BUL 5810 - CORPORATIONS

In the case of Dodge v. Ford Motor Co., the court held: (3)

1. A business corporation is organized and carried on primarily for the profit of the stockholders 2. The right of shareholders to receive a dividend may not be arbitrarily withheld by the directors 3. The directors were not acting in the best interest of the corporation.

Allen owns 200 of the 1,000 shares outstanding of General Myopics. GM plans to issue 1,000 new shares. If Allen has preemptive rights, he may buy:

200 shares at the new stock price

Which of the following is correct regarding a foreign corporation? a. A foreign corporation is incorporated in a foreign country. b. Failure to obtain a certificate of authority to transact business in the state impairs the validity of a contract entered into by the corporation. c. A foreign corporation transacting business within a particular state without having first qualified cannot use the state court to maintain a lawsuit until the corporation obtains a certificate of authority.

A foreign corporation transacting business within a particular state without having first qualified cannot use the state court to maintain a lawsuit until the corporation obtains a certificate of authority

Courts have responded by piercing the veil when the shareholders have: a. not followed the formalities of corporate procedures. b. not provided an adequate financial basis for the business. c. used the corporation to defraud.

ALL OF THESE ARE CORRECT

Shareholders of Tridential, Inc. are worried that the court will "pierce" its corporate veil and hold the shareholders liable. Which of the following factors will a court consider in deciding whether to pierce Tridential, Inc.'s corporate veil? a. Tridential, Inc. did not follow the formalities of corporate procedures. b. Tridential, Inc. did not provide an adequate financial basis for the business. c. Tridential, Inc. did used the corporation to defraud others.

ALL OF THESE ARE CORRECT

Which of the following is the basic governing document of a corporation?

Articles of Incorporation

The incorporators would typically do which of the following? a. Purchase outstanding shares. b. Assemble the assets. c. Sign the charter.

Assemble the assets

State laws that regulate the issuance and sale of securities are known as:

Blue sky Laws

Which of the following determines when to declare dividends and in what amount?

Board of Directors

James, a promoter of Unobtainium Corporation, has a fiduciary duty to:

Both the other promoters and the initial shareholders of Unobtainium Corporation

Carlos is a promoter of Debonair Enterprises, Inc. To whom, if any, does Carlos owe a fiduciary duty?

Carlos owes a fiduciary duty to any other promoters of Debonair Enterprises.

Which of the following is correct with regard to common stock?

Common stock does not have any special contract rights or preferences

Robert approaches you and seeks to form a corporation. He asks you which document should he create to govern the corporation. What do you tell him?

Create Articles of Incorporation

What are the principal sources for corporate financing?

Debt Equity Investment Securities Retained Earnings

Deer Haven, Inc. is a corporation incorporated in Arkansas and has its principal office in San Antonio, Texas. Which of the following is true of Deer Haven, Inc.'s citizenship status?

Deer Haven, Inc. is a citizen of Arkansas and Texas, for the purpose of determining diversity of citizenship

All states impose a "cash flow test" on the payment of dividends or other distributions. The "cash flow test" is also known as the:

Equity Solvency Test

Which of the following is NOT a characteristic of the corporate form of doing business?

Informal organization

All of the following are characteristics of a corporation EXCEPT: a. it has perpetual existence. b. it is a legal entity of its own. c. it is able to be sued and to sue. d. it is usually managed by its owners.

It is usually managed by its owners

Claire opened Claire's Beauty Parlor in her home. She solicited funds to begin the business from Jack, who believed that the business was incorporated. Claire had, in fact, never filed the papers. One day, Claire fell asleep while giving a customer a permanent and the solution caused her customer severe burns. The customer sued the Beauty Parlor for $500,000, an amount enormously in excess of the business assets. Under the Revised Act, what would be the result?

Jack would not be personally liable, but Claire would

In the case of Harold Lang Jewelers, Inc. v. Johnson, the court found that:

Lang's business was regular, continuous and substantial such that it was transacting business in North Carolina

Under the Revised Act, Lupita owns common stock in XeroSum Corporation. Lupita believes that her common stock is preferred stock. Which of the following is correct with regard to Lupita's common stock?

