Question 1

Which of the following does "ex officio" authority refer to?

Accepted Answer

A)  Authority by virtue of one's office 
B)  Duty to act within one's authority 
C)  Conducting the affairs of the corporation with due care 
D)  Duty to act with loyalty and good faith 
A)  Authority by virtue of one's office 
B)  Duty to act within one's authority 
C)  Conducting the affairs of the corporation with due care 
D)  Duty to act with loyalty and good faith A

Question 2

The vice president of a corporation:

Accepted Answer

A)  cannot be leading any specific department of the company. 
B)  has charge of the funds of the corporation. 
C)  cannot have implied authority. 
D)  has no authority by virtue of that office. 
A)  cannot be leading any specific department of the company. 
B)  has charge of the funds of the corporation. 
C)  cannot have implied authority. 
D)  has no authority by virtue of that office. D

Question 3

What is generally required for fundamental changes in the corporation?

Accepted Answer

A)  Novation 
B)  Referendum 
C)  Board initiative 
D)  Deal protection devices 
A)  Novation 
B)  Referendum 
C)  Board initiative 
D)  Deal protection devices C

Question 4

The board of directors of Meckes Corporation,at a regular meeting of the board,entered into a contract with Peter,one of the directors.The agreement called for the sale of a retail store the corporation operated to Peter.There were 12 board members,10 of whom were present at the meeting.Nine directors,including Peter,voted in favor of the contract and one voted against it.In view of these facts,which of the following is correct?

Accepted Answer

A)  A director cannot enter into a contract with a corporation of which he is a director. 
B)  The contract between Peter and the corporation is illegal. 
C)  If the contract is unfair to the corporation, it is voidable at the option of the corporation. 
D)  The contract is valid because Peter's vote was not necessary for approval of the contract. 
A)  A director cannot enter into a contract with a corporation of which he is a director. 
B)  The contract between Peter and the corporation is illegal. 
C)  If the contract is unfair to the corporation, it is voidable at the option of the corporation. 
D)  The contract is valid because Peter's vote was not necessary for approval of the contract.

Question 5

Trading on inside information is in violation of fiduciary duties.

Accepted Answer

A) True 
 B)False

Question 6

Under the Delaware General Corporation Law,e-mail is not a legally-recognized official form of business communication.

Accepted Answer

A) True 
 B)False

Question 7

According to the MBCA,all corporate powers shall be exercised by or under the authority of,and the business and affairs of a corporation shall be managed under the direction of a _____.

Accepted Answer

A)  board of directors 
B)  president 
C)  majority shareholder 
D)  chief executive officer 
A)  board of directors 
B)  president 
C)  majority shareholder 
D)  chief executive officer

Question 8

Which of the following acts requires CEOs and CFOs of publicly traded corporations to certify that,to their knowledge,all financial information in quarterly and annual reports is not false or misleading?

Accepted Answer

A)  Landrum-Griffin Act 
B)  Clayton Act 
C)  Sarbanes-Oxley Act 
D)  Norris-LaGuardia Act 
A)  Landrum-Griffin Act 
B)  Clayton Act 
C)  Sarbanes-Oxley Act 
D)  Norris-LaGuardia Act

Question 9

Under the MBCA,the president of a corporation cannot also be the secretary of the corporation.

Accepted Answer

A) True 
 B)False

Question 10

A director or officer will be held to have failed to act with due care and diligence if he or she:

Accepted Answer

A)  does not personally investigate every facet of every business decision. 
B)  makes an error acting in the best interest of the corporation. 
C)  fails to make a reasonable investigation before making any corporate decisions. 
D)  does not personally attend all board meetings, even if insufficient notice is given. 
A)  does not personally investigate every facet of every business decision. 
B)  makes an error acting in the best interest of the corporation. 
C)  fails to make a reasonable investigation before making any corporate decisions. 
D)  does not personally attend all board meetings, even if insufficient notice is given.

Question 11

An officer or director who has acted in bad faith or who is found liable to the corporation can be indemnified under special circumstances.

Accepted Answer

A) True 
 B)False

Question 12

A _____ authorizes any corporation to adopt a specific amendment to its articles of incorporation that removes breach of duty as a cause of action for monetary damages against directors.

