Question 1

A ________ is a suit brought by a shareholder of a parent corporation on behalf of a subsidiary corporation owned by the parent.

Accepted Answer

A) strike suit 
B) double derivative suit 
C) derivative action 
D) class action 
A) strike suit 
B) double derivative suit 
C) derivative action 
D) class action B

Question 2

If several shareholders have been similarly affected by a wrongful act of another,one of these shareholders may bring a ________ on behalf of all the affected shareholders.

Accepted Answer

A) derivative action 
B) double derivative suit 
C) class action 
D) strike suit 
A) derivative action 
B) double derivative suit 
C) class action 
D) strike suit C

Question 3

A share split within the same class of shares generally:

Accepted Answer

A) increases the net value of the shares following the split. 
B) decreases the net value of the shares following the split. 
C) has no effect on the net value of the shares following the split. 
D) reduces the capital surplus and increases the number of shares authorized. 
A) increases the net value of the shares following the split. 
B) decreases the net value of the shares following the split. 
C) has no effect on the net value of the shares following the split. 
D) reduces the capital surplus and increases the number of shares authorized. C

Question 4

In the case in the text,Reynolds Health Care Services,Inc.v.HMNH,Inc. ,the court found that the intended long-term shareholder voting agreement:

Accepted Answer

A) was valid and enforceable against both parties. 
B) was invalid because long-term proxies are only allowed for 11 months. 
C) was never created,and instead,the parties created an irrevocable proxy. 
D) was never created,and instead,the parties created a revocable proxy. 
A) was valid and enforceable against both parties. 
B) was invalid because long-term proxies are only allowed for 11 months. 
C) was never created,and instead,the parties created an irrevocable proxy. 
D) was never created,and instead,the parties created a revocable proxy.

Question 5

Corporations must give notice of the annual meeting and special meetings to shareholders.

Accepted Answer

A) True 
 B)False

Question 6

Under the Model Nonprofit Corporation Act (MNCA),members have an absolute right to inspect and copy a list of the members.

Accepted Answer

A) True 
 B)False

Question 7

Tom,Brady,and Alex are members of a golf country club (a nonprofit corporation).Tom holds 5 percent of voting power,Brady holds 8 percent of voting power,and Alex holds 1 percent of voting power in the club.They would like to call a special meeting of the club to discuss renovation of some of its facilities.Who amongst them can call such a meeting?

Accepted Answer

A) Brady and Alex 
B) Alex and Tom 
C) Alex,Tom,and Brady 
D) Tom and Brady 
A) Brady and Alex 
B) Alex and Tom 
C) Alex,Tom,and Brady 
D) Tom and Brady

Question 8

Under the Model Business Corporation Act (MBCA),a corporation that retains at least ________ percent of its business activity and either its income or revenue has not disposed of substantially all its assets.

Accepted Answer

A) 10 
B) 25 
C) 50 
D) 45 
A) 10 
B) 25 
C) 50 
D) 45

Question 9

Under the Model Business Corporation Act (MBCA),dissenters' rights apply only if the shareholders' shares are not traded on a national securities exchange.

Accepted Answer

A) True 
 B)False

Question 10

Atria Corporation wishes to dissolve.How can it do so?

Accepted Answer

The directors of Atria Corporation must

Question 11

The ________ prevents a corporation from paying to common shareholders a dividend that will impair the liquidation rights of preferred shareholders.

Accepted Answer

A) solvency test 
B) balance sheet test 
C) business judgment rule 
D) liquidity test 
A) solvency test 
B) balance sheet test 
C) business judgment rule 
D) liquidity test

Question 12

Which of the following is correct concerning the election of directors?

Accepted Answer

A) Straight voting is the cleanest way to allocate equity ownership of the corporation among shareholders. 
B) In cumulative voting,each share has one vote for each new director to be elected. 
C) Cumulative voting can prevent harmful coalitions in close corporations. 
D) Under straight voting,the voting power of minority shareholders is increased. 
A) Straight voting is the cleanest way to allocate equity ownership of the corporation among shareholders. 
B) In cumulative voting,each share has one vote for each new director to be elected. 
C) Cumulative voting can prevent harmful coalitions in close corporations. 
D) Under straight voting,the voting power of minority shareholders is increased.

Question 13

A corporation's decision to issue a dividend,and the size of that dividend,is made by the:

Accepted Answer

A) shareholders. 
B) board of directors. 
C) officers of the corporation. 
D) creditors of the corporation. 
A) shareholders. 
B) board of directors. 
C) officers of the corporation. 
D) creditors of the corporation.

