Question 1

When a vacancy occurs because a director resigns,by whom can the vacancy be filled?

Accepted Answer

A)  the remaining board members 
B)  the shareholders 
C)  the corporate president 
D)  A or B 
E)  A,B,or C 
A)  the remaining board members 
B)  the shareholders 
C)  the corporate president 
D)  A or B 
E)  A,B,or C

Question 2

A proxy is valid for an indefinite period of time.

Accepted Answer

A) True 
 B)False

Question 3

Shareholders never have a right to bring a lawsuit on behalf of a corporation,as this is the job of the board of directors.

Accepted Answer

A) True 
 B)False

Question 4

In a corporation,each officer position must be held by a different individual.

Accepted Answer

A) True 
 B)False

Question 5

Who has a right to receive dividends?

Accepted Answer

A)  both preferred and common shareholders at all times 
B)  both preferred and common shareholders,so long as the corporation has adequate profit 
C)  preferred shareholders at all times when the corporation has adequate profit,and common shareholders whenever dividends have been declared 
D)  both preferred and common shareholders,but only when dividends have been declared 
E)  neither preferred nor common shareholders ever have a right to the payment of dividends,even after their declaration 
A)  both preferred and common shareholders at all times 
B)  both preferred and common shareholders,so long as the corporation has adequate profit 
C)  preferred shareholders at all times when the corporation has adequate profit,and common shareholders whenever dividends have been declared 
D)  both preferred and common shareholders,but only when dividends have been declared 
E)  neither preferred nor common shareholders ever have a right to the payment of dividends,even after their declaration

Question 6

Roger is a director of the RST Corporation,which is engaged in the business of creating and marketing toys and games.A proposal is made to the board to manufacture and market a toy bird that really flies.Market surveys have been done to indicate that the toy would be a good seller,and engineering studies have been done testing the feasibility of such a product.Roger reviews this information and votes in favor of producing this new toy.The vote was 7 to 4 in favor.RST produces and markets this new toy bird,but sales are very slow.After several years of losing money,RST discontinues this toy.Lynn,a shareholder of RST,thinks the toy bird venture was a waste of time and money.In fact,she thinks the idea was so bad,that she sues Roger for breach of his fiduciary duty of due care in making the decision to proceed with the bird.Discuss the general standards of due care of a director of a corporation,and determine whether Roger is liable in this situation.

Accepted Answer

Roger is probably protected by the busin

Question 7

Which of the following is true?

Accepted Answer

A)  Voting trusts and voting agreements both require the transfer of stock certificates to a trustee. 
B)  In a voting trust,the shareholder grants the trustee the right to vote the shares,but in a voting agreement,the shareholders vote their own shares. 
C)  Voting agreements,but not voting trusts,must be accompanied by proxies executed by the shareholders. 
D)  Voting trusts are irrevocable,while voting agreements can be either revocable or irrevocable. 
E)  Voting agreements cannot extend for more than 10 years. 
A)  Voting trusts and voting agreements both require the transfer of stock certificates to a trustee. 
B)  In a voting trust,the shareholder grants the trustee the right to vote the shares,but in a voting agreement,the shareholders vote their own shares. 
C)  Voting agreements,but not voting trusts,must be accompanied by proxies executed by the shareholders. 
D)  Voting trusts are irrevocable,while voting agreements can be either revocable or irrevocable. 
E)  Voting agreements cannot extend for more than 10 years.

Question 8

What is a derivative lawsuit?

Accepted Answer

A)  an action brought by the board of directors on behalf of the corporation 
B)  an action brought by a majority of the board of directors against an individual board member 
C)  an action brought by a shareholder or shareholders on behalf of the corporation when the board of directors does not file the suit 
D)  an action brought by shareholders against the corporation 
E)  an action brought by the officers against the directors 
A)  an action brought by the board of directors on behalf of the corporation 
B)  an action brought by a majority of the board of directors against an individual board member 
C)  an action brought by a shareholder or shareholders on behalf of the corporation when the board of directors does not file the suit 
D)  an action brought by shareholders against the corporation 
E)  an action brought by the officers against the directors

Question 9

Which of the following is true about supramajority requirements?

Accepted Answer

A)  They can be required for voting but not for quorums. 
B)  They can be required for either voting or for quorums,but must be part of the original articles. 
C)  They are automatically required for quorums of shareholders meetings and voting at such meetings when approving mergers,consolidations,or the sale of substantially all of the assets of the corporation. 
D)  They can be required for either voting or for quorums,and if the requirement is added in an amendment,the vote approving the amendment must pass by the same supramajority as the new supramajority requirement contained in the amendment on which is being voted. 
E)  They can be required for either voting or for quorums,and if the requirement is added in an amendment,the vote approving the amendment needs only to have a simple majority in order to become effective. 
A)  They can be required for voting but not for quorums. 
B)  They can be required for either voting or for quorums,but must be part of the original articles. 
C)  They are automatically required for quorums of shareholders meetings and voting at such meetings when approving mergers,consolidations,or the sale of substantially all of the assets of the corporation. 
D)  They can be required for either voting or for quorums,and if the requirement is added in an amendment,the vote approving the amendment must pass by the same supramajority as the new supramajority requirement contained in the amendment on which is being voted. 
E)  They can be required for either voting or for quorums,and if the requirement is added in an amendment,the vote approving the amendment needs only to have a simple majority in order to become effective.

Question 10

Directors of a corporation have unlimited access to the records of the corporation.

Accepted Answer

A) True 
 B)False

Question 11

When action is taken at a special shareholders' meeting where the notice was defective,the action is valid,but any shareholder can call another special meeting to reconsider the item.

