Question 1

A director may make business decisions in reliance on information provided to him without incurring liability for negligence as long as he:

Accepted Answer

A)  notifies the preparer of the information. 
B)  reasonably believes that the information is reliable. 
C)  conducts his own independent investigation. 
D)  is given a sworn affidavit by the preparer. 
A)  notifies the preparer of the information. 
B)  reasonably believes that the information is reliable. 
C)  conducts his own independent investigation. 
D)  is given a sworn affidavit by the preparer.

Question 2

How does the management structure of a closely held corporation differ from that of a publicly traded corporation?

Accepted Answer

A close corporation is one whose shares

Question 3

If Eilene, a shareholder, sues in a derivative suit, the judgment will be paid to:

Accepted Answer

A)  the shareholders as a dividend. 
B)  Eilene directly. 
C)  the corporate treasury. 
D)  the board of directors. 
A)  the shareholders as a dividend. 
B)  Eilene directly. 
C)  the corporate treasury. 
D)  the board of directors.

Question 4

Directors may vote by proxy when they are not able to be present for a meeting.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

The RMBCA states that "all corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed under the direction of, its:

Accepted Answer

A)  board of directors." 
B)  chief executive officer." 
C)  officers." 
D)  shareholders." 
A)  board of directors." 
B)  chief executive officer." 
C)  officers." 
D)  shareholders."

Question 7

The right of a shareholder to examine the books and records of the corporation may be denied if the shareholder:

Accepted Answer

A)  seeks information to determine the financial condition of the corporation. 
B)  desires to know the value of shares. 
C)  seeks information to embarrass or cause loss to the corporation. 
D)  desires the names and addresses of other shareholders. 
A)  seeks information to determine the financial condition of the corporation. 
B)  desires to know the value of shares. 
C)  seeks information to embarrass or cause loss to the corporation. 
D)  desires the names and addresses of other shareholders.

Question 8

Unissued shares and treasury stock must be counted to see if a quorum exists.

Accepted Answer

A) True 
 B)False

Question 9

With respect to the voting rights of shareholders, unless the articles of incorporation provide otherwise, a shareholder is entitled to:

Accepted Answer

A)  vote only at annual shareholder meetings. 
B)  one vote for every two shares of stock owned. 
C)  vote only in person and not by proxy. 
D)  vote at annual and special shareholder meetings with one vote for each share of stock he owns. 
A)  vote only at annual shareholder meetings. 
B)  one vote for every two shares of stock owned. 
C)  vote only in person and not by proxy. 
D)  vote at annual and special shareholder meetings with one vote for each share of stock he owns.

Question 10

The business judgment rule would require an officer or director to use the highest duty of care in the execution of his office.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Theodore, as treasurer of Komand Corporation, had the duty to invest corporate earnings as he deemed best for the company. When Komand Corporation went public, the new board decided that a committee of the officers would make such investment decisions. If Theodore thereafter unilaterally contracted to purchase investment securities with corporate earnings as he had done many times before, such contract would be valid:

Accepted Answer

A)  since Theodore would have express authority. 
B)  since Theodore had implied authority. 
C)  under apparent authority if the seller knew of Theodore's past transactions. 
D)  because of ratification if the board did not know of his actions. 
A)  since Theodore would have express authority. 
B)  since Theodore had implied authority. 
C)  under apparent authority if the seller knew of Theodore's past transactions. 
D)  because of ratification if the board did not know of his actions.

Question 13

Discuss the business judgment rule.

Accepted Answer

The business judgment rule precludes imp

Question 14

Compare the respective roles of the officers, board of directors, and the shareholders of a corporation. Who runs the corporation? Explain your answer and give examples.

Accepted Answer

The officers of a corporation handle the

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

The Dodd-Frank Wall Street Reform and Consumer Protection Act:

Accepted Answer

A)  was signed into law in 2009. 
B)  authorizes the SEC to issue rules requiring that a publicly held company's proxy solicitation include nominations for the board of directors that have been submitted by shareholders. 
C)  authorizes the SEC to issue rules directing the national securities exchanges to require that no member of a listed company's compensation committee be an independent director. 
D)  All of these are correct. 
A)  was signed into law in 2009. 
B)  authorizes the SEC to issue rules requiring that a publicly held company's proxy solicitation include nominations for the board of directors that have been submitted by shareholders. 
C)  authorizes the SEC to issue rules directing the national securities exchanges to require that no member of a listed company's compensation committee be an independent director. 
D)  All of these are correct.

Question 17

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 18

One difference between large, publicly held corporations and closely held corporations is that more of the shares of closely held corporations are held by institutional investors.

Accepted Answer

A) True 
 B)False

Question 19

In most states, but not under the Revised Act, cumulative voting is permissive and not mandatory.

Accepted Answer

A) True 
 B)False

Question 20

A shareholder would have all of the following rights EXCEPT the right to:

Accepted Answer

A)  inspect the corporate records in order to discover customer lists to share with a competitor. 
B)  see corporate financial statements in order to value his share for future sale. 
C)  bring suit against the corporation to require payment of his declared dividend. 
D)  bring suit on behalf of the corporation to recover improper dividends. 
A)  inspect the corporate records in order to discover customer lists to share with a competitor. 
B)  see corporate financial statements in order to value his share for future sale. 
C)  bring suit against the corporation to require payment of his declared dividend. 
D)  bring suit on behalf of the corporation to recover improper dividends.

Exam 35: Management Structure of Corporations

A director may make business decisions in reliance on information provided to him without incurring liability for negligence as long as he:

How does the management structure of a closely held corporation differ from that of a publicly traded corporation?

If Eilene, a shareholder, sues in a derivative suit, the judgment will be paid to:

Directors may vote by proxy when they are not able to be present for a meeting.

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

The RMBCA states that "all corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed under the direction of, its:

The right of a shareholder to examine the books and records of the corporation may be denied if the shareholder:

Unissued shares and treasury stock must be counted to see if a quorum exists.

With respect to the voting rights of shareholders, unless the articles of incorporation provide otherwise, a shareholder is entitled to:

The business judgment rule would require an officer or director to use the highest duty of care in the execution of his office.

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

Discuss the business judgment rule.

Compare the respective roles of the officers, board of directors, and the shareholders of a corporation. Who runs the corporation? Explain your answer and give examples.

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

The Dodd-Frank Wall Street Reform and Consumer Protection Act:

The board of directors of a corporation:

One difference between large, publicly held corporations and closely held corporations is that more of the shares of closely held corporations are held by institutional investors.

In most states, but not under the Revised Act, cumulative voting is permissive and not mandatory.

A shareholder would have all of the following rights EXCEPT the right to:

Introduction to Law

Business Ethics

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Consideration

Illegal Bargains

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance, Breach, and Discharge

Contract Remedies

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability: Warranties and Strict Liability

Sales Remedies

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits, Collections, and Funds Transfers

Relationship of Principal and Agent

Relationship With Third Parties

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature and Formation of Corporations

Financial Structure of Corporations

Fundamental Changes of Corporations

Secured Transactions and Suretyship

Bankruptcy

Securities Regulation

Intellectual Property

Employment Law

Antitrust

Accountants Legal Liability

Consumer Protection

Environmental Law

International Business Law

Introduction to Property, Property Insurance, Bailments, and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

Trusts and Wills

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