Question 1

Each director has one vote.

Accepted Answer

A) True 
 B)False

Question 2

"Kite Sales." Wendy is president of a business that manufactures kites. The kites of her company, ABC Kites, are sold to large toy stores. After Wendy learned a great deal about kites at ABC, she started to make kites at home. She started selling kites to friends. She also started to make inquiries regarding selling her kites to larger toy stores in the area, and she began making a few sales to them. Her plan was to start small and then leave ABC after she had increased sales. She did not work on her side project while she was on the clock with ABC. Some of the directors learned about her kite sales and accused her of wrongdoing. Wendy denied any wrongdoing and pointed out that she did not work on her project while she was on the job with ABC.
-What remedy will be imposed on Wendy, if any, for her home kite sales?

Accepted Answer

A)   Nothing because Wendy did not engage in any wrongdoing.
B)   She will be required to cede to the corporation all the profits she earned as a result of the breach.
C)   She will be required to cede to the corporation only profits she earned as a result of the breach that the corporation can prove by a preponderance of the evidence it lost as a result of her actions.
D)   She will be required to cede to the corporation any profits she earned as a result of the breach unless she can by a preponderance of the evidence prove that the corporation lost no sales as a result of her actions.
E)   She will be required to cede to the corporation half of any profits she earned as a result of the breach.F) A) and B)
G) A) and E)

Question 3

Which of the following is true regarding the Revised Model Business Corporation Act?

Accepted Answer

A)   It has been adopted at least in part in over half of the states.
B)   It has been fully rejected in over half of the states in favor of the Model Business Corporation Act.
C)   It has been adopted fully by seventy-five percent of the states.
D)   It has been rejected in over half of the states in favor of the Model Corporate Act.
E)   There is no Revised Model Business Corporation Act.F) A) and B)
G) B) and E)

Question 4

"Machine Malfunction." Bruno, the president of a health club operation called ABC Health Club, convinced the board of directors to approve a large purchase of a type of fitness machine called "Perfect Body." Bruno had carefully investigated the machine and did a presentation to the board on its purported benefits. Unfortunately, after the purchase, it was announced that "Perfect Body" was actually a very dangerous machine that should not be used. The manufacturer of "Perfect Body" went bankrupt, and ABC lost $200,000 on the purchase of the machines. The shareholders are furious and want to sue Bruno and the directors. In an attempt to appease her, the board of directors agrees to allow Frances, the ring leader of the shareholders, to purchase stock of the company at below its fair market value. Frances purchases a considerable amount of stock on that basis, but says that the shareholders plan to continue with an action against Bruno and the board members.
-Which of the following is a term for stock such as that issued to Frances?

Accepted Answer

A)   No-par stock
B)   Reduced stock
C)   Watered stock
D)   Less-value stock
E)   Unapproved stockF) A) and D)
G) A) and C)

Question 5

Which of the following are outside directors who do not have business contacts with the corporation?

Accepted Answer

A)   Approved directors
B)   Associated directors
C)   Inside directors
D)   Affiliated directors
E)   Unaffiliated directorsF) All of the above
G) B) and D)

Question 6

While ordinary decisions made by directors require a ______ vote, more important decisions sometimes require a _____ vote.

Accepted Answer

A)   Majority; two-thirds
B)   Majority; three-fourths
C)   Two-thirds; three-fourths
D)   One-third; majority
E)   Majority; unanimousF) A) and C)
G) C) and D)

Question 7

Which of the following are directors who are also officers or employees of the corporation?

Accepted Answer

A)   Approved directors
B)   Outside directors
C)   Inside directors
D)   Affiliated directors
E)   Unaffiliated directorsF) A) and B)
G) A) and C)

Question 8

Which of the following was the result on appeal in McCann v. McCann, the case in the text involving whether a corporation engaged in a "squeeze-out" as to a minority shareholder?

