Question 1

One of the fiduciary duties of directors is the duty not to compete with the corporation. They may pursue their own business interest, but they may not:

Accepted Answer

A)  use corporate resources do do so. 
B)  hire away personnel for their own business. 
C)  use corporate facilities to do so. 
D)  All of the answer choices are correct. 
A)  use corporate resources do do so. 
B)  hire away personnel for their own business. 
C)  use corporate facilities to do so. 
D)  All of the answer choices are correct.

Question 2

The Revised Act provides that every shareholder is entitled to examine specified corporate records upon prior signed written request if the demand is made in good faith, for a proper purpose, and during regular business hours at the corporation's principal office.

Accepted Answer

A) True 
 B)False

Question 3

With respect to the board of directors of a corporation, which of the following is NOT correct?

Accepted Answer

A)  They manage the business and affairs of the corporation. 
B)  They are the shareholders' elected representatives. 
C)  They must always obtain shareholder approval before deciding questions of operating policy. 
D)  They have the authority to delegate power to officers and agents. 
A)  They manage the business and affairs of the corporation. 
B)  They are the shareholders' elected representatives. 
C)  They must always obtain shareholder approval before deciding questions of operating policy. 
D)  They have the authority to delegate power to officers and agents.

Question 4

Under the Statutory Close Corporation Supplement, a closely held corporation may use a shareholder agreement in place of bylaws.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is untrue about a corporation's ratification of an act of an officer?

Accepted Answer

A)  It applies to an authorized act of an officer. 
B)  It relates back to the original transaction. 
C)  It may be either express or implied from the corporation's acceptance of the contract's benefits. 
D)  The corporation must have full knowledge of the facts in order to ratify the act. 
A)  It applies to an authorized act of an officer. 
B)  It relates back to the original transaction. 
C)  It may be either express or implied from the corporation's acceptance of the contract's benefits. 
D)  The corporation must have full knowledge of the facts in order to ratify the act.

Question 6

The role of shareholders in managing the corporation is generally restricted to:

Accepted Answer

A)  election of directors. 
B)  approval of certain extraordinary measures. 
C)  the approval of corporate transactions that are void or voidable unless ratified. 
D)  All of these are restrictions. 
E)  None of these are restrictions. 
A)  election of directors. 
B)  approval of certain extraordinary measures. 
C)  the approval of corporate transactions that are void or voidable unless ratified. 
D)  All of these are restrictions. 
E)  None of these are restrictions.

Question 7

Randall has been a member of the board of his sister's company for three years but has never actually attended a board meeting. He may be liable for failing to act.

Accepted Answer

A) True 
 B)False

Question 8

Members of the board of directors may not determine their own compensation.

Accepted Answer

A) True 
 B)False

Question 9

Arthur is a shareholder of Rowson, Inc. He has evidence to suggest that its president/CEO has allowed the corporation to engage in acts that are ultra vires . Based upon this evidence, Arthur contacts an attorney and sues the corporation on behalf of the corporation. The lawsuit Arthur has filed is known as:

Accepted Answer

A)  a direct suit. 
B)  a derivative suit. 
C)  a class action suit. 
D)  an unauthorized suit. 
A)  a direct suit. 
B)  a derivative suit. 
C)  a class action suit. 
D)  an unauthorized suit.

Question 10

The board of directors generally manages the day-to-day affairs of the company.

Accepted Answer

A) True 
 B)False

Question 11

The board of directors of a corporation:

Accepted Answer

A)  determines the capital structure and financial policy of the corporation. 
B)  receives no salaries for services, although directors may receive a fee for attending board meetings. 
C)  has the power to bind the corporation when acting as a unit or individually. 
D)  All of these are correct. 
A)  determines the capital structure and financial policy of the corporation. 
B)  receives no salaries for services, although directors may receive a fee for attending board meetings. 
C)  has the power to bind the corporation when acting as a unit or individually. 
D)  All of these are correct.

Question 12

The type of authority that arises from acts of the corporation that lead third parties to believe reasonably and in good faith that an officer has the requisite authority is:

Accepted Answer

A)  actual express authority. 
B)  actual implied authority. 
C)  apparent authority. 
D)  ratification. 
A)  actual express authority. 
B)  actual implied authority. 
C)  apparent authority. 
D)  ratification.

Question 13

Under the MBCA, a quorum of shareholders at an annual meeting may be not less than what percentage of the shares entitled to vote?

Accepted Answer

A)  10 
B)  33 1/3 
C)  66 
D)  50 
A)  10 
B)  33 1/3 
C)  66 
D)  50

Question 14

The Investor Protection and Securities Reform Act of 2010 imposes new corporate governance rules on both publicly held and privately held companies.

