Question 1

A ________ is a decrease in the number of shares of a class such that,for example,two shares become one share.

Accepted Answer

A) share split 
B) reverse share split 
C) share dividend 
D) redemption 
A) share split 
B) reverse share split 
C) share dividend 
D) redemption

Question 2

Corporation law authorizes a shareholder to bring a class action on behalf of the corporation and for its benefit.

Accepted Answer

A) True 
 B)False

Question 3

Repurchase of ________ shares by a corporation is involuntary on the shareholder's part.

Accepted Answer

A) split 
B) fractional 
C) outstanding 
D) preferred 
A) split 
B) fractional 
C) outstanding 
D) preferred

Question 4

In Montgomery Cellular Holding Co. ,Inc.v.Dobler,the case in the text,the court applied the ________ test to review competing valuations of minority shares.

Accepted Answer

A) reasonable corporation 
B) International Shoe 
C) reasonable person 
D) Weinberger 
A) reasonable corporation 
B) International Shoe 
C) reasonable person 
D) Weinberger

Question 5

A corporation may have several classes of common shares with unequal voting rights.

Accepted Answer

A) True 
 B)False

Question 6

Most state statutes and the Model Business Corporation Act (MBCA)provide that a quarterly meeting of shareholders shall be held.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is true about mergers?

Accepted Answer

A) The shareholders of the surviving corporation must approve the merger. 
B) The MBCA does not recognize mergers done solely for the profit motive. 
C) A merger may be invalidated if it freezes out minority shareholders. 
D) Shareholders of the acquired corporation must be paid a premium on their shares. 
A) The shareholders of the surviving corporation must approve the merger. 
B) The MBCA does not recognize mergers done solely for the profit motive. 
C) A merger may be invalidated if it freezes out minority shareholders. 
D) Shareholders of the acquired corporation must be paid a premium on their shares.

Question 8

A corporation may not declare and distribute dividends unless it has excess solvency.

Accepted Answer

A) True 
 B)False

Question 9

If a shareholder's derivative action succeeds the suing shareholder is entitled to:

Accepted Answer

A) compensation for the time he devoted toward the lawsuit. 
B) compensation from the other shareholders. 
C) reimbursement of any costs and fees incurred in bringing the action. 
D) reimbursement of his reasonable attorney's fees that he incurred in bringing the action. 
A) compensation for the time he devoted toward the lawsuit. 
B) compensation from the other shareholders. 
C) reimbursement of any costs and fees incurred in bringing the action. 
D) reimbursement of his reasonable attorney's fees that he incurred in bringing the action.

Question 10

Gnossis Company has 15,000 outstanding common shares and a total equity of $250,000.Gnossis has an additional 30,000 common shares that are authorized,but not issued or outstanding.Gnossis has $225,000 in excess liquidity that it does not need to pay its currently maturing obligations.Gnossis has paid all currently due dividends to preferred shareholders.What is the maximum share dividend that Gnossis may make to its common shareholders?

Accepted Answer

Gnossis may give its common shareholders

Question 11

MacTech Corporation is a subsidiary of Clickon Corporation,which owns 90 percent of MacTech's shares.The management of Clickon is not happy with the way MacTech is being managed.They believe that MacTech is losing out on a huge chunk of potential business to rivals due to mismanagement.As a solution,the board of directors of Clickon approves a merger between Clickon and MacTech and they send a copy of the merger plan to MacTech's shareholders.This form of merger is called a(n):

Accepted Answer

A) semi-merger. 
B) short-form merger. 
C) incomplete merger. 
D) half-merger. 
A) semi-merger. 
B) short-form merger. 
C) incomplete merger. 
D) half-merger.

Question 12

Henry brought a lawsuit against NewAge Inc. ,claiming that the CEO of NewAge had misappropriated funds last year,as a result of which NewAge ended the year in the red.However,Henry was not a shareholder of NewAge last year and his only motive for buying NewAge shares was to bring this lawsuit in order to gain out-of-court settlements for himself.This kind of lawsuit is known as a:

Accepted Answer

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

Question 13

What are the various ways through which a corporation can be dissolved?

