LAW 3800 Ch 22 SB + HW

Which of the following is a way a shareholder can recognize a profit from a stock investment?

the shareholder can receive dividends from the corporation

Which of the following is an incorrect statement about stock certificates?

A shareholder's ownership in a corporation depends on his or her possession of a physical stock certificate

Courts are likely to pierce the corporate veil in all but which of the following situations?

a corporation is closely held

Which of the following is not a requirement for becoming an S corporation?

all of the shares of an S corporation must have identical voting rights

The directors and officers ___________ for failure to exercise a duty of care with respect to the management of shareholder assets.

bear liability

In the context of corporate financing, debt securities are __

bonds

An alien corporation is a business incorporated in another __.

country

Inside __ are also officers or employees of a corporation.

directors

The Revised Model Business Corporation Act recognizes that shareholders have the legal right to initiate dissolution if the corporation engages in all but which of the following behaviors?

directors are not devoting their full professional commitment and careers to the corporation

Although ___ are in charge of major policy decisions, ___ run the day-to-day business of a corporation.

directors; officers

Corporate officers are technically __ of the corporation.

employees

The articles of ___ is a document that contain basic information about a corporation and its filed with the state

incorporation

Directors of a corporation who are not officers or employees that the corporation are called ___ directors.

outside

A ___ is a corporation created by government to help administer law.

public corporation

The ________________ allows directors to be reimbursed for any legal fees incurred in lawsuits against them.

right to indemnification

When corporate directors or officers violate their duty of loyalty they are __.

self-dealing

___ generally governs corporations

state law

Corporations are liable for torts and crimes committed by their agents during the scope of their employment according to

the doctrine of respondeat superior.

Which of the following is one of the two primary fiduciary duties directors and officers owe to the corporation?

the duty of loyalty

In the context of corporate dissolution, the articles of dissolution must include all but which of the following types of informaiton?

the parties who will bear the costs of dissolution

A(n) _____________ is a business incorporated in another country.

alien corporation

Because there are many times when individual directors and officers may personally benefit from decisions made by the board of directors, the directors and officers have a fiduciary duty to disclose ___ that arise in corporate transactions.

conflicts on interest

___ of a corporation can initiate the voluntary dissolution procedures.

either directors or shareholders

If corporations act beyond their ___ and __ powers, this act is called an ultra vires act.

express; implied

Because corporate directors are in positions of great legal vulnerability, they have the right to ___

indemnification

Although ordinary decisions by a board of directors requires a __ vote, more important decision sometimes require a ___ vote.

majority; two-thirds majority

Generally, the statement of corporate ___ in each corporation's articles of ___ gives each corporation its implied powers.

purpose; incorporation

According to the ___ person doctrine, a court may find a corporate officer criminally liable regardless of the extent to which the officer took part in a criminal activity.

responsible

___ earnings are profits that a corporation keeps.

retained

If corporate directors fail to sue when the corporation has been harmed by an individual, shareholders can file a ______________ on behalf of the corporation.

shareholder's derivative suit

___ attempt to hide behind the corporate veil of limited liability to protect themselves from personal liability.

shareholders

___ of a corporation own it.

shareholders

Which of the following is a true statement about weather corporations can sue and/or be sued by others?

Corporations can sue or be sued by others

In ___ corporations, the transfer of stock is usually restricted so that shareholders can choose the corporation's other shareholders.

closely held

S corporation are a particular type of __ corporation.

closely held

Which of the following is an inaccurate statement about closely held coporations?

closely held corporations account for the majority of total corporate assets and revenues in the United States

Which of the following is an incorrect statement about common stock?

common stock owners have the highest priority when a corporation distributes dividends

All corporate directors have a right to ___ for their work

compensation

Rules and regulations that govern a corporation's internal management are known as ___.

corporate bylaws

A subscriber is an investor who agrees to purchases stock in a new ___.

corporation

A corporation that has not met the requirements of the state incorporation statutes is known as a ___ corporation.

