Unit 11 Quiz

Partnerships are required to give notice to creditors when they dissolve, but corporations are not required to give notice of their dissolution.

false

Directors have no personal liability for illegally declared dividends

false

Directors may vote on matters in which they have a personal interest.

false

Directors must be compensated for their services.

false

Minority shareholders have the best chance of electing someone to the board of directors under the straight method of voting

false

Receivers have liability on the pre-incorporation contracts of the corporation

false

State laws regulating the sale of securities within the state are called red herring laws.

false

Stock that is issued and then repurchased by a corporation is watered stock.

false

Stock warrants are not transferable and cannot be sold on any stock exchange.

false

Under most state corporation statutes, shareholders are entitled to be paid dividends whenever an earned surplus exists.

false

a cash dividend is a transfer of retained earnings to capital

false

a corporation incorporated in delaware and doing business in new jersey is not a foreign corporation in new jersey

false

a promoter is an agent of the corporation

false

a shareholder's right to discuss to dissent from a proposed merger and have his shares purchased by the corporation is the right of preemption

false

a shareholder's right to dissent from a proposed merger and have his shares purchased by the corporation is the right of preemption

false

article 2a of the uniform commercial code governs the sale of securities

false

in a closely held corporation, the majority shareholders have a statutory duty to purchase the stock of a minority shareholder who has died

false

in a consolidation, one corporation (A) assumes the assets and liabilities of another corporation (B), and corporation B ceases to exist

false

in a merger, two or more existing corporations A and B combine so that a third corporation C results

false

participating preferred stock allows holders to trade their preferred shares for common shares when the trading price reaches a specified target

false

pre-incorporation stock subscriptions are merely offers to purchase stock and are not normally binding on the purchaser

false

registered agents have liability on the the pre-incorporation contracts of the corporation

false

shareholders are taxed on the value of the stock they receive in stock dividends

false

the person appointed by a corporation to receive service of process is the receiver

false

which of the following is not required for a foreign corporation to get a certificate of authority to do business

file a copy of its bylaws with the secretary of state

ABC corporation, which is incorporated in Delaware, has its corporate offices and main manufacturing plant in Ohio. ABC is classified as a ___. corporation in Ohio

foreign

the merger of two businesses in the same field that reduces the number of competitors is a ___ merger

horizontal

the merger that creates the greatest number of antitrust issues is a ___ merger

horizontal

three major US banks have launched a service to process online electronic payments, creating in the process a major competitor of PayPal's. If the banks were to buy out PayPal in the future, this would constitute a ____ merger

horizontal

The corporate merger that raises the greatest number of anti-trust issues is a _________merger; the corporate merger that raises the fewest number of anti-trust issues is a __________merger.

horizontal----conglomerate

Pat agreed to purchase 250 shares of Pamco Company five months before the corporation came into existence. This agreement is a ___

pre-incorporation subscription

the prerogative of existing shareholders to buy new issues of stock in the same proportion as their current holdings is their ___ right

preemptive

When a corporation dissolves, holders of ___________ stock have priority in the distribution of corporation assets.

preferred

Shareholders may dissent from both stock-for-stock mergers and cash-for-stock mergers

true

Shareholders may vote on matters in which they have a personal interest

true

Some states use the alter ego theory to require corporations to assume liability for contracts negotiated on their behalf by the promoters.

true

State laws regulating the sale of securities within the state are called blue sky laws

true

States have statutes of limitations limiting the time after the dissolution of a corporation when creditors of the corporation may sue former shareholders on corporate debts.

true

The agreement to purchase stock in a future corporation is a pre-incorporation subscription.

true

The surviving corporation in a merger assumes the liabilities and obligations of the merged corporation.

true

a corporation is a person for purposes of the due process clauses of the 5th and 14th amendements

true

a director's duty of care is that of a normally prudent businessperson in the management of his or her own affairs

true

a receiver is an officer of the court who takes possession of property involved in a lawsuit for the benefit of the ultimate owner

true

a shareholder who has not fully paid the corporation for an original issue of stock may become liable to a creditor of the corporation for the unpaid balance

true

directors have personal liability if the corporation fails to withhold social security taxes from employee wages

true

in a closely held corporation, shareholders owe each other substantially the same fiduciary duties that partners owe one another

true

in most states corporations can have perpetual existence

true

officers of a corporation are responsible for carrying out the policies set by the board of directors

true

shareholders have a right to vote on major changes to the corporation, such as mergers and dissolutions

true

shareholders may sue to compel dividends if there are profits from which the dividend may legally be declared and the board's failure to do so is a gross abuse of its discretion

true

the business judgement rule protects directors who are loyal and careful from liability for business decisions that result in loss to the corporation

true

the business judgement rule protects directors who are loyal and careful from liability for business decisions that results in loss to the corporation

true

the party who signs the application for a corporate charter is the incorporator

true

Acts of a corporation that goes beyond the powers granted to it by the state or in its charter are _____________acts.

