Question 1

Matt,a dissident shareholder,can run for director by placing his name on the company's proxy statement.

Accepted Answer

A) True 
 B)False

Question 2

Who has the right to manage the business of a corporation?

Accepted Answer

A)  Shareholders. 
B)  Officers. 
C)  Bondholders. 
D)  The board of directors. 
A)  Shareholders. 
B)  Officers. 
C)  Bondholders. 
D)  The board of directors.

Question 3

A corporation's obligation to provide shareholders with financial information:

Accepted Answer

A)  depends on whether the company is publicly or privately held. 
B)  depends on the requirements of the Model Business Corporation Act, which is widely followed in regard to the shareholders' right to information. 
C)  is extensive and is carefully regulated by the SEC if the company is privately held. 
D)  All the above. 
A)  depends on whether the company is publicly or privately held. 
B)  depends on the requirements of the Model Business Corporation Act, which is widely followed in regard to the shareholders' right to information. 
C)  is extensive and is carefully regulated by the SEC if the company is privately held. 
D)  All the above.

Question 4

Shareholder proposals on the company proxy statement:

Accepted Answer

A)  must be stated in the form of a request or recommendation according to SEC rules. 
B)  may only be implemented by the company if they receive support from at least a simple majority of the shareholders. 
C)  are, in about half of the cases, withdrawn before a vote because the company decides to implement the proposal. 
D)  may address only corporate-governance issues, such as cumulative voting or executive compensation, but may not address the shareholder's political agenda, such as saving the environment. 
A)  must be stated in the form of a request or recommendation according to SEC rules. 
B)  may only be implemented by the company if they receive support from at least a simple majority of the shareholders. 
C)  are, in about half of the cases, withdrawn before a vote because the company decides to implement the proposal. 
D)  may address only corporate-governance issues, such as cumulative voting or executive compensation, but may not address the shareholder's political agenda, such as saving the environment.

Question 5

Maureen,a shareholder of Metra,Inc.,is unhappy with how the corporation was being managed.Maureen wants to be a member of Metra's board of directors.Which statement is correct?

Accepted Answer

A)  If Maureen owns at least 1 percent or $2,000 of Metra's stock, she can require the company to include her name as a candidate for the board of directors in its proxy statement. 
B)  If Maureen has a proper purpose, she can require the company to include her name as a candidate for the board of directors in its proxy statement. 
C)  If Maureen can show cause, she can require the company to include her name as a candidate for the board of directors in its proxy statement. 
D)  Maureen cannot require that the company put her name in the proxy statement, but she can prepare and distribute her own proxy. 
A)  If Maureen owns at least 1 percent or $2,000 of Metra's stock, she can require the company to include her name as a candidate for the board of directors in its proxy statement. 
B)  If Maureen has a proper purpose, she can require the company to include her name as a candidate for the board of directors in its proxy statement. 
C)  If Maureen can show cause, she can require the company to include her name as a candidate for the board of directors in its proxy statement. 
D)  Maureen cannot require that the company put her name in the proxy statement, but she can prepare and distribute her own proxy.

Question 6

Alfrieda purchased an ownership interest in a corporation.This gives her the right to use the equipment owned by the corporation,as long as her usage does not interfere with the normal operation of the business.

Accepted Answer

A) True 
 B)False

Question 7

A "fundamental change" in a corporation would be illustrated by:

Accepted Answer

A)  E-prise, Inc. merging with Vitta Corporation. 
B)  the voluntary dissolution of Oldtry, Inc. 
C)  the amendment to bylaws of Chaney Company. 
D)  All of the above. 
A)  E-prise, Inc. merging with Vitta Corporation. 
B)  the voluntary dissolution of Oldtry, Inc. 
C)  the amendment to bylaws of Chaney Company. 
D)  All of the above.

Question 8

To be successful in a court challenge regarding an executive's compensation,shareholders must prove that:

Accepted Answer

A)  the board was grossly uninformed before it set the compensation amount. 
B)  the executive's performance caused the business to become unprofitable. 
C)  the amount of the executive's compensation was too high in relation to the compensation of the typical employee within the company. 
D)  the compensation level is not in the company's best interests. 
A)  the board was grossly uninformed before it set the compensation amount. 
B)  the executive's performance caused the business to become unprofitable. 
C)  the amount of the executive's compensation was too high in relation to the compensation of the typical employee within the company. 
D)  the compensation level is not in the company's best interests.

