Corp mc #5 correct
E Which of these entities created under Florida law may not be converted into a Florida corporation? Answers: Limited liability company General partnership You Selected: Charitable trust Real estate investment trust
Answer choice C is correct. A charitable trust may not be converted into a Florida corporation.
PeachTree Corporation ("PeachTree"), which is in the business of producing and selling peaches, is incorporated in Georgia. The board of directors of PeachTree annually holds its winter board meeting in Key West, Florida. In addition, PeachTree maintains an account with a bank chartered under Florida law. PeachTree also transports peaches from Georgia to New Orleans over Florida highways. Is PeachTree required to register as a foreign corporation with the Florida Department of State? Answers: You Selected: No, because these activities do not constitute doing business in Florida. Yes, because PeachTree's board of directors annually holds its winter board meeting in Florida. Yes, because PeachTree maintains an account with a bank chartered under Florida law. Yes, because PeachTree transports peaches over Florida highways to New Orleans.
Answer choice A is correct because none of these activities engaged in by a corporation constitute doing business in Florida for the purpose of determining whether the corporation must register in Florida.
E The directors of a corporation want to set their own compensation for serving as directors. The current articles of incorporation and the bylaws are silent on this issue. What action, if any, must the directors take to permit the board of directors to set their own compensation? Answers: They need take no action because, by statute, the board of directors can set the directors' compensation. The directors should adopt an amendment to the articles of incorporation that gives the board the right to set their own compensation and secure shareholder approval of the amendment. The directors should adopt a bylaw that gives the board the right to set the directors' compensation. They cannot set their own compensation because only the shareholders may set the directors' compensation.
Answer choice A is correct. By statute, the board of directors may fix the compensation of the directors unless the articles of incorporation or the bylaws state otherwise.
M/H Aqua Co., a Florida corporation, is engaged in salvaging shipwrecks. The articles of incorporation provided for preemptive rights for shareholders of the corporation's only class of stock, but do not spell out the details of those rights. The board of directors has agreed to authorize the issuance of 50 shares of stock to Omar, the owner of a boat, in exchange for the transfer of the boat to the corporation. Aqua currently has 1000 shares of stock outstanding, 100 of which are held by Sanjay. How many shares of stock is Sanjay entitled to acquire from Aqua? Answers: None, because Omar is acquiring his shares in exchange for a boat. Five, because Sanjay is entitled to maintain his 10 percent ownership of Aqua. Ten, because Sanjay currently owns 10 percent of Aqua's 1000 shares. Fifty, because Sanjay is entitled to acquire the same number of shares as will be issued to Omar.
Answer choice A is correct. The shareholders of a Florida corporation have preemptive rights only if the articles of incorporation provide for these rights. Even if the articles of incorporation do provide for preemptive rights, unless the articles provide otherwise, there are no preemptive rights with respect to shares issued for consideration other than money. Here, since Aqua is issuing stock to Omar in exchange for his boat, Sanjay does not enjoy preemptive rights with respect to this transaction.
The persons seeking to form a corporation under Florida law want to impose restrictions on a shareholder's derivative action. Which of the following is a correct statement regarding such restrictions? Answers: A forum selection provision in the articles of incorporation cannot apply to a shareholder's derivative action. The articles of incorporation can specify that the action must be brought in the circuit court for the Florida county in which the corporation has its primary place of business. The articles of incorporation can require that the shareholder submit the matter to arbitration. A provision in the articles of incorporation can impose liability on the shareholder for the corporation's attorney fees or expenses in connection with such an action.
Answer choice B is correct. A corporation in its articles of incorporation (or bylaws) may include an exclusive forum selection provision regarding internal corporate claims that requires such claims to be brought in one or more Florida courts. A shareholder derivative action is among the actions that constitute an internal corporate claim.
M Kernel Farms Corp. ("Kernel") sells all of its farming equipment and other assets to Husky, Inc. ("Husky"). Whose shareholders must approve of this transaction? Answers: The approval of the shareholders of both Kernel and Husky is required. You Selected: The approval of the shareholders of Kernel but not Husky is required. The approval of the shareholders of Husky but not Kernel is required. The approval of the shareholders of neither Kernel nor Husky is required.
