Question 1

According to the MBCA,which of the following may,rather than must,be included in the articles of incorporation?

Accepted Answer

A) The number of shares that the corporation has authority to issue 
B) The name and address of each incorporator 
C) The address of the initial registered office of the corporation 
D) The names and addresses of the individuals who are to serve as the initial directors 
A) The number of shares that the corporation has authority to issue 
B) The name and address of each incorporator 
C) The address of the initial registered office of the corporation 
D) The names and addresses of the individuals who are to serve as the initial directors

Question 2

ABC is a nonprofit corporation formed by Alex.As its promoter,Alex made a few contracts with Johnsons,Inc.The following year,Alex formed another for-profit company.Meanwhile,Johnsons,Inc.claimed that Alex has not honored the contracts he made with them as promoter of ABC.Is Alex personally liable for those contracts? If not,what remedies are available for Johnsons,Inc.?

Accepted Answer

No,Alex is not personally liable for the

Question 3

Which of the following is included in the articles of incorporation?

Accepted Answer

A) The number of shares a corporation is authorized to issue 
B) The standards for declaring dividends 
C) The procedures for calling special meetings of shareholders 
D) The procedures for maintenance of share records 
A) The number of shares a corporation is authorized to issue 
B) The standards for declaring dividends 
C) The procedures for calling special meetings of shareholders 
D) The procedures for maintenance of share records

Question 4

In SmithStearn Yachts,Inc.v.Gyrographic Communications,Inc. ,the case in the text,why did the court deny the defendant's motion to dismiss?

Accepted Answer

A) The plaintiff was able to demonstrate that it intended the original corporation to be the primary on the contract with defendant. 
B) The plaintiff corporation ratified the agreement between the defendant and the corporation that never came into existence. 
C) The defendant failed to render services promised under the service agreement with the plaintiff. 
D) The defendant's agent failed to disclose the corporation's identity when contracting with the plaintiff. 
A) The plaintiff was able to demonstrate that it intended the original corporation to be the primary on the contract with defendant. 
B) The plaintiff corporation ratified the agreement between the defendant and the corporation that never came into existence. 
C) The defendant failed to render services promised under the service agreement with the plaintiff. 
D) The defendant's agent failed to disclose the corporation's identity when contracting with the plaintiff.

Question 5

When a promoter is liable on a preincorporation contract,the promoter is released from liability on the contract:

Accepted Answer

A) only after the contract has been fully performed. 
B) when the corporation ratifies the contract. 
C) when the corporation and the other party to the contract agree to release the promoter from liability. 
D) when the corporation's articles have been filed by the secretary of state. 
A) only after the contract has been fully performed. 
B) when the corporation ratifies the contract. 
C) when the corporation and the other party to the contract agree to release the promoter from liability. 
D) when the corporation's articles have been filed by the secretary of state.

Question 6

Joe is the promoter of New Corporation (NC).He entered into various preincorporation contracts.NC was properly formed on January 1,2006.As a result:

Accepted Answer

A) Joe is no longer personally liable on those preincorporation contracts. 
B) NC is automatically liable on those preincorporation contracts. 
C) Joe is jointly and severally liable on preincorporation contracts. 
D) Joe is not liable because NC released him from personal liability. 
A) Joe is no longer personally liable on those preincorporation contracts. 
B) NC is automatically liable on those preincorporation contracts. 
C) Joe is jointly and severally liable on preincorporation contracts. 
D) Joe is not liable because NC released him from personal liability.

Question 7

In the states that provide statutory solutions for close corporations that fail to address the share transferability problem,which of the following is not included in these statutes?

Accepted Answer

A) A right of first refusal provision 
B) An option provision 
C) A buy-and-sell provision 
D) A consent restraint provision 
A) A right of first refusal provision 
B) An option provision 
C) A buy-and-sell provision 
D) A consent restraint provision

Question 8

In the case in the text,Krupinski v.Deyesso,what did the court decide would be improper for it to determine on summary judgment?

Accepted Answer

A) Whether a breach of contract occurred between the promoter and the corporation. 
B) Whether a person was actually a promoter. 
C) Whether the promoter breached his fiduciary duty. 
D) Whether the plaintiff was entitled to damages. 
A) Whether a breach of contract occurred between the promoter and the corporation. 
B) Whether a person was actually a promoter. 
C) Whether the promoter breached his fiduciary duty. 
D) Whether the plaintiff was entitled to damages.

Question 9

On preincorporation share subscriptions:

Accepted Answer

A) promoters have no liability. 
B) promoters have no liability after incorporation. 
C) promoters have personal liability till novation. 
D) promoters have maximum liability. 
A) promoters have no liability. 
B) promoters have no liability after incorporation. 
C) promoters have personal liability till novation. 
D) promoters have maximum liability.

Question 10

Under the MBCA,a purchaser of shares that have a transfer restriction is not put on notice of such restriction if:

Accepted Answer

A) the restriction is public information. 
B) the restriction is conspicuously noted on the face of the share certificate. 
C) the restriction is conspicuously noted on the back of the share certificate. 
D) he knows of the restriction when he buys the shares. 
A) the restriction is public information. 
B) the restriction is conspicuously noted on the face of the share certificate. 
C) the restriction is conspicuously noted on the back of the share certificate. 
D) he knows of the restriction when he buys the shares.

Question 11

Generally,________ have a shorter duration than debentures or bonds.

Accepted Answer

A) options 
B) warrants 
C) promissory notes 
D) rights 
A) options 
B) warrants 
C) promissory notes 
D) rights

Question 12

________ are long-term,unsecured debt securities.

Accepted Answer

A) Options 
B) Warrants 
C) Bonds 
D) Debentures 
A) Options 
B) Warrants 
C) Bonds 
D) Debentures

Question 13

Any corporation that has complied with all ________ is called a de jure corporation.

Accepted Answer

A) mandatory bylaw provisions 
B) mandatory conditions subsequent 
C) mandatory conditions precedent 
D) mandatory statutory provisions 
A) mandatory bylaw provisions 
B) mandatory conditions subsequent 
C) mandatory conditions precedent 
D) mandatory statutory provisions

Question 14

Regardless of what state a corporation files in,that business will need to produce an annual report and pay a fee or tax to the state.

Accepted Answer

A) True 
 B)False

Question 15

In close corporations,free transferability of shares as a legal matter is a threat to:

Accepted Answer

A) the balance of power among shareholders. 
B) the stock market. 
C) the board of directors. 
D) the inherent right of freedom of contract. 
A) the balance of power among shareholders. 
B) the stock market. 
C) the board of directors. 
D) the inherent right of freedom of contract.

Question 16

Watered shares are shares issued for consideration that has been overvalued impermissibly by the board of directors.

Accepted Answer

A) True 
 B)False

Question 17

A right of first refusal on a share certificate allows the corporation to match the offer that a selling shareholder receives for his shares.

Accepted Answer

A) True 
 B)False

Question 18

Consent restraints and provisions disqualifying purchasers may be used as long as:

Accepted Answer

A) they are not manifestly unreasonable. 
B) at least one party consented to the provision. 
C) the limitation is not unfair under prevailing professional norms. 
D) the provision has a legitimate business interest. 
A) they are not manifestly unreasonable. 
B) at least one party consented to the provision. 
C) the limitation is not unfair under prevailing professional norms. 
D) the provision has a legitimate business interest.

Question 19

Under the Model Business Corporation Act (MBCA),a prospective shareholder may not revoke a preincorporation subscription for a one-year period,in the absence of a contrary provision in the subscription.

Accepted Answer

A) True 
 B)False

Question 20

A clause in a contract that states that a promoter of a contract will cease to be liable under the contract once a corporation has adopted it,is called:

Accepted Answer

A) an automatic novation clause. 
B) an automatic agency clause. 
C) an incorporation clause. 
D) a bylaws clause. 
A) an automatic novation clause. 
B) an automatic agency clause. 
C) an incorporation clause. 
D) a bylaws clause.

Exam 42: Organization and Financial Structure of Corporations

According to the MBCA,which of the following may,rather than must,be included in the articles of incorporation?

Which of the following is included in the articles of incorporation?

In SmithStearn Yachts,Inc.v.Gyrographic Communications,Inc. ,the case in the text,why did the court deny the defendant's motion to dismiss?

When a promoter is liable on a preincorporation contract,the promoter is released from liability on the contract:

Joe is the promoter of New Corporation (NC).He entered into various preincorporation contracts.NC was properly formed on January 1,2006.As a result:

In the states that provide statutory solutions for close corporations that fail to address the share transferability problem,which of the following is not included in these statutes?

In the case in the text,Krupinski v.Deyesso,what did the court decide would be improper for it to determine on summary judgment?

On preincorporation share subscriptions:

Under the MBCA,a purchaser of shares that have a transfer restriction is not put on notice of such restriction if:

Generally,________ have a shorter duration than debentures or bonds.

________ are long-term,unsecured debt securities.

Any corporation that has complied with all ________ is called a de jure corporation.

Regardless of what state a corporation files in,that business will need to produce an annual report and pay a fee or tax to the state.

In close corporations,free transferability of shares as a legal matter is a threat to:

Watered shares are shares issued for consideration that has been overvalued impermissibly by the board of directors.

A right of first refusal on a share certificate allows the corporation to match the offer that a selling shareholder receives for his shares.

Consent restraints and provisions disqualifying purchasers may be used as long as:

Under the Model Business Corporation Act (MBCA),a prospective shareholder may not revoke a preincorporation subscription for a one-year period,in the absence of a contrary provision in the subscription.

A clause in a contract that states that a promoter of a contract will cease to be liable under the contract once a corporation has adopted it,is called:

The Nature of Law

The Resolution of Private Disputes

Business and the Constitution

Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking

Criminal Law and Procedure

Intentional Torts

Negligence and Strict Liability

Intellectual Property and Unfair Competition

Introduction to Contracts

The Agreement: Offer

The Agreement: Acceptance

Consideration

Reality of Consent

Capacity to Contract

Illegality

Writing

Rights of Third Parties

Performance and Remedies

Formation and Terms of Sales Contracts

Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance Law

Introduction to Credit and Secured Transactions

Security Interests in Personal Property

Bankruptcy

Negotiable Instruments

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Transfers

The Agency Relationship

Third-Party Relations of the Principal and the Agent

Introduction to Forms of Business and Formation of Partnerships

Operation of Partnerships and Related Forms

Partners Dissociation and Partnerships Dissolution and Winding up

Limited Liability Companies, limited Partnerships, and Limited Liability Limited Partnerships

History and Nature of Corporations

Management of Corporations

Shareholders Rights and Liabilities

Securities Regulation

Legal and Professional Responsibilities of Auditors, Consultants, and Securities Professionals

Administrative Law

The Federal Trade Commission Act and Consumer Protection Laws

Antitrust: the Sherman Act

The Clayton Act, the Robinsonpatman Act, and Antitrust Exemptions and Immunities

Employment Law

Environmental Regulation

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