Chapter 34 BLAW

liable for their own crimes and torts, and may be liable for the crimes and torts committed by corporate employees under their supervision

liability of directors and offiers

annually

shareholder meetins must occur at least ____

shareholder derivative suit

the right to sue on behalf of the corporation

dividends

payments of cash from a corporation to its stockholders

True

Corporate officers are hired by the directors.

proxy

(n.) an agent, substitute; a written permission allowing one person to act in another's place

do not

Individual corporate directors ____ have the ability, as agents of the corporation, to bind the corporation.

False- A corporation can properly deny a shareholder request if the request is not for a proper purpose, e.g. for harassment or to get protected trade secrets.

A corporation cannot refuse a shareholder's request to inspect corporate records. (T/F)

A person on the board of directors who does not hold a management position at the corporation is an outside director.

A person on the board of directors who does not hold a management position at the corporation is:

need not

A shareholder ___ have a stock certificate to prove ownership of the stock.

proxy solicits

Because shareholders with a very small percentage of shares may not be able to travel to annual meetings, the law allows them to appoint someone else to vote their shares using a____ authorization form. Management often ____ these.

in good faith ordinarily prudent best interest

Directors and officers have a duty of care to act _____ , to exercise the care that a(n) _____ person would exercise in similar circumstances, and to do what the director or officer believes is in the ____ of the corporation.

shareholders

Directors are elected by ____ and usually serve a one-year term

False

Directors are hired by the shareholders through an interview process.

participation, inspection, and indemnification

Directors' rights include the rights of ____, ___, ____

True

If a board of directors declares a dividend to "pay back" investors but that dividend would cause them to have to miss paying several bills as they become due, the members of that board will be personally responsible for any loss to the corporation.

quorum

In order for shareholders to exercise control, a ___ must be present, either in person or through proxies.

d. valid and enforceable.

Odell, Prince, and Quinn are shareholders of Rite Corporation. Before a shareholders' meeting, they agree in writing to vote their shares together in a certain manner. Usually, such agreements are held to be: a. oppressive and irresponsible. b. suspect and voidable. c. invalid and unenforceable. d. valid and enforceable.

Fiduciaries

Officers and directors have a special relationship with the corporation and its shareholders and are called:

True

One of the hallmarks of the corporate form is that shareholders may lose their investment in the corporation but no more than that.

True- Shareholders vote on fundamental changes affecting the corporation (e.g. amending articles and bylaws or approving a merger) and elect the directors. However, shareholders do not manage the corporation.

Shareholders have no right to manage a corporation. (T/F)

c. are immune from liability for bad business judgments so long as they exercised reasonable care

The business judgment rule states that directors and officers: a. are never liable for bad business decisions if they attend all their meetings and vote for the actions b. must make good business judgments or be held personally liable for any loss to the corporation c. are immune from liability for bad business judgments so long as they exercised reasonable care

d. allow minority shareholders a chance at electing a director

The reason that most states either permit or require cumulative voting when electing directors is to a. allow directors to have greater input in to the election process b. reduce fraud among voters c. allow minority shareholders to control the election process d. allow minority shareholders a chance at electing a director

b. are paid into the corporation's treasury

To encourage shareholders to pay attention to the board's actions, when a shareholder's derivative suit is won, the damages: a. are paid to the shareholders, but only up to 50% of the damages b. are paid into the corporation's treasury c. are fully paid to the shareholders who brought the suit

conflicts of interest

To fulfill their duty of loyalty, directors and officers must make a full disclosure of any potential conflicts between their personal interests and those of the corporation.

disclose abstrain from

When a corporation enters into a contract or engages in business with another corporation in which one of the board members has a personal interest, that board member must fully ____ the conflict and ____ voting.

Directors

______ responsible for all policymaking decisions necessary to the management of corporate affairs

True

a min number of shareholders (a quorum) must be present at a meeting for business to be conducted. Resolutions are usually passed by simple majority vote

cumulative voting

a system in which a shareholder can accumulate all of his or her votes and vote them all for one candidate or split them among several candidates

Quorum

minimum number of members that must be present to rightfully transact business

shareholders' power

must approve fundamental corporate changes like amending the articles of incorporation

Preemptive rights are

the right of a shareholder in a corporation to have the first opportunity to purchase a new issue of that corporation's stock in proportion to the amount of stock already owned by the shareholder

Business Judgement Rule

this rule immunizes directors and officers from liability for honest mistakes of judgment or bad business decisions made in good faith