BUL 3310 Unit 14

The business judgment rule protects directors who are loyal and careful from liability for business decisions that result in loss to the corporation. True False

True

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

True

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. Domestic Foreign Native Alien

Foreign

In a consolidation, one corporation (A) assumes the assets and liabilities of another corporation (B), and corporation B ceases to exist. True False

False

Participating preferred stock allows holders to trade their preferred shares for common shares when the trading price reaches a specified target. True False

False

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

False

Pre-incorporation stock subscriptions are merely offers to purchase stock and are not normally binding on the purchaser. True False

False

Receivers have liability on the pre-incorporation contracts of the corporation. True False

False

Shareholders are taxed on the value of the stock they receive in stock dividends True False

False

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

False

The person appointed by a corporation to receive service of process is the receiver. True False

False

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

False

A cash dividend is a transfer of retained earnings to capital. True False

False

A corporation incorporated in Delaware and doing business in New Jersey is not a foreign corporation in New Jersey. True False

False

A promoter is an agent of the corporation. True False

False

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

False

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

False

Article 2A of the Uniform Commercial Code governs the sale of securities. True False

False

Directors have no personal liability for illegally declared dividends. True False

False

Directors must be compensated for their services. True False

False

The dividend that a corporation pays on its common stock must be __________ the dividend that it pays on its preferred stock. Greater than Less than Equal to The dividend on common stock may be any of the above.

Any of the above

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 Asset protection Investment trust White knight

Blue sky

A director would incur personal liability if The corporation failed to withhold taxes from the wages of employees The board declared an illegal dividend The shares of the corporation lost more than 20 of their market value. Both a and b

Both a and b

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 judgment Entire fairness Corporate governance Unocal

Business judgment

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 judgment Director indemnity Good faith and fair dealing Entire fairness

Business judgment

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 Articles of incorporation Charter State incorporation code

By laws

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. Proxy Cumulative Non-cumulative Divisible

Cumulative

DEF Corporation, which is incorporated in Maryland, is a ___________corporation in Maryland. Foreign Domestic Alien Native

Domestic

The merger of two businesses in the same field that reduces the number of competitors is a _________________merger Conglomerate Vertical Horizontal Consolidation

Horizontal

Three major U. S. 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 Vertical Market product extension Conglomerate

Horizontal

The merger of two corporations that results in the surviving corporation expanding its products or markets is a _____________merger. Conglomerate Market extension Horizontal Vertical

Market extension

The document that the state issues evidencing that a corporation has been duly formed is the corporation's __________. By laws Articles of incorporation Charter Certificate of authority to do business.

NOT Articles of incorporation Charter (other)

The method of voting that gives minority shareholders the best chance of electing someone to the board of directors is ______________ voting. Cumulative Consolidated Proxy Supermajority

NOT Consolidated. other says cumulative

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 judgment Entire fairness Corporate governance Unocal

NOT Corporate governance Probably business judgement

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 responsible corporate officer doctrine The corporate opportunity doctrine The business judgment doctrine The privileges and immunities doctrine.

NOT The corporate opportunity doctrine But it is

The ex-dividend date is The date on which a stock warrant expires. The date on which a dividend is payable. The date on which a convertible stock option expires. The date on which the corporation purchases treasury stock.

NOT The date on which a convertible stock option expires. The date on which a dividend is payable. (other)

In a successful derivative suit, any money awarded in the judgment will go to The corporation The plaintiff shareholder The plaintiff shareholder and the corporation will share the money equally. There can be no award of money because only equitable remedies are available in derivative suits.

NOT There can be no award of money because only equitable remedies are available in derivative suits. The corporation(other)

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 Ultra vires acts Quo warranto acts Oppressive conduct Unfair trade practices.

Oppressive conduct

When ABC Corporation was formed, the directors authorized an issue of 1,250,000 shares at $1,000 a share. These shares are classified as _______________stock. Treasury Watered Par value No par value

Par value

Shares that are issued with a face value are Par value shares No par shares Treasury shares Non-certificated

Par value shares

Pat agreed to purchase 250 shares of Pamco Company five months before the corporation came into existence. This agreement is an _______________ Shareholders trust Shareholders proxy Pre-incorporation subscription Preemptive preference

Pre-incorporation subscription

Pat agreed to purchase 250 shares of Pamco Company five months before the corporation came into existence. This agreement is an _______________ Shareholders trust Shareholders proxy Pre-incorporation subscription Preemptive preference 1 points

Pre-incorporation subscription

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

Preferred

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 _______. Warrant Proxy Assignment Delegation

Proxy

Which of the following statements about the rights and duties of shareholders is false? Shareholders have virtually unrestricted access to corporate books and records Majority shareholders may have fiduciary duties to minority shareholders in closely held corporations. Shareholders must approve changes to the corporate charter. Shareholders are entitled to notice of the annual meeting and all special meetings. 1 points

Shareholders have virtually unrestricted access to corporate books and records

What happens when a court pierces the corporate veil? Shareholders become personally liable for the debts of the corporation. The court revokes the corporate charter. The promoter becomes liable for the debts of the newly formed corporation The court requires that the corporation be more substantially capitalized.

Shareholders become personally liable for the debts of the corporation.

Which of the following statements about cash dividends is false? Cash dividends become a debt of the corporation once they are declared. Directors have personal liability for illegally declared dividends Shareholders who receive illegal cash dividends may be forced to return them to the corporation. The cash may come from any source, including the corporation's capital stock.

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

Which of the following would not be grounds for dissolving a corporation? A quo warranto proceeding The shareholders are deadlocked in electing a board of directors. Oppressive conduct by a controlling shareholder. The corporation has not made a profit or declared dividends in two years.

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

Which of the following situations would justify piercing the corporate veil? The majority shareholder loans money to the corporation All the shares of a corporation are held by one person All the shares of a corporation are held by another corporation. The corporation was formed with the intent of defrauding another party or violating a statute.

The corporation was formed with the intent of defrauding another party or violating a statute.

A corporation ceases to exist as a legal entity when The directors vote unanimously to dissolve the corporation The shareholders vote unanimously to dissolve the corporation The directors of the corporation notify corporation creditors of the dissolution. The state issues a certificate of dissolution.

The state issues a certificate of dissolution.

A corporation is a person for purposes of the due process clauses of the 5th and 14th Amendments. True False

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 False

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 False

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 False

True

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

True

Corporations normally have the power to make charitable contributions. True False

True

In a closely held corporation, shareholders owe each other substantially the same fiduciary duties that partners owe one another. True False

True

In most states corporations can have perpetual existence. True False

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 False

True

Shareholders have a right to vote on major changes to the corporation, such as mergers and dissolutions. True False

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 False

True

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

True

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

True

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

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 False

True

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

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. Horizontal Vertical Conglomerate Market product extension

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. Treasury Watered Non-par Non-participating

Watered

Which of the following statements about corporate bonds is true? Bond holders are creditors of the corporation Bond holders have the right to vote for directors Bonds pay a stated rate of interest. a and c

a and c