de facto

Courts may disregard an error in a corporation's articles of incorporation by recognizing the corporation as a __ corporation

de facto

A(n) ________ is a corporation that has met the substantial elements of the incorporation process.

de jure corporation

In the context of corporate financing, ___ securities represent loans to a corporation.

debt

If the incorporator or promoters of a corporation make an error or omission during the incorporation process, courts may rule that the organization is not a corporation. In such a case, the organization is a __.

defective corporation

In many cases, corporate directors have good reason to withhold ___ for a limited amount of time to finance major undertakings such as research or expansion.

dividends

McDonald's Corporation is incorporated in Delaware but does does business in all 50 sates. Thus, McDonald's is a(n) __ corporation in Delaware and a(n) __ corporation in all of the other 49 states.

domestic; foreign

Directors and officers of a corporation have fiduciary duty of care, meaning that they must exercise __ care when making decisions for the corporation.

due

In the context of corporate financing, ___ securities represent ownership in a corporation.

equity

Bonds are sometimes called __ securities

fixed-income

___ amendment to the U.S. Constitution protects corporations from unreasonable searches and seizures.

fourth

A(n) ___ is an individual who applies to the state for incorporation on behalf of the corporation

incorporator

Generally, because shareholders are the owners of the corporation, they are liable to the extend of their ___ when the company loses money.

investment

Which of the following is a recognized part of creating a corporation?

legal activities necessary for incorporation

Business self-dealing is a violation of a corporate director's or officer's duty of ___.

loyalty

Personal self-dealing is a violation of a corporate director's or officer's duty of ___.

loyalty

Typically, shareholders use a __ vote to elect directors.

majority

A(n) ___ operates for educational, charitable, social, religious, civic, or humanitarian purposes rather than to earn a profit.

nonprofit corporation

The Church of Jesus Christ of Latter-Day Saints is an example of a(n) _____________________.

nonprofit corporation

The board of directors of a corporation selects ___ to manage the day-to-day business of the corporation.

officers

Because corporation directors are required to make informed business decisions, they have the rights of ___ and ___.

participation; inspection

Which of the following is a major type of stock?

preferred

Private persons create ___ corporations for private purposes.

private

Suppose the federal government charters a corporation to help regulate financial matters across state borders. This corporation would be a(n) ________________.

public corporation

A(n) ___ corporation is a corporation whose stock is available to the public.

publicly held

Which of the following is not true of an S corporation?

Partnerships can be shareholders

Which of the following is an accurate statement about the life of a corporation?

The life of a corporation does not end when the lives of its owners end

Which of the following is one of the two phases of the death of a corpororation?

dissolution

Which of the following statements is false?

Corporations do not assume liability for corporate actions.

According to the Revised Model Business Corporation Act, a corporation's articles of incorporation must include all but which of the following?

the vision statement of the corporation

A(n) ___ is a distribution of corporate profits or income to the shareholders.

dividend

Which of the following is not a factor business owners consider when selecting a state for incorporation?

state laws governing copyrights

Which of the following is not required to be in the articles of incorporation?

Names and addresses of the corporate officers.

Which of the following is always required to become a director of a corporation?

None of these are required

Which of the following is an incorrect statement about shareholder transferability of corporate shares?

Shareholders' shares are only transferable upon their death

Which of the following is not a way corporations can be classified?

T corporations

Which of the following is a requirement for allowing a corporate decision to be made that will personally benefit a director or officer?

The disinterested board members and/or disinterested shareholders must approve the decision

Which of the following is an accurate statement about the fiduciary duties of individuals within a corporation?

The fiduciary duties of the individuals depend on whether they are directors, officers, or shareholders.