ultra vires

the articles of incorporation for abc corporation specifically forbids the corporations from making personal loans to its officers or directors. despite this, the board approved a personal loan to the president of the corporation. this action by the board is ____

ultra vires

which of the following statements about corporate bonds is true

-bond holders are creditors of the corporation -bonds pay a stated rate of interest

which of the following statements is correct about shareholders' voting rights

-shareholders are entitled to notice when a special meeting is called -a quorum of shareholders must be present to conduct business

A director would incur personal liability if

-the corporation failed to withhold taxes from the wages of employees -the board declared an illegal dividend

directors have which of the following fiduciary duties

-the duty of due care -the duty of loyalty

which of the following statements about promoters is true

A promoter is allowed to sell property he owns to the corporation if the sale is approved by the board of directors after full disclosure

corporate bond holders

Are entitled to be paid a specified rate of interest for a set period of time.

Any money recovered in a successful derivative suit belongs to the shareholder who initiated the suit.

false

Courts will allow creditors to pierce the corporate veil of any corporation that has only one shareholder

false

stock that a corporation buys back from its shareholders is treasury. most state corporation statutes require that the money to repurchase shares come from

accumulated profits or surplus

Smith's Inc. is a closely held corporation in which Joe Smith is the President and owns 80% of the corporation's stock. The corporation was undercapitalized when it was formed, and for the past seven years Joe has regularly taken funds from the corporate account to pay his own personal expenses and debts. Should Smith's Inc. not have sufficient funds to pay a creditor, the creditor may hold Joe personally liable for the corporation's debt under the _____________theory.

alter ego

The theory under which courts pierce the corporate veil or corporations whose shareholders do not treat the corporation like a separate legal identity is the ___ theory

alter ego

A shareholder who dissents from a merger is entitled to

be paid the fair value of her stock

To protect instate investors, most states have statutes regulating the sale of stocks and other securities within the state. These state statutes are referred to as ________________laws.

blue sky

If a plaintiff shareholder cannot show that a director's decision was made in violation of his duties of loyalty or care, the court will allow the decision to stand under the ___ rule

business judgement

the legal principle that assumes that directors act with due care and in the good faith belief that their actions are in the best interests of the corporation is the ___ rule

business judgement

the rules that govern the corporation, including the number of directors it will have, the method of electing directors, the time and place of shareholder meetings, etc., are found in the corporation's ___

by laws

the document that the state issues evidencing that a corporation has been duly formed is the corporation's ___

charter

the merger of 2 corporations who are neither competitors nor related as customer and supplier is a ___ merger

conglomerate

the merger that is the least likely to raise antitrust issues is a ____ merger

conglomerate

the combination of two corporations that results in the dissolution of both corporations and the emergence of a new corporation is a(n) ___

consolidation

A bond holder is a ___ of the corporation; and a shareholder is a ___ of the corporation

creditor---owner

Minority shareholders have the best chance of electing directors in a corporation that uses the ___ method of voting

cumulative

preferred stock whose unpaid dividends accrue and are paid when earnings are available is ___ preferred stock

cumulative

the kind of voting that calculates the total number of votes a shareholder may cast by multiplying the number of shares he owns by the number of directors to be elected is ___ voting

cumulative

the method of voting that gives minority shareholders the best chance of electing someone to the board of directors is ___ voting

cumulative

The suit that a shareholder would bring against the officers of a corporation to enjoin ultra vires acts or acts that impair corporate assets is a _________ suit.

derivative

DEF Corporation, which is incorporated in Maryland, is a ___ corporation in Maryland

domestic

the record date on which a dividend is payable is the ___ date

ex dividend

A shareholder has 120 days after dissenting from a merger to change his or her mind and keep the stock.

false

A shareholder's desire to discover why a dividend was not paid is not a "proper purpose" for allowing the shareholder access to the corporation's records.

false

the merger of two corporations that results in the surviving corporation expanding its products or markets is a ___ merger

market extension

the combination of two corporations that results in the absorption of one corporation into another is a(n)

merger

The board of ABC Corporation approved a new issue of Class B voting stock. The stock has no stated value. This stock is an example of ___ stock

no par

Stock which has no stated value when it is sold is ___ stock

no par value

preferred stock that is entitled to receive only the stated preferred dividend and no other is ____ preferred stock

non-participating

Dominant shareholders in closely held corporations who exploit their control of the corporation to benefit themselves at the expense of minority shareholders are guilty of

oppressive conduct

Tom was the minority shareholder in a closely held corporation. Despite massive profits, no dividends were ever declared. The corporation did, however, pay extremely large salaries and bonuses to the officers of the corporation, who were also the majority shareholders. The majority shareholders of this corporation are guilty of _______________.

