Exam 37: Corporate Formation and Financing

A businessperson who enters into a contract with an investor on behalf of a future corporation is not personally liable on the deal, even though the firm is not yet formed, because the nature of investment is risk.

The rights of the director of a corporation include a right to

Because state corporate laws differ, persons wishing to incorporate may look for the state that offers the most advantageous tax or other provisions.

The primary function of a corporation's officers is to authorize major corporate policy decisions.

When directors vote on issues affecting the corporation, ordinary matters generally require a greater-than-majority vote.

To participate in a shareholders' meeting, a shareholder must present a proxy.

Because a close corporation is one whose shares are held by a relatively small group of persons, the firm often operates like a partnership.

To avoid sharing control with someone they do not know or like, it would be most effective for the shareholders of a close corporation to

Guy is a director of Healthcare Corporation. Guy attempts to use his best judgment in guiding corporate management but makes a few honest mistakes. He may be protected from liability for these mistakes by

Because of their positions within the corporation, directors can use confidential corporate information for personal advantage.

The board of directors hires the corporation's officers, and normally can remove them at anytime with or without cause.

A shareholder's right to transfer his or her shares to another party can be subject to restrictions set out in the bylaws or a shareholder agreement.

With respect to a corporation, a director is

In most states, an individual can hold only one corporate office.

Directors are not answerable to the corporation for breaching their duty of care.

Any corporation whose shares are publicly traded in securities markets is

Issuing securities is the only way for a new corporation to raise capital.

To make informed decisions and supervise corporate officers and employees, the directors need an unrestricted right to inspect corporate books and records.

Every corporation is governed by a committee of managerial employees.

To pierce the corporate veil is to disregard the corporate entity and hold the directors liable for a corporate obligation.