Accepted Answer

A)   That the business judgment rule does not apply in such situations and that so long as there is any business reason for a transaction, a corporation cannot be found liable for a "squeeze-out" resulting in dismissal of the plaintiff's claims.
B)   That while the business judgment rule applied, the corporation submitted sufficient evidence to establish legitimate reasons for all questioned transactions and that it, therefore, could not be held liable to the complaining minority shareholder.
C)   That a material question of fact as to whether the directors could be found to have engaged in a "squeeze-out" of the beneficiary, causing him harm beyond every other shareholder, and that the case would be remanded for further proceedings.
D)   That because he owned over 20% of the stock, the failure to grant the complaining minority shareholder a seat on the board in and of itself was sufficient under the facts presented to establish that the corporation was guilty of behavior constituting an illegal "squeeze-out."
E)   That the failure to declare a dividend when sufficient assets existed with which to do so in and of itself was sufficient under the facts presented to establish that the corporation was guilty of behavior constituting an illegal "squeeze-out."F) B) and E)
G) C) and D)

Question 9

Which groups owe a duty of care to the corporation, and what does that duty require?

Accepted Answer

Directors and officers owe a duty of car...

Question 10

Which of the following are directors who are not officers or employees of the corporation?

Accepted Answer

A)   Approved directors
B)   Outside directors
C)   Inside directors
D)   Affiliated directors
E)   Unaffiliated directorsF) C) and D)
G) All of the above

Question 11

Directors and officers have a fiduciary duty of care.

Accepted Answer

A) True 
 B)False

Question 12

In a closely held corporation, a breach of the duty of a majority shareholder to act with care and loyalty when selling his or her shares is known as ____.

Accepted Answer

A)   Oppressive conduct
B)   Majority holder misconduct
C)   Minority oppression
D)   Minority discrimination
E)   Disloyal procedureF) C) and D)
G) A) and E)

Question 13

Decisions of courts in ______ have a significant impact because more than half of U.S. public traded corporations are incorporated there.

Accepted Answer

A)   New York
B)   California
C)   Florida
D)   Delaware
E)   New JerseyF) A) and E)
G) A) and D)

Question 14

A shareholder can file a direct suit against a director if the director has caused harm to the business by violating a fiduciary duty.

Accepted Answer

A) True 
 B)False

Question 15

A stock subscription agreement signed before incorporation may obligate a person to purchase shares in the corporation.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following are sent to shareholders prior to an annual meeting containing proposals made by shareholders?

Accepted Answer

A)   Meeting agenda
B)   Proxy materials
C)   Presidential materials
D)   Officer materials
E)   Meeting proposalsF) A) and B)
G) A) and C)

Question 17

Which of the following may be redeemed for a certain number of shares at a specified price within a given time period?

Accepted Answer

A)   Preemptive shares
B)   Share allowances
C)   Allocated shares
D)   Stock warrants
E)   Share grantsF) A) and E)
G) A) and B)

Question 18

The Revised Model Business Corporation Act forbids directors' meetings being held via telephone.

Accepted Answer

A) True 
 B)False

Question 19

In which of the following does a shareholder sue alleging that he has suffered damages caused by the corporation?

Accepted Answer

A)   Investigative action
B)   Shareholder action suit
C)   Shareholder's direct suit
D)   Shareholder derivative suit
E)   Active allocation suitF) A) and C)
G) B) and C)

Question 20

If a corporation has fewer than _____ shareholders, the Revised Model Business Corporation Act allows companies to eliminate the board of directors entirely.

Accepted Answer

A)   100
B)   50
C)   30
D)   25
E)   10F) C) and D)
G) A) and D)

Exam 39: Corporations: Directors, Officers, and Shareholders

Correct Answer
verified

In which of the following does a shareholder sue alleging that he has suffered damages caused by the corporation?

Correct Answer
verified

Which of the following are outside directors who do not have business contacts with the corporation?

Correct Answer
verified

While ordinary decisions made by directors require a __ vote, more important decisions sometimes require a _ vote.

Correct Answer
verified

A shareholder can file a direct suit against a director if the director has caused harm to the business by violating a fiduciary duty.

Correct Answer
verified

The Revised Model Business Corporation Act forbids directors' meetings being held via telephone.

