Question 1

Since stock is intangible personal property, the ownership right to stock exists independently of a stock certificate.

Accepted Answer

A) True 
 B)False  True

Question 2

Not all directors have a right to access a corporation's books and records, facilities, and premises.

Accepted Answer

A) True 
 B)False  False

Question 3

Nelson is Organic Coffee Company's majority shareholder. Nelson decides to sell his Organic Coffee stock. The sale will be an effective transfer of the control of the company. Does Nelson owe a duty to Organic Coffee or its minority shareholders in this situation?

Accepted Answer

Yes. A single shareholder-or a few shareholders acting together-who owns enough stock to exercise de facto control over a corporation owes the corporation and its minority shareholders a fiduciary duty when transferring those shares. A breach of this fiduciary duty by those who control a close corporation can constitute what is known as oppressive conduct. A breach of this duty may also occur if a majority shareholder attempts to exclude minority shareholders from receiving certain benefits from participating in the firm. Thus, for example, refusing to perform a valuation of the company, or denying the minority shareholders access to corporate information to which they would otherwise entitled, would constitute a violation of this duty.

Question 4

Ben is a shareholder of Commerce & Trade Inc. As a shareholder, Ben does not have

Accepted Answer

A)  ​a right to compensation. 
B)  ​dividend rights. 
C)  ​inspection rights. 
D)  ​preemptive rights. 
A)  ​a right to compensation. 
B)  ​dividend rights. 
C)  ​inspection rights. 
D)  ​preemptive rights.

Question 5

The executive officers represent the ultimate authority in every corporation.

Accepted Answer

A) True 
 B)False

Question 6

Stock warrants are distribution of corporate profits or income ordered by the directors.

Accepted Answer

A) True 
 B)False

Question 7

Riley is elected as a director to the board of Salty Snacks, Inc. He will most likely serve for a term of one

Accepted Answer

A)  ​decade. 
B)  ​four-year period. 
C)  ​lifetime. 
D)  ​year. 
A)  ​decade. 
B)  ​four-year period. 
C)  ​lifetime. 
D)  ​year.

Question 8

Faye and Grant are shareholders of Hearthside Hotels, Inc. As shareholders, they must approve

Accepted Answer

A)  ​a merger. 
B)  ​a decision to pursue new business opportunities. 
C)  ​none of the choices. 
D)  ​a contract between management and labor. 
A)  ​a merger. 
B)  ​a decision to pursue new business opportunities. 
C)  ​none of the choices. 
D)  ​a contract between management and labor.

Question 9

A director must abstain from voting on a proposed transaction in which he or she has a personal interest.

Accepted Answer

A) True 
 B)False

Question 10

Gina is a director on the board of Home Furnishings Inc. As a director, she may not

Accepted Answer

A)  ​authorize major corporate policy decisions. 
B)  ​decide to issue stock and bonds, and declare dividends. 
C)  ​select and remove corporate officers. 
D)  ​subordinate the firm's welfare to her personal interests. 
A)  ​authorize major corporate policy decisions. 
B)  ​decide to issue stock and bonds, and declare dividends. 
C)  ​select and remove corporate officers. 
D)  ​subordinate the firm's welfare to her personal interests.

Question 11

Robyn owns one share of stock in SportBoards Corporation, as evidenced by a stock certificate. She loses the certificate. Her ownership of the stock is

Accepted Answer

A)  ​forfeited immediately. 
B)  ​forfeited within ten days of a third party's claim to ownership. 
C)  ​forfeited within thirty days if she cannot find the certificate. 
D)  ​not affected. 
A)  ​forfeited immediately. 
B)  ​forfeited within ten days of a third party's claim to ownership. 
C)  ​forfeited within thirty days if she cannot find the certificate. 
D)  ​not affected.

Question 12

In some states, a shareholder who receives watered stock may be liable to creditors of the corporation for unpaid corporate debts.

Accepted Answer

A) True 
 B)False

Question 13

Dane is a director of Eco Packing Company. Dane's rights, as a director, do not include a right to

Accepted Answer

A)  ​reimbursement. 
B)  ​inspection. 
C)  ​participation. 
D)  ​self-dealing. 
A)  ​reimbursement. 
B)  ​inspection. 
C)  ​participation. 
D)  ​self-dealing.

Question 14

Shauna is an officer for Tropical Shirts Corporation. Due to a bad choice of shirt-maker on Shauna's part, the company's costs increase. Shauna is most likely liable for breach of

Accepted Answer

A)  ​the business judgment rule. 
B)  ​the duty of care. 
C)  ​the duty of loyalty. 
D)  ​none of the choices. 
A)  ​the business judgment rule. 
B)  ​the duty of care. 
C)  ​the duty of loyalty. 
D)  ​none of the choices.