Accepted Answer

A)  charter option statute 
B)  self-executing statute 
C)  cap on monetary damages statute 
D)  SEC oversight statute 
A)  charter option statute 
B)  self-executing statute 
C)  cap on monetary damages statute 
D)  SEC oversight statute

Question 13

Distanet Corporation and Telenex Corporation are competitors in the gaming accessories market.Telenex has been the market leader for over five years.After examining the price and sales data of products from both companies and consulting an economist and an accountant,Distanet's directors vote for a reduction in price of Distanet's products.They believe that reducing prices would make the company more competitive.The decision to reduce prices does not improve sales significantly.In fact,Distanet's revenues decrease as a result of the decision.Aileen,a stockholder of Distanet,seeks to hold Distanet's directors liable for the failure of the plan to improve Distanet's position in the computer market and for the losses experienced by the corporation as a result of the implementation of the plan.Will she succeed in her suit?

Accepted Answer

A)  No, because the directors are the managers of the corporation. 
B)  No, because the directors' decision is subject to the business judgment rule. 
C)  Yes, because the directors are liable for any business-related financial loss sustained. 
D)  Yes, because shareholders are permitted to sue to allow a court to determine whether the directors have acted in the best interests of the corporation. 
A)  No, because the directors are the managers of the corporation. 
B)  No, because the directors' decision is subject to the business judgment rule. 
C)  Yes, because the directors are liable for any business-related financial loss sustained. 
D)  Yes, because shareholders are permitted to sue to allow a court to determine whether the directors have acted in the best interests of the corporation.

Question 14

When notice of a special meeting is defective,the defect may be cured if:

Accepted Answer

A)  one non-attending director nominates another person to vote on matters in his or her place. 
B)  all of the directors attend the meeting. 
C)  the attending directors make the decisions for the rest of the board. 
D)  some of the directors attend the meeting. 
A)  one non-attending director nominates another person to vote on matters in his or her place. 
B)  all of the directors attend the meeting. 
C)  the attending directors make the decisions for the rest of the board. 
D)  some of the directors attend the meeting.

Question 15

Directors are agents for the corporation by virtue of that office.

Accepted Answer

A) True 
 B)False

Question 16

A director who has acted in bad faith or who is found liable to the corporation:

Accepted Answer

A)  can be indemnified if the losses are lesser than the average annual salary. 
B)  may only be indemnified if some shareholders find the act to be appropriate. 
C)  may only be indemnified upon the approval of an independent legal counsel. 
D)  cannot be indemnified under any circumstances. 
A)  can be indemnified if the losses are lesser than the average annual salary. 
B)  may only be indemnified if some shareholders find the act to be appropriate. 
C)  may only be indemnified upon the approval of an independent legal counsel. 
D)  cannot be indemnified under any circumstances.

Question 17

Stockholders have the ability to effectively reject a merger agreement.

Accepted Answer

A) True 
 B)False

Question 18

Under the MBCA,a director:

Accepted Answer

A)  will not have dissented if he or she refuses to vote for the proposed course of action. 
B)  will not have dissented even if he or she makes his or her dissent clear to the other board members by having it appear in the minutes. 
C)  will have dissented if he or she gives a written notice of dissent immediately following the meeting. 
D)  will have dissented if he or she waits for three months after the meeting to bring up dissent. 
A)  will not have dissented if he or she refuses to vote for the proposed course of action. 
B)  will not have dissented even if he or she makes his or her dissent clear to the other board members by having it appear in the minutes. 
C)  will have dissented if he or she gives a written notice of dissent immediately following the meeting. 
D)  will have dissented if he or she waits for three months after the meeting to bring up dissent.

Question 19

To obtain the protection of the business judgment rule,a director must meet certain requirements in arriving at his or her decisions.He or she must:

Accepted Answer

A)  make an informed decision; be free from conflicts of interest; and must have a rational basis for believing that the decision is in the best interests of the corporation. 
B)  make a subjectively rational decision that is based on a cost benefit analysis. 
C)  make an informed decision that promised to make the corporation a substantial profit; the decision need not be objectively rational, only subjectively rational. 
D)  use the court's business judgment for all of the corporation's matters. 
A)  make an informed decision; be free from conflicts of interest; and must have a rational basis for believing that the decision is in the best interests of the corporation. 
B)  make a subjectively rational decision that is based on a cost benefit analysis. 
C)  make an informed decision that promised to make the corporation a substantial profit; the decision need not be objectively rational, only subjectively rational. 
D)  use the court's business judgment for all of the corporation's matters.