Answer choice B is correct. A corporation may sell, lease, exchange, or otherwise dispose of all, or substantially all, of the corporation's assets outside the usual and regular course of business on the terms and conditions and for the consideration determined by the corporation's board of directors. The approval procedure for an asset transfer follows the approval procedure for a merger, except that only the transferor corporation's board of directors and shareholders must approve the transaction. Consequently, answer choices A, C, and D are incorrect.
M Luke was the sole shareholder, officer, and director of XYZ, Inc. ("XYZ"), a Florida corporation. XYZ had been initially formed to purchase a particular restaurant, but the deal had fallen through. For five years, XYZ maintained its status as a Florida corporation, but otherwise was a dormant entity without any assets. Luke, on behalf of XYZ, then leased a building to be used as a restaurant from Olivia, its owner. After the lease was signed, Luke determined that the leased property was unsuitable. When XYZ failed to pay the rent, Olivia sued both XYZ and Luke for damages resulting from the breach of the lease. Since XYZ had no assets, Olivia asked the court to pierce the corporate veil and hold Luke liable. XYZ's articles of incorporation did not address the corporation's purpose or powers. The court found that XYZ was a mere shell corporation, but that Luke had not used XYZ to mislead or defraud Olivia. Should the court rule in favor of Olivia? Answers: No, because Olivia, as a creditor of XYZ, cannot challenge the propriety of the corporation's actions. No, because Luke did not use XYZ to mislead Olivia. Yes, because XYZ was a mere instrumentality of Luke. Yes, because XYZ was undercapitalized.
Answer choice B is correct. In deciding whether to pierce the corporate veil, Florida focuses on whether the corporation was organized or used to mislead creditors or to perpetrate a fraud upon them. The fact that the corporation is a mere instrumentality of the shareholders is not enough to justify piercing the corporate veil. Since XYZ was organized several years before the lease was entered into for the purpose of buying rather than operating a restaurant, XYZ was not organized for the purpose of misleading or defrauding Olivia. Moreover, the court found that Luke had not used XYZ for that purpose. Consequently, the court should refuse to pierce the corporate veil and rule against Olivia
E Flor Corp. is a corporation whose stock is traded on a national stock exchange. The board of directors of Flor Corp. established an audit committee to make this selection. The committee consisted of three directors, all of whom otherwise have no affiliation with the corporation. The director who is also chief financial officer of the corporation was excluded from this committee. The committee has selected Bean Counters as its outside auditor to comply with the Sarbanes-Oxley Act, in part, because Bean Counters has been employed by Flor Corp. to design the corporation's financial information system. After selecting Bean Counters, the audit committee set the firm's compensation. What, if anything, about this process was improper? Answers: The board of directors cannot delegate the selection of an outside auditor to a committee. The audit committee should have included the director who was also chief financial officer of the corporation. The audit committee should not have selected an outside auditor who was otherwise employed by the corporation. The audit committee should not have set the compensation of the outside auditors.
Answer choice C is correct. According to the Sarbanes-Oxley Act, outside auditors cannot be otherwise employed by the corporation. It was improper for the audit committee to select Bean Counter, who was employed by the corporation to design the corporation's financial information system.
M The president of a corporation, in accord with her authority under the bylaws to employ the other officers of the corporation, entered into a one-year contract with Tobin for him to serve as treasurer of the corporation. The contract specified that Tobin could be removed only for reasons that related to his conduct when performing his duties as treasurer. Three months later, the president, upset with the notoriety Tobin had garnered for the conduct of his personal life, dismissed him. Neither the corporate bylaws nor the board of directors address the president's authority to dismiss corporate officers. Which of the following most correctly describes the legal effect of the president's action? Answers: The president cannot dismiss Tobin based on Tobin's conduct of his personal life. The president's dismissal of Tobin is improper in the absence of bylaw or board authorization. You Selected: The president can effectively dismiss Tobin, but the corporation is liable to Tobin for breach of contract. The president has the authority to dismiss Tobin and, by exercising that authority, terminate any contractual rights Tobin has.