Accepted Answer

A) True 
 B)False

Question 15

All of the following would constitute a "fundamental change" to the corporation EXCEPT:

Accepted Answer

A)  an amendment to the articles of incorporation. 
B)  a merger. 
C)  a stock dividend. 
D)  selling off 60% of the business assets not in the regular course of business. 
A)  an amendment to the articles of incorporation. 
B)  a merger. 
C)  a stock dividend. 
D)  selling off 60% of the business assets not in the regular course of business.

Question 16

A proxy is revocable to the same extent as an agency.

Accepted Answer

A) True 
 B)False

Question 17

Gerhardt is the president of the Pacer Bicycle Company. He also serves as a director of the Flexible Tire Company. It occurs to Gerhardt that both companies could benefit from a contract in which Flexible agrees to supply Pacer with tires for its bicycles. If Gerhardt wishes to negotiate a contract between Pacer and Flexible, which of the following is correct?

Accepted Answer

A)  The contract will be void as a conflict of interest. 
B)  Under the RMBCA, the contract is permitted if it is fair and reasonable to both corporations, or Gerhardt fully discloses all information relating to the transaction and the contract is approved by either the board of disinterested directors or the shareholders. 
C)  The contract is a clear conflict of interest and will be avoidable by either company even with disclosure. 
D)  Both t he contract will be void as a conflict of interest  and t he contract is a clear conflict of interest and will be avoidable by either company even with disclosure. 
A)  The contract will be void as a conflict of interest. 
B)  Under the RMBCA, the contract is permitted if it is fair and reasonable to both corporations, or Gerhardt fully discloses all information relating to the transaction and the contract is approved by either the board of disinterested directors or the shareholders. 
C)  The contract is a clear conflict of interest and will be avoidable by either company even with disclosure. 
D)  Both t he contract will be void as a conflict of interest  and t he contract is a clear conflict of interest and will be avoidable by either company even with disclosure.

Question 18

Some publicly held corporations have used supermajority shareholder voting requirements to defend against hostile takeover bids.

Accepted Answer

A) True 
 B)False

Question 19

a. Who selects the officers of a corporation under most state corporate statutes? Who removes them? Explain. 
b. What duties do the officers and directors of a corporation owe to the corporation? Explain.

Accepted Answer

a. Under most state statutes, the office

Question 20

According to the amendments to the Revised Act from 2014 and 2016, corporations may include in their articles of incorporation a provision that allows a director or an officer to chose to not present a business opportunity to the corporation.

Accepted Answer

A) True 
 B)False

Exam 35: Management Structure of Corporations

One of the fiduciary duties of directors is the duty not to compete with the corporation. They may pursue their own business interest, but they may not:

The Revised Act provides that every shareholder is entitled to examine specified corporate records upon prior signed written request if the demand is made in good faith, for a proper purpose, and during regular business hours at the corporation's principal office.

With respect to the board of directors of a corporation, which of the following is NOT correct?

Under the Statutory Close Corporation Supplement, a closely held corporation may use a shareholder agreement in place of bylaws.

Which of the following is untrue about a corporation's ratification of an act of an officer?

The role of shareholders in managing the corporation is generally restricted to:

Randall has been a member of the board of his sister's company for three years but has never actually attended a board meeting. He may be liable for failing to act.

Members of the board of directors may not determine their own compensation.

The board of directors generally manages the day-to-day affairs of the company.

The board of directors of a corporation:

The type of authority that arises from acts of the corporation that lead third parties to believe reasonably and in good faith that an officer has the requisite authority is:

Under the MBCA, a quorum of shareholders at an annual meeting may be not less than what percentage of the shares entitled to vote?

The Investor Protection and Securities Reform Act of 2010 imposes new corporate governance rules on both publicly held and privately held companies.

All of the following would constitute a "fundamental change" to the corporation EXCEPT:

A proxy is revocable to the same extent as an agency.

Some publicly held corporations have used supermajority shareholder voting requirements to defend against hostile takeover bids.

a. Who selects the officers of a corporation under most state corporate statutes? Who removes them? Explain. b. What duties do the officers and directors of a corporation owe to the corporation? Explain.

According to the amendments to the Revised Act from 2014 and 2016, corporations may include in their articles of incorporation a provision that allows a director or an officer to chose to not present a business opportunity to the corporation.

Introduction to Law

Business Ethics

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Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

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Conduct Invalidating Assent

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Third Parties to Contracts

Performance Breach and Discharge

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Relationship of Principal and Agent

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Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

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Nature and Formation of Corporations

Financial Structure of Corporations

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Secured Transactions and Suretyship

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