Question 14

A shareholder's preemptive right allows him to:

Accepted Answer

A) increase his proportionate voting power. 
B) maintain his dissenters' right. 
C) increase the value of his shares. 
D) maintain his proportionate share of dividends. 
A) increase his proportionate voting power. 
B) maintain his dissenters' right. 
C) increase the value of his shares. 
D) maintain his proportionate share of dividends.

Question 15

When a corporation has been harmed by the actions of another person,the right to sue belongs to the ________,and any damages awarded by a court belong to the ________.

Accepted Answer

A) board of directors;shareholders 
B) corporation;corporation 
C) shareholders;corporation 
D) corporation;shareholders 
A) board of directors;shareholders 
B) corporation;corporation 
C) shareholders;corporation 
D) corporation;shareholders

Question 16

Shareholders have a right of full participation in board of directors' meetings.

Accepted Answer

A) True 
 B)False

Question 17

According to the Statutory Close Corporation Supplement to the MBCA,who does a shareholder have a fiduciary responsibility to?

Accepted Answer

A) To all the other shareholders of the corporation 
B) To the Secretary of State 
C) To individual citizens in the state the corporation is incorporated 
D) To the CEO of the corporation 
A) To all the other shareholders of the corporation 
B) To the Secretary of State 
C) To individual citizens in the state the corporation is incorporated 
D) To the CEO of the corporation

Question 18

If a shareholder is successful in a derivative suit,she is entitled to a reimbursement of her reasonable litigation expenses paid by:

Accepted Answer

A) the corporation. 
B) the secretary of state. 
C) the incorporator. 
D) the arbitrator. 
A) the corporation. 
B) the secretary of state. 
C) the incorporator. 
D) the arbitrator.

Question 19

Under the Model Business Corporation Act (MBCA),shareholders have a qualified but not absolute right to inspect:

Accepted Answer

A) the articles of incorporation and bylaws. 
B) an alphabetical listing of the shareholders entitled to notice of a meeting. 
C) the number of shares owned by the shareholders. 
D) shareholder minutes more than three years old. 
A) the articles of incorporation and bylaws. 
B) an alphabetical listing of the shareholders entitled to notice of a meeting. 
C) the number of shares owned by the shareholders. 
D) shareholder minutes more than three years old.

Question 20

Provided that most of the directors of a corporation are independent,if shareholders bring a derivative action against the directors,the burden of proving that bringing the action is in the best interest of the corporation lies on the:

Accepted Answer

A) company secretary. 
B) secretary of state. 
C) board of directors. 
D) shareholders. 
A) company secretary. 
B) secretary of state. 
C) board of directors. 
D) shareholders.

Exam 44: Shareholders Rights and Liabilities

A ________ is a suit brought by a shareholder of a parent corporation on behalf of a subsidiary corporation owned by the parent.

If several shareholders have been similarly affected by a wrongful act of another,one of these shareholders may bring a ________ on behalf of all the affected shareholders.

A share split within the same class of shares generally:

In the case in the text,Reynolds Health Care Services,Inc.v.HMNH,Inc. ,the court found that the intended long-term shareholder voting agreement:

Corporations must give notice of the annual meeting and special meetings to shareholders.

Under the Model Nonprofit Corporation Act (MNCA),members have an absolute right to inspect and copy a list of the members.

Under the Model Business Corporation Act (MBCA),a corporation that retains at least ________ percent of its business activity and either its income or revenue has not disposed of substantially all its assets.

Under the Model Business Corporation Act (MBCA),dissenters' rights apply only if the shareholders' shares are not traded on a national securities exchange.

Atria Corporation wishes to dissolve.How can it do so?

The ________ prevents a corporation from paying to common shareholders a dividend that will impair the liquidation rights of preferred shareholders.

Which of the following is correct concerning the election of directors?

A corporation's decision to issue a dividend,and the size of that dividend,is made by the:

A shareholder's preemptive right allows him to:

When a corporation has been harmed by the actions of another person,the right to sue belongs to the ________,and any damages awarded by a court belong to the ________.

Shareholders have a right of full participation in board of directors' meetings.

According to the Statutory Close Corporation Supplement to the MBCA,who does a shareholder have a fiduciary responsibility to?

If a shareholder is successful in a derivative suit,she is entitled to a reimbursement of her reasonable litigation expenses paid by:

Under the Model Business Corporation Act (MBCA),shareholders have a qualified but not absolute right to inspect:

Provided that most of the directors of a corporation are independent,if shareholders bring a derivative action against the directors,the burden of proving that bringing the action is in the best interest of the corporation lies on the:

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

Organization and Financial Structure of Corporations

Management of Corporations

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

Filters

When a corporation has been harmed by the actions of another person,the right to sue belongs to the ,and any damages awarded by a court belong to the .