Chapter 33

Defining a corporation with such information as the corporate name, the number and type of authorized shares of stock, identification of the purpose and the agent, is done through the:

All of the above. All of these terms are used to identify the same document.

Which of the following statements is correct?

All the above are correct.

Once a provision is in the corporate charter, it can only be changed by:

Both of the above are necessary to change a corporate charter.

What is meant by the term "piercing the corporate veil"?

Corporate shareholders may be held personally liable to a person damaged by an act of the corporation.

A business corporation can be incorporated under either state law or federal law.

F

Incorporators are required to sign the charter, deliver it to the proper state officials, and purchase a certain percentage of the initial stock offering.

F

Incorporators of Maizey Co. signed and delivered the corporate charter to the proper office, but due to inefficiencies in the government office, the filing was delayed. During the period between the delivery of the charter and the filing, a promoter of Maizey Co. entered a contract for the delivery of goods using the corporate name. The supplier, if it finds out the filing had not been completed when the contract was entered, may hold the promoter personally liable on the contract.

F

It is illegal for shareholders to transfer their stock to a trust and give the trustee the power to vote the shares.

F

Terminating a corporation is a three-step process: dissolution, winding up, and termination.

F

Under corporate law, a corporation that officially states its purpose is "to engage in any lawful activity for which corporations may be organized under the General Corporation Law of Idaho" is too broad. A corporation's purpose must be more narrowly defined.

F

MegaCorp is incorporated under Delaware law. It is registered to do business in New York. Legally, in New York MegaCorp is known as what kind of corporation?

Foreign.

MegaCorp occasionally sells products in Michigan. It does not have an office in that state and does not advertise in Michigan. The company's marketing representatives are based in New York but do travel to Michigan once a year to attend a trade show. Which statement is correct?

MegaCorp is not required to register in Michigan because it does not have an ongoing presence in Michigan.

The directors of MegaCorp learn that an outsider is planning on buying enough voting stock to get herself elected to the board of directors. MegaCorp, which has cumulative voting, quickly puts together a vote of shareholders to eliminate the company's cumulative voting procedure. The shareholders vote to do away with cumulative voting. The outsider, Dawn, who wanted to get herself elected to MegaCorp's board, claims that the company has committed an illegal act. Is she right?

No. Under the Model Act, regardless of MegaCorp's motives, it had the right to act as it did.

Fashions, Inc. has 12 shareholders. There is no shareholder agreement concerning the board of directors. The company is subject to the Model Act. How many directors is Fashions, Inc. required to have?

None.

A corporation by estoppel is based on fairness rather than strict legal rules.

T

A corporation is not allowed to issue dividends to shareholders unless it is solvent.

T

A corporation must always have a registered agent within the state of incorporation, even if the corporation does not maintain an office in that state.

T

A de jure corporation is recognized as a corporation despite a defect in incorporation.

T

Lee owns 1,000 shares of common stock in TriColor, Inc. Common stock is last stock in line for any corporate payouts, including dividends and liquidation payments.

T

Owners of preferred stock typically have a preference in liquidation.

T

Sara decided to incorporate her business under the name Gomo, Inc. Before Gomo was incorporated, Sara signed a contract in the name of Gomo, Inc. to lease a store front. Sara did not tell the other party that Gomo was not yet formed. Sara is personally liable on the lease.

T

Shyff decided to incorporate his business under the name of "Zamm." In addition to "Zamm," the Model Act requires that Shyff include one of the following words: "corporation," "incorporated," "limited," or "company" or an abbreviation thereof.

T

TriColor, Inc. is doing business in Minnesota, West Virginia, and Oklahoma. TriColor must register in all three of these states.

T

Fashions, Inc. has 12 shareholders. The company is subject to the Model Act. What officers is Fashions, Inc. required to have?

Whatever officers are described in the corporate bylaws.

MegaCorp is incorporated in the state of Delaware and is registered only in Delaware. Jolene purchased a MegaCorp product from a company's sales representative following a presentation in Michigan. Jolene was seriously injured by the product in Michigan. Under the Model Act, if Jolene sues in Michigan, can MegaCorp defend the suit there?

Yes, MegaCorp can defend against a lawsuit in Michigan regardless of whether MegaCorp is registered to do business in that state.

A corporate charter is filed with:

a state's Secretary of State office.

Hank owns 100 shares of cumulative preferred stock in Wayside Transport, Inc. Kelsey owns 50 non-cumulative preferred shares, and Oleg owns 120 shares of common stock. Wayside does not pay dividends in 2007. In 2009:

all of the above.

The executives of Jornaginn Corporation have decided they need to sell 50,000 additional shares of stock to finance their plans. The executives:

are limited by the number of shares authorized in the corporate charter, but this number can be increased by amending the charter and paying a fee.

Laurie is incorporating her business. The business's home state is Wisconsin. Business will be conducted in California, Michigan, Pennsylvania, and Virginia. Laurie:

can incorporate the business in any state.

The officers of a corporation are:

chosen by the board of directors.

Corporate stock can be divided into categories called ________, which can be further divided into ________.

classes, series.

In incorporating E-prise, the promoter gave an incorrect ZIP Code for the registered agent. All of the other requirements for incorporation were met. E-prise is a(n):

de jure corporation.

Preemptive rights are:

designed to prevent dilution of a shareholder's ownership in the company.

In Delaware, a person may reserve a corporate name:

for 120 days by paying a $75 fee.

Under most state statutes, a corporation may:

include in its charter a provision indemnifying directors unless they have engaged in intentional misconduct or bad faith.

Incorporation protects:

shareholders against personal liability for the debts of the company.

Mike is planning on incorporating his business in the state of Delaware. The corporate name of Mike's business must be different from:

that of any corporation that already exists in Delaware.

Wizardry Corporation's purpose clause in its charter states, "To operate a home-cleaning service business." After a few years of successful operation, Wizardry is offered the challenge of landscaping a neighboring business. If Wizardry accepts the offer, it would be violating its charter under:

the ultra vires doctrine.

MegaCorp purchased 10,000 shares of its own stock that had previously been owned by private investors. The stock MegaCorp repurchased is called:

treasury stock.

Carey decided to incorporate her business under the name yStar Inc. Before yStar was incorporated, Carey signed a contract in the name of yStar, Inc. to have some office space remodeled. Which statement is correct?

yStar will be liable on the contract only if the corporation adopts the contract.