Correct Answer
verified

Which of the following was the result on appeal in McCann v. McCann, the case in the text involving whether a corporation engaged in a "squeeze-out" as to a minority shareholder?

Correct Answer
verified

Which of the following may be redeemed for a certain number of shares at a specified price within a given time period?

Correct Answer
verified

In a closely held corporation, a breach of the duty of a majority shareholder to act with care and loyalty when selling his or her shares is known as ____.

Correct Answer
verified

Which of the following are directors who are not officers or employees of the corporation?

Correct Answer
verified

Directors and officers have a fiduciary duty of care.

Correct Answer
verified

Each director has one vote.

Correct Answer
verified

A stock subscription agreement signed before incorporation may obligate a person to purchase shares in the corporation.

Correct Answer
verified

Decisions of courts in ______ have a significant impact because more than half of U.S. public traded corporations are incorporated there.

Correct Answer
verified

Which groups owe a duty of care to the corporation, and what does that duty require?

Correct Answer
verified
Directors and officers owe a duty of car...
View Answer

Correct Answer
verified

Which of the following are directors who are also officers or employees of the corporation?

Correct Answer
verified

Which of the following are sent to shareholders prior to an annual meeting containing proposals made by shareholders?

Correct Answer
verified

If a corporation has fewer than _____ shareholders, the Revised Model Business Corporation Act allows companies to eliminate the board of directors entirely.

Correct Answer
verified

Which of the following is true regarding the Revised Model Business Corporation Act?

Correct Answer
verified

Exam 39: Corporations: Directors, Officers, and Shareholders

Correct AnswerverifiedShow Answer

In which of the following does a shareholder sue alleging that he has suffered damages caused by the corporation?

Correct AnswerverifiedShow Answer

Which of the following are outside directors who do not have business contacts with the corporation?

Correct AnswerverifiedShow Answer

While ordinary decisions made by directors require a ______ vote, more important decisions sometimes require a _____ vote.

Correct AnswerverifiedShow Answer

A shareholder can file a direct suit against a director if the director has caused harm to the business by violating a fiduciary duty.

Correct AnswerverifiedShow Answer

The Revised Model Business Corporation Act forbids directors' meetings being held via telephone.

Correct AnswerverifiedShow Answer

Which of the following was the result on appeal in McCann v. McCann, the case in the text involving whether a corporation engaged in a "squeeze-out" as to a minority shareholder?

Correct AnswerverifiedShow Answer

Which of the following may be redeemed for a certain number of shares at a specified price within a given time period?

Correct AnswerverifiedShow Answer

In a closely held corporation, a breach of the duty of a majority shareholder to act with care and loyalty when selling his or her shares is known as ____.

Correct AnswerverifiedShow Answer

Which of the following are directors who are not officers or employees of the corporation?

Correct AnswerverifiedShow Answer

Directors and officers have a fiduciary duty of care.

Correct AnswerverifiedShow Answer

Each director has one vote.

Correct AnswerverifiedShow Answer

A stock subscription agreement signed before incorporation may obligate a person to purchase shares in the corporation.

Correct AnswerverifiedShow Answer

Decisions of courts in ______ have a significant impact because more than half of U.S. public traded corporations are incorporated there.

Correct AnswerverifiedShow Answer

Which groups owe a duty of care to the corporation, and what does that duty require?

Correct AnswerverifiedDirectors and officers owe a duty of car...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Which of the following are directors who are also officers or employees of the corporation?

Correct AnswerverifiedShow Answer

Which of the following are sent to shareholders prior to an annual meeting containing proposals made by shareholders?

Correct AnswerverifiedShow Answer

If a corporation has fewer than _____ shareholders, the Revised Model Business Corporation Act allows companies to eliminate the board of directors entirely.

Correct AnswerverifiedShow Answer

Which of the following is true regarding the Revised Model Business Corporation Act?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

While ordinary decisions made by directors require a __ vote, more important decisions sometimes require a _ vote.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Directors and officers owe a duty of car...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified