BUL 3310 Ch 29

Mercado Corporation is voting for two directors. Candace owns 500 shares of Mercado stock. Because Mercado uses cumulative voting to elect its directors, Candace has:

1,000 votes.

The exclusion of minority shareholders from the benefits of participating in the firm by majority shareholders is:

A breach of the shareholders' fiduciary duty.

Carla's cupcake business could really grow if she had enough money to expand. To generate funds, she sells shares in the company to her two brothers, her cousin, and her friend. Her company likely would be considered:

A close corporation.

The board of directors of U.S. Goods Corporation announces that the corporation will pay a cash dividend to its shareholders. Once declared, a cash dividend is

A corporate debt.

Rena incorporates her business, Rena's Rhinestones, in her home state of Maryland. She wants to expand and sell some of her baubles in Virginia. In Virginia, her company will be considered

A foreign corporation, because her business has been incorporated in another state.

Annie owns stock in a company and feels that her stock has lost significant value as a result of actions taken by the corporate directors. When a corporation suffers a wrong as a result of its directors' conduct, one way to address the harm is through:

A shareholder's derivative suit.

When a corporation suffers a wrong as a result of actions taken or not taken by the corporate directors, one way to address the harm is through:

A shareholder's derivative suit.

Stock may be described as:

An ownership interest in the corporation.

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

False

The rights of shareholders are established only in the articles of incorporation.

False

The management of National Brands, Inc., is at odds with the shareholders over some recent decisions. To redress a wrong suffered by National from the actions of management, the shareholders may

File a shareholder's derivative suit.

Trey owns 250 shares of common stock in a toy store company. This means that he owns a percentage of the company based on the proportion of shares he owns out of the total shares issued by the company. With this ownership he also acquires rights to:

Vote.

In simple terms, an S corporation can be defined as a corporation:

Whose shareholders have limited liability but avoid corporate income taxes.

Federated Products Corporation uses cumulative voting in its elections of directors. Mary owns 3,000 Federated shares. At an annual shareholders' meeting at which three directors are to be elected, how many votes may Mary cast for any one candidate?

9,000

Adam, Terry, and Victor want to form ATV Corporation. Which of the following is not a step in forming the corporation?

Adopting bylaws at a shareholders' meeting.

A major power held by shareholders is the power to:

Amend the articles of incorporation or the corporate bylaws.

U.S. Digital Corporation incorporated in Ohio, its only place of business. Its stock is owned by ten shareholders. Two are resident aliens. Three of the others are the directors and officers. The stock has never been sold to the public. If a shareholder wants to sell his or her shares, the other shareholders must be given the opportunity to buy them first. U.S. Digital is

Close Corp

A corporation whose shares are held by members of a family most likely is a:

Close corporation.

Leslie is starting up a new business, and she needs to raise additional capital to get it going. Her associate, Lenny, set up an Internet site with information about the company in an attempt to attract investors. This is an example of:

Crowdfunding.

Cohen, Stracher & Bloom, Inc., was a close corporation with Bloom, Cohen, and Stracher as the only officers, directors, and shareholders. The corporation entered into a lease agreement with Property Co. to rent office space. The lease was signed by Paul Bloom, with a note that he was signing as the vice president of Cohen, Stracher & Bloom. When the corporation became delinquent in paying its rent, Property Co. sued to recover approximately $9,000 in lease payments and other charges due under the lease. The complaint was filed against the corporation and each individual shareholder. The individual shareholders moved to dismiss the actions against them individually. The court most likely:

Granted the motions to dismiss, because shareholders in corporations are not individually liable unless the court pierces the corporate veil.

Mark is the CEO of TruLawn Landscaping. The stated purpose of TruLawn is to do yard and garden work. Mark contracts with Judah in TruLawn's name to use TruLawn trucks to help move Judah's office. Mark likely:

Has committed an ultra vires act.

Mike, Nora, and Paula are shareholders in National Business, Inc. All of the shareholders are National's

Owners.

Linda and Jerry started a consignment business called Cozy Consignment. They would take furniture and clothing from sellers and hold it in their shop until it was purchased. Upon purchase, Cozy Consignment would keep a commission and would give the remaining income to the owners of the furniture and clothing. Cozy Consignment was incorporated with Linda and Jerry as the only shareholders, directors, and officers. The sign on the building did not include the terms Corp., Inc., or any other indication that the business was a corporation. Similarly, letterhead, business cards, and other outward marketing and publicity did not include any notice that the business was incorporated. Linda admitted that she had not been as regular as she should have been in filing annual reports and statements with the state, though she stated that the company did have annual meetings. Mary Ann contacted Cozy Consignment and dropped off approximately $15,000 worth of clothing and furniture for sale. Because of sloppy bookkeeping and a failure to pay corporate income taxes, the Cozy Consignment went out of business. Linda and Jerry donated all inventory to a charity. Mary Ann sued, alleging that Linda and Jerry had converted (taken as their own) all of her consigned furniture and clothing. Jerry and Linda responded that the corporation had gone out of business and had no assets. Mary Ann asked the court to pierce the corporate veil. In this case, a court likely would:

Pierce the corporate veil because the corporation failed to observe corporate formalities.

Lysco, Inc., gives to all 15,000 of its shareholders the right to purchase newly issued shares of Lysco stock in proportion to the percentage of shares they currently own and before anyone else is offered the shares. This right is known as a(n):

Preemptive right.

Keenan wants to incorporate his business. He buys business cards and labels with the name "Keenan's Kwips" on them and begins selling gag gifts. Keenan follows the rules for incorporation in his state, including a statement that he is the sole shareholder, and he is granted a certificate of incorporation. Keenan's business is probably a:

Properly formed corporation.

Suzy signs a written agreement with Phillip, giving Phillip the right to cast Suzy's votes for a certain group of people nominated for the Syllibar Corporation board of directors. This agreement between Suzy and Phillip is known as a:

Proxy.

Jill is a shareholder of United Manufacturing Company. As a shareholder, Jill's rights include all of the following except a right to

Sell corporate property when directors are mishandling corporate assets.

Preventing insider trading (when someone uses information that is not available to the public to buy or sell securities to make a profit or avoid a loss) is one of the major goals of:

The Securities Exchange Act of 1934.

General Manufacturing, Inc. (GMI), issues bonds to finance the purchase of a factory. Regarding those bonds, which of the following is true?

The bonds must be repaid.

Shareholders have a right to inspect:

The corporate books and records, but only for a proper purpose.

Jacob Shimmel and Herbert Kosak, the founders of Komel Electric Corp., each owned 50 percent of the corporation's shares and served as the corporation's only officers. Kosak brought a shareholder's derivative suit against Shimmel, alleging that Shimmel had diverted Komel assets and opportunities to Shimmelly Systems, Inc., a corporation wholly owned by Shimmel. The court held that Shimmel had wrongfully diverted the funds and had stolen corporate opportunities. On the issue of the damages, Kosak argued that they should be awarded to him personally so that Shimmel, as a shareholder of Komel, would not be able to share in the proceeds of the award. The court most likely granted damages to:

The corporation, because Shimmel's actions deprived the entire corporation, not just Kosak, of profits.

Articles of incorporation must contain

The name or the corporation and its registered agent.

As a general rule, shareholders are not personally responsible for the debts of the corporation.

True

Cumulative voting allows minority shareholders to obtain representation on the board of directors.

True

Stocks represent the purchase of corporate ownership.

True

A corporation is an artificial being.

True.

A corporation that is formed in a country other than the United States, but which does business in the United States, is a foreign corporation.

True.

Acts of a corporation that are beyond the authority given to it by its charter are called:

Ultra vires acts.