Accepted Answer

A) True 
 B)False

Question 12

An agreement between shareholders that addresses how they will vote their shares in an upcoming election of the board of directors,but provides for nothing else,is a:

Accepted Answer

A)  voting trust 
B)  proxy 
C)  voting agreement 
D)  agency agreement 
A)  voting trust 
B)  proxy 
C)  voting agreement 
D)  agency agreement

Question 13

Which of the following is correct regarding the business judgment rule?

Accepted Answer

A)  Directors and officers have an obligation to exercise sound business judgment,and any failure to do so is per se negligence that results in liability to the corporation. 
B)  Directors and officers have an obligation to exercise sound business judgment,and any failure to do so results in a rebuttable presumption of negligence. 
C)  Directors and officers are never liable in suits filed against them by shareholders. 
D)  Directors and officers are not liable for honest mistakes of judgment. 
E)  Directors and officers are liable for gross negligence,but not for ordinary negligence. 
A)  Directors and officers have an obligation to exercise sound business judgment,and any failure to do so is per se negligence that results in liability to the corporation. 
B)  Directors and officers have an obligation to exercise sound business judgment,and any failure to do so results in a rebuttable presumption of negligence. 
C)  Directors and officers are never liable in suits filed against them by shareholders. 
D)  Directors and officers are not liable for honest mistakes of judgment. 
E)  Directors and officers are liable for gross negligence,but not for ordinary negligence.

Question 14

Dividends may be paid in the form of:

Accepted Answer

A)  cash only 
B)  cash or property only 
C)  cash,property,or additional stock 
D)  cash,property,debt,or additional stock 
A)  cash only 
B)  cash or property only 
C)  cash,property,or additional stock 
D)  cash,property,debt,or additional stock

Question 15

The management of corporations frequently solicit proxies for a management-supported board of directors.What is the risk to shareholders of blindly granting these proxies?

Accepted Answer

The officers and directors of a corporat

Question 16

Under what circumstances can the terms of directors be staggered such that only a portion of the board members' terms expire in any one-year?

Accepted Answer

A)  in any circumstances 
B)  in closely held corporations 
C)  when there are both inside and outside directors 
D)  when there are nine or more members of the board of directors 
E)  under no circumstances 
A)  in any circumstances 
B)  in closely held corporations 
C)  when there are both inside and outside directors 
D)  when there are nine or more members of the board of directors 
E)  under no circumstances

Question 17

Which method of voting would give minority shareholders the best chance to elect someone to the board of directors of a corporation?

Accepted Answer

A)  cumulative 
B)  straight 
C)  proxy 
D)  supermajority 
E)  preemptive 
A)  cumulative 
B)  straight 
C)  proxy 
D)  supermajority 
E)  preemptive

Question 18

What is the purpose of cumulative voting?

Accepted Answer

A)  to enforce a supramajority voting requirement 
B)  to vote on mergers and other fundamental changes to the corporation 
C)  to vote to pay dividends 
D)  A,B,and C 
E)  to give a minority shareholder a better opportunity to elect someone to the board of directors 
A)  to enforce a supramajority voting requirement 
B)  to vote on mergers and other fundamental changes to the corporation 
C)  to vote to pay dividends 
D)  A,B,and C 
E)  to give a minority shareholder a better opportunity to elect someone to the board of directors

Question 19

There are 100,000 shares of outstanding stock outstanding for a corporation.A shareholders' meeting is called to amend the articles of incorporation.At the meeting,50,001 shares attend the meeting to vote on the proposed amendment.Is there a quorum present? If 25,001 vote to amend the articles,does the amendment pass?

Accepted Answer

A)  There is a quorum present,and a vote of 25,001 will be sufficient to pass the amendment. 
B)  There is a quorum present,but a vote of less than 50% of the outstanding shares of stock will result in the failure of the proposed amendment. 
C)  There is not a quorum present,but the 25,001 votes are sufficient to pass the amendment. 
D)  There is not a quorum present,and the number of votes will not result in passage of the amendment. 
A)  There is a quorum present,and a vote of 25,001 will be sufficient to pass the amendment. 
B)  There is a quorum present,but a vote of less than 50% of the outstanding shares of stock will result in the failure of the proposed amendment. 
C)  There is not a quorum present,but the 25,001 votes are sufficient to pass the amendment. 
D)  There is not a quorum present,and the number of votes will not result in passage of the amendment.

Question 20

The articles of incorporation,but not the bylaws,can require more than a simple majority for a quorum of the board of directors.

Accepted Answer

A) True 
 B)False

Exam 37: Corporate Governance and the Sarbanes Oxley Act

When a vacancy occurs because a director resigns,by whom can the vacancy be filled?

A proxy is valid for an indefinite period of time.

Shareholders never have a right to bring a lawsuit on behalf of a corporation,as this is the job of the board of directors.

In a corporation,each officer position must be held by a different individual.

Who has a right to receive dividends?

Which of the following is true?

What is a derivative lawsuit?

Which of the following is true about supramajority requirements?

Directors of a corporation have unlimited access to the records of the corporation.

When action is taken at a special shareholders' meeting where the notice was defective,the action is valid,but any shareholder can call another special meeting to reconsider the item.

An agreement between shareholders that addresses how they will vote their shares in an upcoming election of the board of directors,but provides for nothing else,is a:

Which of the following is correct regarding the business judgment rule?

Dividends may be paid in the form of:

The management of corporations frequently solicit proxies for a management-supported board of directors.What is the risk to shareholders of blindly granting these proxies?

Under what circumstances can the terms of directors be staggered such that only a portion of the board members' terms expire in any one-year?

Which method of voting would give minority shareholders the best chance to elect someone to the board of directors of a corporation?

What is the purpose of cumulative voting?

The articles of incorporation,but not the bylaws,can require more than a simple majority for a quorum of the board of directors.

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