Question 15

Nina is a director of Outback Outfitters, Inc. Under the standard of due care owed by directors of a corporation, Nina's decisions must be informed and

Accepted Answer

A)  ​reasonable. 
B)  ​unquestionable. 
C)  ​indefensible. 
D)  ​perfect. 
A)  ​reasonable. 
B)  ​unquestionable. 
C)  ​indefensible. 
D)  ​perfect.

Question 16

Beth and Curt form Day-to-Day Care, Inc. Ultimate responsibility for policy decisions necessary to the management of corporate affairs rests with Day-to-Day's

Accepted Answer

A)  ​board of directors. 
B)  ​incorporators. 
C)  ​officers. 
D)  ​shareholders. 
A)  ​board of directors. 
B)  ​incorporators. 
C)  ​officers. 
D)  ​shareholders.

Question 17

Ernie is a director of Five-Star Properties, Inc. Ernie is a property appraiser. Five-Star makes several purchases in which it pays too much. Ernie approves all the transactions without evaluating them. He is most likely liable for breach of

Accepted Answer

A)  ​the duty of care. 
B)  ​none of the choices. 
C)  ​the duty of loyalty. 
D)  ​the business judgment rule. 
A)  ​the duty of care. 
B)  ​none of the choices. 
C)  ​the duty of loyalty. 
D)  ​the business judgment rule.

Question 18

Fact Pattern 6-1
Don is a shareholder of Energy Renew, Inc. When the directors fail to undertake an action to redress a wrong suffered by the corporation, Don files a suit on the firm's behalf.
-Refer to Fact Pattern 6-1.Don's suit is a shareholder's

Accepted Answer

A)  ​reimbursement suit. 
B)  ​derivative suit. 
C)  ​business-judgment rule suit. 
D)  ​preemptive suit. 
A)  ​reimbursement suit. 
B)  ​derivative suit. 
C)  ​business-judgment rule suit. 
D)  ​preemptive suit.

Question 19

A dividend is a right given by a company to buy stock at a stated price by a specified date.

Accepted Answer

A) True 
 B)False

Question 20

In most states, an individual can be an officer or a director of a corporation, but not both at the same time.

Accepted Answer

A) True 
 B)False

Exam 6: Corporate Directors, Officers, and Shareholders

Since stock is intangible personal property, the ownership right to stock exists independently of a stock certificate.

Not all directors have a right to access a corporation's books and records, facilities, and premises.

Nelson is Organic Coffee Company's majority shareholder. Nelson decides to sell his Organic Coffee stock. The sale will be an effective transfer of the control of the company. Does Nelson owe a duty to Organic Coffee or its minority shareholders in this situation?

Ben is a shareholder of Commerce & Trade Inc. As a shareholder, Ben does not have

The executive officers represent the ultimate authority in every corporation.

Stock warrants are distribution of corporate profits or income ordered by the directors.

Riley is elected as a director to the board of Salty Snacks, Inc. He will most likely serve for a term of one

Faye and Grant are shareholders of Hearthside Hotels, Inc. As shareholders, they must approve

A director must abstain from voting on a proposed transaction in which he or she has a personal interest.

Gina is a director on the board of Home Furnishings Inc. As a director, she may not

Robyn owns one share of stock in SportBoards Corporation, as evidenced by a stock certificate. She loses the certificate. Her ownership of the stock is

In some states, a shareholder who receives watered stock may be liable to creditors of the corporation for unpaid corporate debts.

Dane is a director of Eco Packing Company. Dane's rights, as a director, do not include a right to

Shauna is an officer for Tropical Shirts Corporation. Due to a bad choice of shirt-maker on Shauna's part, the company's costs increase. Shauna is most likely liable for breach of

Nina is a director of Outback Outfitters, Inc. Under the standard of due care owed by directors of a corporation, Nina's decisions must be informed and

Beth and Curt form Day-to-Day Care, Inc. Ultimate responsibility for policy decisions necessary to the management of corporate affairs rests with Day-to-Day's

Ernie is a director of Five-Star Properties, Inc. Ernie is a property appraiser. Five-Star makes several purchases in which it pays too much. Ernie approves all the transactions without evaluating them. He is most likely liable for breach of

Fact Pattern 6-1 Don is a shareholder of Energy Renew, Inc. When the directors fail to undertake an action to redress a wrong suffered by the corporation, Don files a suit on the firm's behalf. -Refer to Fact Pattern 6-1.Don's suit is a shareholder's

A dividend is a right given by a company to buy stock at a stated price by a specified date.

In most states, an individual can be an officer or a director of a corporation, but not both at the same time.

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