Question 9

Kian is the chief financial officer of Yonkka,Inc.He is also a member of Yonkka's board of directors.Kian is:

Accepted Answer

A)  an inside director. 
B)  an outside director. 
C)  holding an illegal position. 
D)  a public director. 
A)  an inside director. 
B)  an outside director. 
C)  holding an illegal position. 
D)  a public director.

Question 10

Frank is a controlling shareholder in E-prise,Inc.Frank:

Accepted Answer

A)  may not enter into unfair business transactions with the corporation. 
B)  has a fiduciary duty to minority shareholders. 
C)  may not exclude minority shareholders from beneficial arrangements involving stock. 
D)  All of the above are correct. 
A)  may not enter into unfair business transactions with the corporation. 
B)  has a fiduciary duty to minority shareholders. 
C)  may not exclude minority shareholders from beneficial arrangements involving stock. 
D)  All of the above are correct.

Question 11

The proceeds,if any,of a derivative lawsuit go to:

Accepted Answer

A)  the shareholders of the corporation. 
B)  the shareholders who actually filed the lawsuit. 
C)  the board of directors. 
D)  the corporation. 
A)  the shareholders of the corporation. 
B)  the shareholders who actually filed the lawsuit. 
C)  the board of directors. 
D)  the corporation.

Question 12

Ev-R-Green Co.,a private corporation,decides to sell substantially all of the company's assets.Under the Model Act and many state statutes:

Accepted Answer

A)  the sole remedy for dissenting shareholders is to sell their stock on the stock exchange. 
B)  the board must first get unanimous shareholder approval for this fundamental change. 
C)  Ev-R-Green must buy back, at fair value, the stock of any shareholders who object to the decision. 
D)  the company may buy back, at fair value, the stock of any shareholders who object to the decision or the shareholders who object may receive the right of first refusal to purchase corporate assets. 
A)  the sole remedy for dissenting shareholders is to sell their stock on the stock exchange. 
B)  the board must first get unanimous shareholder approval for this fundamental change. 
C)  Ev-R-Green must buy back, at fair value, the stock of any shareholders who object to the decision. 
D)  the company may buy back, at fair value, the stock of any shareholders who object to the decision or the shareholders who object may receive the right of first refusal to purchase corporate assets.

Question 13

Charles owns 1,000 shares of stock in Temperan,Inc.Charles wants to obtain corporate records including the corporation's minute book and accounting records.Under the Model Act,Charles is entitled to this information if he requests it in good faith and:

Accepted Answer

A)  he has a proper purpose. 
B)  he owns at least 1 percent of the company or $2,000 of stock. 
C)  he is an employee of Temperan. 
D)  he is a controlling shareholder. 
A)  he has a proper purpose. 
B)  he owns at least 1 percent of the company or $2,000 of stock. 
C)  he is an employee of Temperan. 
D)  he is a controlling shareholder.

Question 14

Kris,a shareholder of E-Max,Inc.,claimed that the business was being mismanaged.Kris notified the board of directors that the corporation has been wronged and asked the board to bring suit in the name of the corporation directly.In response to Kris' demand,what actions may the board take? What could Kris's response be to each alternative?

Accepted Answer

The board has three choices:
1.It can ag

Question 15

Who establishes executive compensation?

Accepted Answer

A)  The board of directors. 
B)  The shareholders. 
C)  The officers themselves. 
D)  An independent CPA firm. 
A)  The board of directors. 
B)  The shareholders. 
C)  The officers themselves. 
D)  An independent CPA firm.

Question 16

Under the Model Act,who has the right to call a special meeting of the shareholders to vote on an emergency issue that cannot wait until the next annual meeting?

Accepted Answer

A)  Shareholders who own at least 10 percent of a company's stock. 
B)  The board of directors. 
C)  Both of the above. 
D)  None of the above. 
A)  Shareholders who own at least 10 percent of a company's stock. 
B)  The board of directors. 
C)  Both of the above. 
D)  None of the above.

