Unit 2
_______ are executive managers whom the board of directors hires to run the day-to-day business of the corporation.
Officers
Corporations can extend their operations by doing which of the following?
Purchasing another corporation's stock.
Which of the following statements is true of a consolidation?
Two or more corporations combine to form an entirely new corporation, with its own legal status.
Which of the following statements best describes unsecured bonds?
Unsecured bonds are those that have no assets to support a corporation's obligation to repay.
At the first organizational meeting of a corporation, the shareholders adopt corporate _______, which are rules and regulations that govern the corporation's internal management.
bylaws
When more than one shareholder has suffered damages caused by the same act of a corporation, the shareholders can bring a _______ suit against the corporation.
class action
A corporation is a(n) _______ corporation in states in which it conducts business but is not incorporated.
foreign
A de jure corporation literally means a corporation _______
from law
Directors can be classified as _______, _______, _______, and _______.
inside, outside, affiliated, unaffiliated
A certificate of incorporation certifies that a corporation _______
is authorized to conduct business.
A _______ occurs when a legal contract combines two or more corporations such that only one of the corporations continues to exist.
merger
Hostile takeovers are takeovers in which the management of the target corporation _______ the takeover.
objects to
In a beachhead acquisition, the aggressor gradually accumulates a substantial number of the target corporation's shares and then initiates a(n) _______
proxy fight.
A _______ corporation is one created by the government to help administer law.
public
A court may find a corporate officer criminally liable regardless of the extent to which the officer took part in any criminal activity under the _______.
responsible person doctrine
One method of restricting stock transferability is the _______.
right of first refusal
When directors or officers violate their duty of loyalty, they are _______
self-dealing
A(n) _______ main liability is for the extent of their investment when the company loses money.
shareholder's
A(n) _______ occurs when a parent corporation merges with a subsidiary corporation.
short-form merger
The aggressor offers target shareholders a price above the current market value of the stock in a _______.
tender offer
Mike Jones had been living at the same address in Springfield, California, for more than 30 years when he discovered that his water was emitting a strong odor. When he brought this observation to the attention of many of his neighbors, they complained of a similar odor. After some investigating, Mike discovered that a large corporation, the hypothetical Springfield Gas & Electric, had been dumping chromium 6, a possible carcinogen, into the water supply for decades. Mike then went to a lawyer with this discovery. The lawyer then filed suit against Springfield Gas & Electric in the name of the nearly 1,000 residents in Springfield with contaminated water. Because corporations are legal entities, ____________________.
they can sue or be sued by others
If a corporation does not issue physical stock certificates, the shares are considered _______.
uncertificated
The dissolution described in the case is ____________________.
voluntary
Roll your cursor over each label to reveal one of the events in the formation of a corporation. Then drag the tile to the appropriate place on the process line.
1. Promoters prepare 2. Subscribers buy stock 3. Selecting a state 4. Articles of Incorporation 5. Cert. of Incorporation 6. Organizational meeting
While in both mergers and consolidations corporations, shareholders, and creditors have the same rights and liabilities, mergers and consolidations are two legally distinct procedures. A merger occurs when a legal contract combines two or more corporations such that only one of the corporations continues to exist. Yet in a consolidation, neither of the original corporations continues to exist legally. Rather, they form an entirely new corporation with its own legal status
1. Board of Directors 2. Shareholder Meeting 3. Secretary of State 4. Grants Approval 5. Issues Shares
All but which of the following is a tax advantage of an S corporation?
All S corporations must pay taxes to each state in which they are incorporated.
When an asset purchase occurs, the acquiring corporation will assume the liabilities of the selling corporation in all but which of the following circumstances?
Asset purchases never involve the acquiring corporation assuming the selling corporation's liabilities.
According to the doctrine of respondeat superior, corporations are liable for which of the following?
Corporations are liable for the torts and crimes committed by their agents during the scope of their employment.
_______ requires that if a corporation cannot pay the required dividends in a given year, it must pay them in the next year before it pays any common stock dividends.
Cumulative preferred stock
The most influential power of shareholders is to do which of the following?
Elect and remove directors
Chili Cheese, a fast-food corporation serving chili and a host of other American favorites, lost a substantial amount of revenue after the 2009 recession. The firm was set to go out of business in April 2010. However, in February of the same year, the major shareholder, Miranda Pickering, used corporate funds to purchase a million-dollar house in Southern Florida, and then sold the house to herself for $10,000. Two of Chili Cheese's creditors brought suit against Miranda, seeking to recover the funds that Miranda had spent. The court pierced the corporate veil, finding Miranda personally liable. Consequently, Miranda was ordered to repay the funds she had used to purchase the house. But what if the facts of the case were different? Select each set of facts below that could change the outcome of the case.
Rather than buying a Floridian home, Miranda used corporate funds to invest in the training of more workers. Further, to the best of the court's knowledge, Chili Cheese had followed all statutory mandates regarding corporate business and carefully maintained separate shareholder and corporate funds.
Which of the following statements is true of the liability of shareholders?
Shareholders can be held personally liable for receiving illegal dividends.
A court can force a corporation's involuntary dissolution in all but which of the following circumstances?
The shareholders vote to oust the board of directors.
All but which of the following are requirements for mergers and consolidation?
The state's legislature approves a resolution permitting the involved corporations to merge or consolidate.
In a self-tender offer, the target corporation offers which of the following?
The target corporation offers to buy its own shareholders' stock.
Which of the following statements is true of promoters?
They prepare a corporation's incorporation papers.
A target corporation may defend itself by having a group within the corporation (usually management) purchase all the corporation's outstanding stock held by the public. This defense strategy is called _______.
a leveraged buyout
The legal termination of a corporation is called _______.
dissolution