oppressive conduct

states that are issued with a face value are

par value shares

The stock John owns in DEF Corporation has the following characteristics: the stock is entitled to a specified dividend and, if there are not sufficient earnings to pay the dividend, the dividends accrue and are paid when earnings are available. This stock is classified as

preferred cumulative

a shareholder who cannot attend a shareholder meeting may give another person the right to vote her shares in that election. this temporary grant of authority is an ___

proxy

States have the power to cancel or revoke the charters of corporations that engage in illegal activities. These forfeiture hearings are called ____ proceedings.

quo warranto

Suits by the state to determine if a corporate charter should be cancelled or forfeited are _______________ proceedings.

quo warranto

The person who is designated to receive notices and service of process for a corporation is its

registered agent

what happens when a court pierces the corporate veil

shareholders become personally liable for the debts of the corporation

which of the following statements about the rights and duties of shareholders is false

shareholders have virtually unrestricted access to corporate books and records

ABC Corporation has been dissolved. After paying all its creditors, ABC will make a cash distribution to its shareholders. Of the following, which shareholders will have priority in the distribution?

shareholders who own preferred stock

Allison is going to create a lawn service business. Allison would like to limit her liability by creating a subchapter "S" corporation. She does not know if the state she lives in allows for a single shareholder corporation. Where should Allison look to find the answer to her question?

state statutes

the document that is written evidence of an ownership interest in a corporation is a(n)

stock certificate

Instead of giving shareholders a cash dividend, ABC Corporation gave each shareholder 2 shares of a new stock issue for each share of stock the shareholder already owned. This is an example of a ___

stock dividend

Mike owned 10,000 shares in Texas Equipment that had a par value of 10. As part of a financial reorganization, Texas Equipment now records Mike as having 20,000 shares with a par value of 5. This is an example of a _____________.

stock split

The certificate issued by a corporation that gives the owner the right to buy a stated number of shares at a stated price is a ___

stock warrant

the method of voting for directors in which each shareholder casts as many votes as he or she has shares is the ___ method

straight

which of the following statements about cash dividends is false

the cash may come from any source, including the corporation's capital stock

what is the name of the doctrine that makes it a breach of a director's duty of loyalty to take for himself a business prospect that should have been offered to the corporation

the corporate opportunity doctrine

which of the following situations would justify piercing the corporate veil

the corporates was formed with the intent of defrauding another party or violating a statute

which of the following are not grounds for a state cancelling a corporation's charter

the corporation has not made a profit in 3 years

which of the following would not be grounds for dissolving a corporation

the corporation has not made a profit or declared dividends in two years

the ex-dividend date is

the date on which a dividend is payable

which of the following is false about the name of a corporation

the name can never be changed once it is registered with the state

a corporation ceases to exist as a legal entity when

the state issues a certificate of dissolution

One method for determining a fair value of the stock of a shareholder who dissents from a proposed merger is the ___

the weighted average method

Stock that a corporation buys back from its shareholders is ___

treasury

which of the following statements about treasury stock is false

treasury stock can be resold only at par value

A corporation officer may be personally liable to the injured third party if he or she aided the corporation in violating a copyright or infringing on a patent.

true

A creditor who succeeds in holding a shareholder liable for the debts of an existing corporation is said to have "pierced the corporate veil."

true

A shareholder who holds watered stock is potentially liable to the creditors of the corporation should the corporation become insolvent and unable to meet its obligations.

true

Boards of directors normally have the power to purchase insurance to indemnify directors who are sued personally for corporation-related actions.

true

Corporations must include the terms "corporation" or "company" or "incorporated" or "limited" in their names.

true

Corporations normally have the power to make charitable contributions.

true

Courts have great discretion in deciding whether to order the dissolution of a corporation when the shareholders or directors are deadlocked.

true

Courts will not allow a merger of corporations if the only purpose is to get rid of minority shareholders.

true

Most states consider a shareholder attempt to oust management to be a proper purpose for allowing the shareholders access to corporation books and papers.

true

Once a corporation has been dissolved and the remaining assets of the corporation have been distributed to the shareholders, a creditor of the corporation may be able to sue the former shareholders on the corporate debt.

true

PaperCo makes paper products from recycled materials. If PaperCo acquires the recycling plant from which it buys most of its raw materials, the acquisition would be a ______________merger.

vertical

the merger of a corporation with one of its suppliers is a ___ merger

vertical

Alice bought 10,000 shares of ABC Corporation that had a par value of 10 a share. To pay for her shares, Alice gave ABC 45,000 in cash and a piece of real property that she said was worth 55,000. In fact, the land appraised for only 20,000. The stock that Alice bought from ABC Corporation is ______________ stock.

watered