Question 17

Quick Supply House breached a contract with MegaCorp.The breach resulted in the loss of a great deal of money to MegaCorp.The board of directors for MegaCorp vote not to sue the supply house since it believes the legal costs would be more than it would probably recover.If a group of shareholders wish to sue the supply house,this would:

Accepted Answer

A)  be a type of direct lawsuit. 
B)  have to be a derivative lawsuit. 
C)  be a settlement lawsuit. 
D)  be an SEC lawsuit. 
A)  be a type of direct lawsuit. 
B)  have to be a derivative lawsuit. 
C)  be a settlement lawsuit. 
D)  be an SEC lawsuit.

Question 18

A majority of shareholders of FamLi Co.wish to expel Glenn,a minority shareholder.In most states,the company cannot expel Glenn unless:

Accepted Answer

A)  it pays a fair price for Glenn's stock. 
B)  there is a legitimate business purpose for expelling him. 
C)  Both of the above. 
D)  Neither a nor b 
A)  it pays a fair price for Glenn's stock. 
B)  there is a legitimate business purpose for expelling him. 
C)  Both of the above. 
D)  Neither a nor b

Question 19

A corporation must obtain shareholder approval before the company:

Accepted Answer

A)  sells off a major portion of its business to another company. 
B)  amends its bylaws. 
C)  amends its charter. 
D)  All the above are correct. 
A)  sells off a major portion of its business to another company. 
B)  amends its bylaws. 
C)  amends its charter. 
D)  All the above are correct.

Question 20

A corporation is required to have at least one class of stock with voting rights.

Accepted Answer

A) True 
 B)False

Exam 35: Shareholders

Matt,a dissident shareholder,can run for director by placing his name on the company's proxy statement.

Who has the right to manage the business of a corporation?

A corporation's obligation to provide shareholders with financial information:

Shareholder proposals on the company proxy statement:

Maureen,a shareholder of Metra,Inc.,is unhappy with how the corporation was being managed.Maureen wants to be a member of Metra's board of directors.Which statement is correct?

Alfrieda purchased an ownership interest in a corporation.This gives her the right to use the equipment owned by the corporation,as long as her usage does not interfere with the normal operation of the business.

A "fundamental change" in a corporation would be illustrated by:

To be successful in a court challenge regarding an executive's compensation,shareholders must prove that:

Kian is the chief financial officer of Yonkka,Inc.He is also a member of Yonkka's board of directors.Kian is:

Frank is a controlling shareholder in E-prise,Inc.Frank:

The proceeds,if any,of a derivative lawsuit go to:

Ev-R-Green Co.,a private corporation,decides to sell substantially all of the company's assets.Under the Model Act and many state statutes:

Charles owns 1,000 shares of stock in Temperan,Inc.Charles wants to obtain corporate records including the corporation's minute book and accounting records.Under the Model Act,Charles is entitled to this information if he requests it in good faith and:

Who establishes executive compensation?

Under the Model Act,who has the right to call a special meeting of the shareholders to vote on an emergency issue that cannot wait until the next annual meeting?

A majority of shareholders of FamLi Co.wish to expel Glenn,a minority shareholder.In most states,the company cannot expel Glenn unless:

A corporation must obtain shareholder approval before the company:

A corporation is required to have at least one class of stock with voting rights.

Introduction To Law

Business Ethics And Social Responsibility

Dispute Resolution

Common Law,Statutory Law,And Administrative Law

Constitutional Law

Intentional Torts And Business Torts

Negligence And Strict Liability

Crime

International Law

Introduction To Contracts

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Consideration

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Written Contracts

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Remedies

Practical Contracts

Introduction To Sales

Ownership And Risk

Warranties And Product Liability

Performance And Remedies

Secured Transactions

Creating A Negotiable Instrument

Liability For Negotiable Instruments

Accountants' Liability

Agency Law

Employment Law

Labor Law

Starting A Business

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Life And Death Of A Corporation

Corporate Management

Securities Regulation

Bankruptcy

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Planning For The Future: Wills,Trusts,And Insurance

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