Question 20

Scott was a member of the board of directors of Buffalo Corporation.Officers of Buffalo were considering the purchase of new equipment to produce a new product.The board of directors had not been consulted about the new venture,but Scott found out about the plan and objected to its implementation.He sought to inspect the corporate books and records to gain factual information supportive of his position.The officers refused his inspection request,asserting that Scott had no management function or power.Under these circumstances,Scott:

Accepted Answer

A)  is barred from examination of the books and records of the corporation under the business judgment rule. 
B)  has the right to inspect corporate books and records, as information regarding the corporation and its affairs is essential to perform his duties. 
C)  is barred from examination of the books and records of the corporation under the doctrine of respondeat superior. 
D)  has the right to inspect corporate books only if he is also a majority shareholder. 
A)  is barred from examination of the books and records of the corporation under the business judgment rule. 
B)  has the right to inspect corporate books and records, as information regarding the corporation and its affairs is essential to perform his duties. 
C)  is barred from examination of the books and records of the corporation under the doctrine of respondeat superior. 
D)  has the right to inspect corporate books only if he is also a majority shareholder.

Exam 29: Management of the Corporate Business

Which of the following does "ex officio" authority refer to?

The vice president of a corporation:

What is generally required for fundamental changes in the corporation?

Trading on inside information is in violation of fiduciary duties.

Under the Delaware General Corporation Law,e-mail is not a legally-recognized official form of business communication.

According to the MBCA,all corporate powers shall be exercised by or under the authority of,and the business and affairs of a corporation shall be managed under the direction of a _____.

Which of the following acts requires CEOs and CFOs of publicly traded corporations to certify that,to their knowledge,all financial information in quarterly and annual reports is not false or misleading?

Under the MBCA,the president of a corporation cannot also be the secretary of the corporation.

A director or officer will be held to have failed to act with due care and diligence if he or she:

An officer or director who has acted in bad faith or who is found liable to the corporation can be indemnified under special circumstances.

A _____ authorizes any corporation to adopt a specific amendment to its articles of incorporation that removes breach of duty as a cause of action for monetary damages against directors.

When notice of a special meeting is defective,the defect may be cured if:

Directors are agents for the corporation by virtue of that office.

A director who has acted in bad faith or who is found liable to the corporation:

Stockholders have the ability to effectively reject a merger agreement.

Under the MBCA,a director:

To obtain the protection of the business judgment rule,a director must meet certain requirements in arriving at his or her decisions.He or she must:

Law, Legal Reasoning, and the Legal Profession

Dispute Settlement

Business Ethics and Corporate Social Responsibility

Business and the Constitution

Crimes

Intentional Torts

Negligence and Strict Liability

Licensing and Intellectual Propertypart Two Contracts

The Nature and Origins of Contracts

Creating a Contract: Offers

Creating a Contract: Acceptances

Consideration

Capacity to Contract

Voluntary Consent

Illegality

The Form and Meaning of Contracts

Third Parties Contract Rights

Performance and Remediespart Three Sales

Formation and Terms of Sales Contracts

Warranties and Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contractspart Four Agency and Employment

The Agency Relationship-Creation, duties, and Termination

Liability of Principals and Agents to Third Parties

Employment Laws-Part Five Business Organizations

Which Form of Business Organization

Partnerships

Formation and Termination of Corporations

Financing the Corporation and the Role of the Shareholders

Securities Regulation

Legal Liability of Accountantspart Six Property

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance-Part Seven Commercial Paper

Negotiable Instruments

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Fund Transfers-Part Eight Credit Transactions

Introduction to Security

Security Interests in Personal Property

Bankruptcy-Part Nine Government Regulation

The Antitrust Laws

Consumer Protection Laws

Environmental Regulation

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