Exam 35: Management Structure of Corporations

The 1969 amendments to the MBCA, which were carried over to the Revised Act, tightened restrictions on closely held corporations.

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.

While officers, as agents of a corporation, owe an agent's duty of obedience, diligence, and loyalty to the corporation, this is not true of directors.

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.

The Revised Act requires that demand be made upon the board of directors to enforce the corporate right at issue as a prerequisite to bringing a derivative suit.

Under the Revised Act and an increasing number of other statutes, by a majority vote, shareholders may remove the entire board of directors without cause.

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?

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

The issuance of favorably priced shares to management while excluding other shareholders normally will constitute a violation of the fiduciary duty.

Directors, but not officers, may compete with the corporation in their own private business dealings.

In most states, a corporation may, with shareholder approval, limit or eliminate the liability of directors for some breaches of the duties which they owe to the corporation.

Notice of a shareholder's meeting may be waived in writing.

An officer or director's responsibility to exercise ordinary care and prudence in discharging duties is the:

Jack has been on the board of his brother's company for three years but has never attended a board meeting. He may be liable for failing to act.

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

A voting trust permits a concentration of corporate control in one or more persons.

In most states, an officer can be removed for no reason if the board decides to do so.

The remedy for a director's breach of fiduciary duty is:

A proxy is effective until the shareholder revokes it.