Question 1

Some publicly held corporations have used supermajority shareholder voting requirements to defend against hostile takeover bids.

Accepted Answer

A) True 
 B)False

Question 2

Directors are elected at the annual meeting of shareholders.

Accepted Answer

A) True 
 B)False

Question 3

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.

Question 4

By a majority vote, shareholders may remove the entire board of directors without cause.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Discuss the business judgment rule.

Accepted Answer

The business judgment rule precludes imp

Question 7

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.

Accepted Answer

A) duty of diligence. 
B) duty of obedience. 
C) business judgment rule. 
D) None of the above. 
A) duty of diligence. 
B) duty of obedience. 
C) business judgment rule. 
D) None of the above.

Question 8

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 9

Tunso Corp.has 1,000 shares of stock outstanding that are permitted to vote for directors.If Tunso Corp.permits cumulative voting, a minority shareholder would need to vote how many shares to elect one of three directors?

Accepted Answer

A) 251 
B) 501 
C) 201 
D) 334 
A) 251 
B) 501 
C) 201 
D) 334

Question 10

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

Bill is a member of the board of directors of Telmar Corp.He would like to have the corporation lend him some money so that he can begin another business venture.Which of the following is correct regarding loans of a corporation to one of its directors?

Accepted Answer

A) The Model Act does not permit a corporation to lend money to its directors without authorization in each instance by its shareholders. 
B) The Sarbanes-Oxley Act prohibits any publicly held corporation from making personal loans to its directors, with limited exceptions. 
C) Both the Model Act and the Revised Act prohibit loans to directors in all cases. 
D) Both (a) and (b) are correct. 
A) The Model Act does not permit a corporation to lend money to its directors without authorization in each instance by its shareholders. 
B) The Sarbanes-Oxley Act prohibits any publicly held corporation from making personal loans to its directors, with limited exceptions. 
C) Both the Model Act and the Revised Act prohibit loans to directors in all cases. 
D) Both (a) and (b) are correct.

Question 13

The board of directors generally manages the day-to-day affairs of the company.

Accepted Answer

A) True 
 B)False

Question 14

What are some of the areas where the board determines corporation policy?

Accepted Answer

A) Selecting and removing officers. 
B) Determining the corporation's capital structure. 
C) Initiating fundamental changes and declaring dividends. 
D) Setting management compensation. 
E) All of the above. 
A) Selecting and removing officers. 
B) Determining the corporation's capital structure. 
C) Initiating fundamental changes and declaring dividends. 
D) Setting management compensation. 
E) All of the above.

Question 15

Members of the board of directors may not determine their own compensation.

Accepted Answer

A) True 
 B)False

Question 16

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 17

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

Accepted Answer

A) duty of good faith. 
B) duty of diligence. 
C) fiduciary duty. 
D) duty of obedience. 
A) duty of good faith. 
B) duty of diligence. 
C) fiduciary duty. 
D) duty of obedience.

Question 18

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?

Accepted Answer

A) The contract will be void as a conflict of interest. 
B) Under the RMBCA, the contract is permitted if it is fair and reasonable to both corporations, Gerhardt fully discloses all information relating to the transaction, and the contract is approved by either the board of disinterested directors or the shareholders. 
C) The contract is a clear conflict of interest and will be avoidable by either company even with disclosure. 
D) Both (a) and (c) are correct. 
A) The contract will be void as a conflict of interest. 
B) Under the RMBCA, the contract is permitted if it is fair and reasonable to both corporations, Gerhardt fully discloses all information relating to the transaction, and the contract is approved by either the board of disinterested directors or the shareholders. 
C) The contract is a clear conflict of interest and will be avoidable by either company even with disclosure. 
D) Both (a) and (c) are correct.

Exam 36: Management Structure of Corporations

Some publicly held corporations have used supermajority shareholder voting requirements to defend against hostile takeover bids.

Directors are elected at the annual meeting of shareholders.

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

By a majority vote, shareholders may remove the entire board of directors without cause.

Discuss the business judgment rule.

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.

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

Tunso Corp.has 1,000 shares of stock outstanding that are permitted to vote for directors.If Tunso Corp.permits cumulative voting, a minority shareholder would need to vote how many shares to elect one of three directors?

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.

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

Bill is a member of the board of directors of Telmar Corp.He would like to have the corporation lend him some money so that he can begin another business venture.Which of the following is correct regarding loans of a corporation to one of its directors?

The board of directors generally manages the day-to-day affairs of the company.

What are some of the areas where the board determines corporation policy?

Members of the board of directors may not determine their own compensation.

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

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

Introduction to Law

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