Answer choice C is correct. Unless the bylaws or the board of directors provide otherwise, an officer may be removed with or without cause at any time by the board of directors, the appointing officer, or successor to that officer. The existence of an employment contract between an officer and the corporation does not prevent the removal of the officer, but it may give rise to contractual remedies, such as damages, if removal constitutes a breach of contract. Here, the president, as an officer with the authority to hire Tobin as treasurer, also has the authority to fire him, despite the existence of a contract purporting to limit that authority. However, since Tobin was removed for conduct unrelated to his job as treasurer, the president will be liable to Tobin for breach of contract
Which of the following is required to be set forth in a corporation's articles of incorporation? Answers: A statement of the corporation's duration, which may indicate that the corporation has perpetual existence A statement of the corporation's purpose The names and addresses of the directors constituting the corporation's initial board of directors The corporation's aggregate number of authorized shares of stock
Answer choice D is correct. A corporation's articles of incorporation must include the aggregate number of authorized shares of stock.
E/M A year ago, Min, a shareholder of Mega Corporation ("Mega"), acquired title to her shares through a divorce proceeding. The shares had belonged to her husband who had been an initial shareholder of Mega. A month ago, Min made a demand that the board of directors of Mega address looting of the corporation's assets by officers of the corporation, which had been ongoing for several years and recently had escalated to the point that the corporation's financial well-being was threatened. A month later, the board has not yet taken any action on Min's demand. May Min presently file a derivative shareholder action? Answers: No, because the board has 90 days from the date of the demand in which to respond to Min's demand. No, because the officers' wrongful conduct predated her ownership of Mega stock. Yes, because a month has passed since Min made a demand on the board. Yes, because the officers' wrongful conduct threatens material injury to the corporation.
Answer choice D is correct. A derivative action generally may not commence until at least 90 days have passed since the date of demand unless, prior to the expiration of the 90 days, the board of directors refused, rejected, or ignored the demand. However, the plaintiff, after making a demand on the board, may be excused from waiting for the board to respond to the demand if the delay would result in irreparable injury to the corporation or misapplication or waste of corporate assets causing material injury to the corporation. Here, since the looting of Mega's assets by the corporation's officers now threatens Mega's financial well-being, Min may file her shareholder derivative action without waiting for the board of directors to respond to her demand.
M A newly elected director of a corporation engaged in the fast food business has a potato farm. The director is interested in supplying the potatoes from his farm to the corporation. The director is concerned about any potential conflicts of interest he might face in this transaction and seeks advice from his attorney. The attorney should advise the director that: Answers: A director is strictly prohibited from doing business with his own corporation. The director can sell potatoes to the corporation provided that either a majority of the qualified directors or a majority of disinterested shareholders approved the purchase. The director can sell potatoes to the corporation provided that both a majority of the qualified directors and a majority of disinterested shareholders approved the purchase. The director can sell potatoes to the corporation provided the transaction is fair to the corporation.
Answer choice D is correct. A director who engages in a conflict of interest transaction with his own corporation, also known as self-dealing, has violated his duty of loyalty unless the transaction is fair to the corporation
M/e A group of individuals wants to form a for-profit company in Florida that has as a purpose of manufacturing and selling inexpensive computers at cost to individuals in the United States whose household income is below the poverty level. Can they do so? Answers: No, they can achieve that purpose only through a not-for-profit corporation. No, a for-profit corporation cannot have as a purpose an activity that is not meant to generate a profit. Yes, by forming a benefit corporation. You Selected: Yes, by forming a social purpose corporation.
Answer choice D is correct. The statutory purpose of a social purpose corporation is to create a public benefit, rather than a "general" public benefit, which is the statutory purpose of a benefit corporation. Thus, a social purpose corporation may pursue a single public benefit, such as providing computers at cost to individuals whose household income is below the poverty level, while also engaging in for-profit activities.