Which of the following are the two types of self-dealing hat violate the duty of loyalty directors and officers owe to their corporation?

business and personal

According to the ___ rule, the directors and officers of a corporation are not liable for decisions that harm the firm if they were acting in good faith at the time of the decision.

business judgement

A corporation by ___ is a defective corporation that has conducted business with a third party and therefore cannot deny its status as a corporation to escape liability.

estoppel

___ powers typically granted to corporations by state incorporation statutes include the power to make contracts, the power to borrow and lend money, the power to make charitable donations, and the power to establish rules for managing the corporation.

express

If a majority shareholder owns such a significant portion of a corporation's stock that he or she essentially controls the firm, the majority shareholder has a ___ duty to act with care and loyalty in selling his or her shares because the sale of his or her shares will shift control of the company to another individual.

fiduciary

For a par-value share of a corporation, a shareholder must pay the corporation at least the __ value of the stock.

par

Which of the following is an accurate statement about the existence of a corporation?

In most states, unless the articles of incorporation provide otherwise, corporations continue to exist indefinitely

When can shareholders inspect the records and bookkeeping of the corporation?

Shareholders can inspect records and books only if they ask in advance and have a proper purpose.

If a corporation commits an ultra vires act, the Revised Model Business Corporation Act (RMBCA) provides all but which of the following remedies?

Shareholders may sue the sate government for allowing the corporation to commit the ultra vires act

In a shareholder's __ suit, the shareholder alleges that he or she has suffered damages caused by the corporation.

direct

A stock ___ is a type of security issued by a corporation that gives the holder the right to purchase a certain amount of common stock at a stated price.

warrant

Which of the following is an accurate statement about the inspection rights of shareholders?

All shareholders have the right to inspection under both statutory and common law

Which of the following is an inaccurate statement about the criminal and tort liabilities of corporate officers and directors?

Corporate directors cannot be held personally responsible for the torts and crimes of other employees within the organization

Which of the the following is an accurate statement regarding the taxation of corporations?

Corporations are required to pay federal and state taxes on their income

Which of the following is an accurate statement about the personal malpractice liability of dentists, doctors, or other professionals who practice in a professional corporation?

Courts sometimes impose personal malpractice liability on those who practice in a professional corporation.

Which of the following is an incorrect statement about the rights and duties of directors as managers of a corporation?

Directors select shareholders as they see fit

In which of the following scenarios could the courts pierce the corporate veil?

If a corporation did not follow statutory mandates regarding corporate business.

Which of the following statements regarding the liability of directors and officers is false?

They cannot be held personally liable for the torts and crimes of other employees.

Which of the following is an accurate statement about the right of first refusal?

a corporation or its shareholders have the right of first refusal

An authorization for someone else to vote your shares is called ________________.

a proxy

Which of the following are the two subcategories of outside directors?

affiliated and unaffiliated

Generally, shareholders can freely transfer __

corporate shares

If corporate directors fail to sue when the corporation has been harmed by an individual, another corporation, or a director, individual shareholders can file a shareholder's ___ suit on behalf of the corporation.

derivative

A corporation is a(n) ___ corporation in the state in which it is incorporated.

domestic

___ can initiate involuntary dissolution of a corporation

either government or private parties

Most corporations are ___ corporations

for-profit

A corporation is a(n) ___ corporation in states in which it conducts business but it not incorporated.

foreign

Major groups of individuals within a corporation include all but which of the following?

partners

___ raise capital for an infant corporation by making subscription agreements with subscribers in which the subscribers agree to purchase stock in the new corporation.

promoters

A subscription agreement is an agreement between __ and __ in which the latter parties agree to purchase stock in a new corporation

promoters; subscribers

The directors and officers have a fiduciary duty to a corporation. In other words, they have a duty to ___.

put the corporation's interest above their own

Each individual corporation's charter creates a contract between that corporation and the ___.

state

Generally, a quorum of shareholders exist when shareholders hold more than __ percent of the outstanding shares are present.

50

Which of the following is an accurate statement about corporations and due process rights?

Corporations have due process rights under both the fifth and the fourteenth amendments to the U.S. constitution

Which of the following types of corporation is known specifically for being a closely held corporation yet enjoying the tax status of partnerships?

S corporations