Accepted Answer

The various ways through which a corpora

Question 14

The Model Business Corporation Act (MBCA)provides that the ________ right of a shareholder does not exist except to the extent provided by the articles of incorporation.

Accepted Answer

A) preemptive 
B) information 
C) dissenters' 
D) liquidation 
A) preemptive 
B) information 
C) dissenters' 
D) liquidation

Question 15

Klingon Corporation has only one class of shares,its common shares.Klingon has assets of $200,000 and liabilities of $160,000.It has $40,000 of excess liquidity that it does not need to pay its currently maturing obligations.What is the maximum property dividend that Klingon may pay to its common shareholders?

Accepted Answer

A) $60,000 
B) $10,000 
C) $40,000 
D) $30,000 
A) $60,000 
B) $10,000 
C) $40,000 
D) $30,000

Question 16

Prior to bringing a derivate action,a shareholder must first demand that the board of directors bring the suit and they must decline.

Accepted Answer

A) True 
 B)False

Question 17

A ________ is a lawsuit brought to gain out-of-court settlements for the complaining shareholders personally or to earn large attorney's fees,rather than to obtain a recovery for the corporation.

Accepted Answer

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

Question 18

The LexCon Corporation takes over the Zebra Corporation.By applying which principle will LexCon become the owner of all the shares of Zebra Corporation?

Accepted Answer

A) Merger 
B) Acquisition 
C) Share trading 
D) Share exchange 
A) Merger 
B) Acquisition 
C) Share trading 
D) Share exchange

Question 19

Shareholders of a corporation brought a class action against the president,alleging that they missed out on dividends and an increase in the value of their shares because the president misappropriated the corporation's funds.This suit was successful and the president paid $10 million in damages.This money will go to:

Accepted Answer

A) the shareholders who brought the class action. 
B) the treasury of the corporation. 
C) the state,as a fine. 
D) the federal government,as a fine. 
A) the shareholders who brought the class action. 
B) the treasury of the corporation. 
C) the state,as a fine. 
D) the federal government,as a fine.

Question 20

A special litigation committee whose purpose is to decide whether to sue should consist of:

Accepted Answer

A) directors who were directors at the time the wrong occurred. 
B) directors who are not defendants in the derivative suit. 
C) directors who are interested in the challenged action. 
D) directors who are not independent of the defendant directors. 
A) directors who were directors at the time the wrong occurred. 
B) directors who are not defendants in the derivative suit. 
C) directors who are interested in the challenged action. 
D) directors who are not independent of the defendant directors.

Exam 44: Shareholders Rights and Liabilities

A ________ is a decrease in the number of shares of a class such that,for example,two shares become one share.

Corporation law authorizes a shareholder to bring a class action on behalf of the corporation and for its benefit.

Repurchase of ________ shares by a corporation is involuntary on the shareholder's part.

In Montgomery Cellular Holding Co. ,Inc.v.Dobler,the case in the text,the court applied the ________ test to review competing valuations of minority shares.

A corporation may have several classes of common shares with unequal voting rights.

Most state statutes and the Model Business Corporation Act (MBCA)provide that a quarterly meeting of shareholders shall be held.

Which of the following is true about mergers?

A corporation may not declare and distribute dividends unless it has excess solvency.

If a shareholder's derivative action succeeds the suing shareholder is entitled to:

What are the various ways through which a corporation can be dissolved?

The Model Business Corporation Act (MBCA)provides that the ________ right of a shareholder does not exist except to the extent provided by the articles of incorporation.

Prior to bringing a derivate action,a shareholder must first demand that the board of directors bring the suit and they must decline.

A ________ is a lawsuit brought to gain out-of-court settlements for the complaining shareholders personally or to earn large attorney's fees,rather than to obtain a recovery for the corporation.

The LexCon Corporation takes over the Zebra Corporation.By applying which principle will LexCon become the owner of all the shares of Zebra Corporation?

A special litigation committee whose purpose is to decide whether to sue should consist of:

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

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