Lupita's common stock does not have any special contract rights or preferences

Barbara, a self-made millionaire, wants to start a corporation exclusively for charitable and educational purposes. What type of corporation should Barbara form?

Non-profit corporation

Denali, Inc. is seeking to pay out dividends to all of its shareholders and seeks advice on the customary type of dividend to pay out to its shareholders. What advice would you give Denali, Inc.?

Pay shareholders cash dividends

The Porter Corporation has $100,000 in equity and $150,000 in liabilities. If the board of directors seek to declare dividends, which of the following is true under the cash flow test?

The Board cannot declare dividends because doing so would make Porter Corporation insolvent

Yukon Corporation purchases 1,000 shares of its own stock from Jones at a price of $50 a share. These shares, which are now issued but not outstanding, are known as:

Treasury Shares

__________, usually called debentures, have only the obligation of the corporation behind them.

Unsecured bonds

Patrick, a shareholder in Denali, Inc., thinks that the company is doing well, but wants to know when and who decided when to declare dividends and how much, and he seeks your advice. What advice would you give Patrick to answer his questions about dividends?

Wait for the Board of Directors to declare dividends

Michael is truck driver employed by Simmons Construction Corporation. While operating the truck during business hours, Michael negligently crashes into Peter. Is Simmons Construction Corporation liable?

Yes, Simmons Construction Corporation is liable under the doctrine of respondeat superior

The president of Hi-Glow Cosmetics sends his top chemist to Hi-Glow's competitor's labs to steal its formula for shiny lipstick. The chemist gets caught and is sent to jail. Can Hi-Glow be found to be criminally liable?

Yes, since the president authorized the crime

In the case of Coopers & Lybrand v. Fox, the court held:

a promoter is personally liable for the contracts he makes

A promoter of a corporation has a fiduciary duty to:

any other promoters of that corporation

If The Raintree Company has accumulated earnings each year but the directors have not declared dividends for five years, the shareholders may:

ask for an injunction requiring a dividend to be declared

The most customary type of dividend is a:

cash dividend

The Ajax Corporation issues bonds that pay a minimum of 6% interest but that can pay more if corporate earnings reach certain specified levels. The holder of the bond may exchange it for stock of the corporation. This bond would be a:

convertible bond

In the case of Metropolitan Life Insurance Company v. RJR Nabisco, Inc., the court:

examined the indentures themselves to determine the agreement of the parties

The board of directors cannot declare dividends when the corporation:

is insolvent

Par value:

is the minimum price at which the corporation may sell the stock at issuance

In Cox Enterprises, Inc. v. Pension Benefit Guaranty Corporation, the court found that solvency should be measured on the date:

of a payment to a shareholder

A corporation is considered a citizen:

of the state in both (1) where it has a principal office (2) its incorporation

Use of "Evans & Hall, Ltd." as a corporate name would be:

permissible as long as it is distinguishable from the nae of any other domestic corporation or any foreign corporation authorized to do business within the state

The case of Harris v. Looney dealt with the issue of:

personal liability for a debt by a person purporting to act as or on behalf of a corporation, knowing no corporation existed.

Wyatt, the sole stockholder of International Travel Corporation, wrongfully used the corporation to avoid a personal liability. A court's disregarding the corporate entity and holding Wyatt personally liable is called:

piercing the corporate veil

A corporation's proportional distribution of additional shares of the corporation's capital stock to its shareholders is a:

stock or share dividend

The possible consequences of a defective incorporation include all of the following except: a. the state may bring an action against the association for involuntary dissolution. b. the association always being liable for an obligation. c. the associates are held personally liable to a third party. d. a third party asserts it is not liable to the association.

the association always being liable for an obligation

If Alfred seeks to find out what the par value of his stock in Denim Corporation, Alfred wants to know:

the minimum price at which Denim Corporation may sell the stock at issuance

Whether a corporation is a de facto corporation may be challenged by:

the state in which the business attempted to incorporate

The directors of Premier Glass Company authorize the issuance of 100 shares of common stock for $25 per share to Justin for property the directors value at $2,500. The valuation:

under the Revised Act, depends on the directors' determination of the consideration's "adequacy"