qualified beneficiary (employee & dependents) continuation of group coverage

What is a partnership?

An association of two or more persons formed to carry on as a co-owners business for profit

What are the duties of directors and officers?

Bear a fiduciary relationship to the corporation, owing it good faith, care, and loyalty + fiduciary duty to employees for employee benefit plan (due to ERISA)

How is a partnership formed?

Can be created by the parties' actions, oral agreement, or written agreement. Law presumes a partnership when two or more people work together and share the profits and losses

What is the Employee Retirement Income Security Act (ERISA)?

Creates fiduciary duties for those who invest and distribute the money in employee benefit plans and trusts, but it does not require employers to provide benefit plans.

What is the difference between dissolution and merger?

Dissolution - sale of all corporate assets for cash Merger - sale of all corporate assets for shares of a purchasing corporation

What is involuntary dissolution?

Dissolution at the request of state of incorporation, the stockholders, or the corporate creditors.

What are property dividends?

Dividend paid in shares of corporation the declaring corporation has acquired

What are liquidating dividends?

Dividend paid to distribute liquidation of assets

What are extra dividends?

Dividends paid in addition to standard dividends

What are stock dividends?

Dividends paid in additional shares of declaring corporation

What are cash dividends?

Dividends paid in cash

What is the Disparate Impact Theory of discrimination under Title VII?

Employee must establish that apparently neutral empowerment practices have had a disproportionate effect on a protected class.

What is the Disparate Treatment Theory of discrimination under Title VII?

Employee must establish that the employer's acts were motivated (even in part) by the intent to discriminate.

What are equity securities?

Equity securities represent an ownership interest in a corporation.

What is the Service Contract Act?

Establishes minimum wage and notification requirements for employers with government service contracts over $2,500

What is the Walsh-Healy Public Contracts Act?

Establishes minimum wage and overtime requirements for employers with government supply contracts of more than $10,000

What is a de facto corporation?

Exists when the promoter fails to meet a minor requirement A third party cannot attack its validity and the business cannot deny is corporate status However, state may question status

What is a de jure (in law) corporation?

Formed in compliance with the mandatory provisions of incorporation laws. Is treated as a corporation for all purposes and its validity as a corporation cannot be attacked.

What is the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA)?

Gives employees who return from military services the right to immediate reinstatement to the same or substantially similar position

What are an employer's economic weapons?

Hiring replacement workers and effecting lockouts

What is the Health Insurance Portability and Accountability Act (HIPAA)?

Imposes national standards for privacy and security of medical information.

What is the different between and outside and inside director?

Inside director is a corporate officer, outside director is not.

What is the difference between a joint venture and a partnership?

Joint venture - formed to carry out a single act or a series of acts Partnership - engages in ongoing business

What is redemption with regards to corporate debt?

Method for corporation to retire debt securities and preferred stock by repurchasing them. Generally an option only if the corporate assets exceed its liabilities

Describe a corporate share exchange merger

One corporation acquires all of another corporations' shares in exchange for shares of the acquiring corporation, or of another corporation, or cash, or property

Describe a de facto merger

One corporation sells all of its assets to another corporation in exchange for shares of the acquiring corporation, thus merging the two firms without the statutory requirements of a traditional merger.

Corporation is alien in

Other countries from one that granted its charter

What is the Taft-Hartley Act?

Outlaws secondary boycotts and sympathy strikes

Describe liability involved in a partnership?

Partners and the partnership bear joint and several liability up to the limit of their partnership and personal wealth. Criminal law has no vicarious liability, so only the partner who participates in the crime is liable

What are the advantages of a partnership?

Partnerships are not taxed. Each partners share of the partnership income is reported on his personal income tax form and taxed as his personal income

What is collective bargaining?

Process by which a union negotiates an employment contract

What is the Consumer Credit Protection Act?

Prohibits discharge results from garnishing (withholding) of wages for indebtedness

What is the Americans With Disabilities Act (ADA)?

Prohibits discrimination against any "qualified individual with a disability." applies to any employer with 15 or more employees.

What is Title VII of the Civil Rights Act of 1964?

Prohibits discrimination by employers and unions based on race, color, religion, national origin, or sex. Does not apply to the US gov, private membership/religious groups

What is the 1967 Age Discrimination in Employment Act (ADEA)?

Prohibits employers from discriminating against employees over the age of 40, unless BFOQ

What is the Jury Systems Improvement Act?

Prohibits employers from firing or threatening employees based on jury duty

What is the Civil Rights Act of 1866 (aka Section 1981)?

Prohibits employment discrimination based on ancestry or ethnic characteristics.

What is the Omnibus Crime Control and Safe Streets Act of 1968/Electronic Communications Privacy Act of 1986?

Prohibits interception of wire or oral communications in a place of business engaged in interstate commerce unless one of the parties consents or monitoring occurs in the ordinary course of business.

What is the Executive Order 11246 of 1965?

Prohibits job discrimination based on race/creed/national origin/sex by those under contract with the federal government. Also creates federally mandated affirmative action.

What is the Drug Free Workplace Act of 1988?

Prohibits private sector employers from requesting employee or applicant polygraph tests.

What is the Landrum-Griffin Act?

Prohibits unions and employers from agreeing to boycott another employer's goods

What is the process of incorporation?

Promoter interests people in forming the corporation, organizes the corporation, and files the charter with the secretary of state who issues the corporations certificate of incorporation

What is the Fair Labor Standards Act (FSLA)?

Regulates minimum wages, overtime compensation, child labor, and equal pay for men and women

How are corporations regulated?

Regulation is primarily by the states. Most state incorporation laws follow the Revised Model Business Corporation Act (RMBCA)

What is capital surplus?

Represents the total of excess proceeds when stock is sold above par value

What is the general duty clause of OSHAct?

Requires employers to comply with established safety and health standards and maintain a workplace free from serious hazards for which OSHA has not established a standard

What is the Family Medical Leave Act (FMLA)?

Requires employers to provide eligible employees with up to 12 weeks total of unpaid leave for: 1.the acquisition of children (birth/adoption/foster care) and 2. the care of children, spouse, parent, or self if such persons have serious health conditions

What is the Davis-Bacon Act?

Requires the prevailing wage (union scale) to be paid to laborers and mechanics working on federal construction projects that cost over $2,000

What is good faith bargaining?

Requires understanding of the other person's position and reasonable compromise

Corporation is a foreign corporation in

States besides the one that granted its charter

What are a unions economic weapons?

Striking, picketing, boycotting

What is voluntary dissolution?

The board and the majority of shareholders approve of the dissolution plan. A formal statement of intent to dissolve is filed with the secretary of state, corporation then liquidates and distributes assets

What is the board of directors?

The board of directors is elected by the shareholders to exercise all corporate powers and to direct the management of all business affairs.

Corporation is a domestic corporation in

The state which granted its charter

Describe a takeover

The transfer of control from one group of stockholders to another

What is stated capital?

Total number of risk capital contributed by shareholders

Describe partners' relationships to each other

Unless the partnership agreement states otherwise, the partners share equally in profits, losses, and any surplus upon dissolution

What is Constructive Discharge?

When an employee is forced to resign due to an oppressive environment

When are employers responsible for the sexual harassment of employees?

When employer knew or should have known of the harassment, even if it was specifically prohibited by company policy

What is a secondary boycott?

Where employees refuse to work on materials connected with another employer who is engaged in a labor dispute