Exam 35: Management Structure of Corporations

Regarding the election of directors:

Incorporation statutes generally require that each share of stock issued carry voting rights.

Special shareholder meetings may be called by:

The __________ precludes imposing liability on directors and officers for honest mistakes in judgment if they act with due care, in good faith, and in a manner reasonably believed to be in the best interests of the corporation.

To protect a shareholder's interest in the corporation, the law provides shareholders with certain enforcement rights.

Determining the names of other shareholders in order to communicate with them about corporate affairs is a "proper purpose" for a shareholder to inspect the books and records of a corporation.

Directors who are also officers or employees of a publicly held corporation are "affiliated directors."

Issuing favorably priced shares to management but not to other shareholders will normally  constitute a violation of the fiduciary duty.

The 2002 Sarbanes-Oxley Act forbids use of an audit committee by the board of a publicly held corporation; the full board must oversee the work of the public accounting firm employed to audit the corporate books.

Which of the following would be likely to result in liability to a director of a textile company?

Under the Statutory Close Corporation Supplement to the MBCA, a close corporation may operate without a board of directors.

If Marge, a vice president, made a contract on behalf of Barker Corporation, she is liable if she negligently exceeded her authority.

The Revised Act requires dismissal of a derivative suit if qualified (disinterested) directors determine, in good faith after conducting a reasonable inquiry that maintenance of the derivative suit is not in the best interests of the corporation.

If Marilyn and George form a corporation under the Revised Act with Marilyn as president and George as treasurer, Marilyn cannot also be corporate secretary.

Explain the reasons why the accountability of the management of a corporation is a cultural issue.

As the shareholders' elected representatives, the board of directors are delegated the power to direct the business of the corporation.

Zeelon Corporation stock may be summarized as follows: 100,000 authorized 90,000 issued 75,000 outstanding 15,000 treasury stock How many shares or proxies will have to be present for a quorum (assuming no special provision and that the Revised Act is not in effect)?

Most states, as well as the Revised Act, hold that the test for the duty of diligence requires a director or officer to discharge corporate duties:

Any limits on the duration of the shareholder agreement must be set forth in the agreement.

In the absence of a specific agreement, shares of stock are not freely transferable.