Question 1

Under the Model Business Corporation Act (MBCA),a corporation can issue shares in return for the promoters' preincorporation service.

Accepted Answer

A) True 
 B)False  True

Question 2

Mention the matters that must be included in the articles of incorporation according to the Model Business Corporation Act (MBCA).

Accepted Answer

The MBCA lists the following matters that must be included in the articles of incorporation:
1)The name of the corporation,which must not be deceptively similar to that of any other corporation registered earlier.(It must contain the word corporation,incorporated,company,or limited,or an abbreviation.)
2)The number of shares of capital stock that the corporation shall have authority to issue.
3)The address of the initial registered office of the corporation and the name of its registered agent.
4)The name and address of each incorporator.

Question 3

According to the Model Business Corporation Act (MBCA),which of the following is an optional content that could be included in the articles of incorporation?

Accepted Answer

A)  The name of the corporation 
B)  The name and address of each incorporator 
C)  The number of shares of capital stock that the corporation shall have authority to issue 
D)  The purpose of the corporation 
A)  The name of the corporation 
B)  The name and address of each incorporator 
C)  The number of shares of capital stock that the corporation shall have authority to issue 
D)  The purpose of the corporation D

Question 4

All business corporations derive their existence from the:

Accepted Answer

A)  Commerce Clause of the U.S. Constitution. 
B)  common law. 
C)  state in which they are incorporated. 
D)  federal government. 
A)  Commerce Clause of the U.S. Constitution. 
B)  common law. 
C)  state in which they are incorporated. 
D)  federal government.

Question 5

A promoter's liability on preincorporation contracts terminates when a novation is signed.

Accepted Answer

A) True 
 B)False

Question 6

A de facto corporation:

Accepted Answer

A)  could be challenged by a third party. 
B)  was not permitted to deny its corporate existence. 
C)  never involves a quo warranto action. 
D)  existed when the promoters substantially complied with all mandatory provisions. 
A)  could be challenged by a third party. 
B)  was not permitted to deny its corporate existence. 
C)  never involves a quo warranto action. 
D)  existed when the promoters substantially complied with all mandatory provisions.

Question 7

Explain the promoters' liability to third parties before a corporation is formed.

Accepted Answer

Promoters are generally held liable on c

Question 8

Which of the following statements is true for the dissolution of a corporation by agreement?

Accepted Answer

A)  As a corporation is not an entity created by the state, it need not have the state's consent to dissolve. 
B)  A corporation can be dissolved by oral consent of all shareholders. 
C)  If two corporations consolidate into a new corporation, only the old corporation with major shareholders is dissolved. 
D)  Corporations with more than one class of shareholders sometimes provide for voting on dissolution and other matters by class. 
A)  As a corporation is not an entity created by the state, it need not have the state's consent to dissolve. 
B)  A corporation can be dissolved by oral consent of all shareholders. 
C)  If two corporations consolidate into a new corporation, only the old corporation with major shareholders is dissolved. 
D)  Corporations with more than one class of shareholders sometimes provide for voting on dissolution and other matters by class.

Question 9

Before a corporation comes into existence,it _____.

Accepted Answer

A)  can be liable as principal 
B)  cannot ratify a contract made by the promoter 
C)  is illegal to pay promoters for their services 
D)  is liable if the board acts to adopt the contract 
A)  can be liable as principal 
B)  cannot ratify a contract made by the promoter 
C)  is illegal to pay promoters for their services 
D)  is liable if the board acts to adopt the contract

Question 10

Both nonprofit corporations and nontaxing governmental corporations are similar because they are formed and operated by private persons.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following types of corporations sells shares to people who often have little interest in it except as investors?

Accepted Answer

A)  Nonprofit corporations 
B)  Closely held corporations 
C)  Publicly held corporations 
D)  Municipal corporations 
A)  Nonprofit corporations 
B)  Closely held corporations 
C)  Publicly held corporations 
D)  Municipal corporations

Question 12

Joey and his partners have started a corporation in North Dakota.They could get it incorporated in Illinois if:

Accepted Answer

A)  incorporation fees are low even if incorporation taxes are very high. 
B)  shareholders can actively participate in the management. 
C)  incorporation fees and taxes are lower, and there is minimal shareholder interference. 
D)  promoters and shareholders are barred from interfering. 
A)  incorporation fees are low even if incorporation taxes are very high. 
B)  shareholders can actively participate in the management. 
C)  incorporation fees and taxes are lower, and there is minimal shareholder interference. 
D)  promoters and shareholders are barred from interfering.

Question 13

Helen is a promoter who,prior to forming Bayne Corp.,contracted to purchase tile-manufacturing machinery from Owen Machinery Inc.The contract was negotiated and entered into in the name of Bayne Corp.Subsequently,a certificate of incorporation was issued to Bayne Corp.Which of the following statements is true of this scenario?

Accepted Answer

A)  Only Bayne Corp. is liable for the contract with Owen Machinery Inc. as it received its certificate of incorporation. 
B)  Helen would be liable for the contract with Owen Machinery Inc. 
C)  If the board of directors of Bayne Corp. issues a suitable resolution, Helen would be relieved from all liability for the contract with Owen Machinery Inc. 
D)  Since Bayne Corp. was not in existence at the time the contract was negotiated, the contract is void. 
A)  Only Bayne Corp. is liable for the contract with Owen Machinery Inc. as it received its certificate of incorporation. 
B)  Helen would be liable for the contract with Owen Machinery Inc. 
C)  If the board of directors of Bayne Corp. issues a suitable resolution, Helen would be relieved from all liability for the contract with Owen Machinery Inc. 
D)  Since Bayne Corp. was not in existence at the time the contract was negotiated, the contract is void.

Question 14

The function of bylaws is to establish rules for the conduct of the internal affairs of a corporation.

Accepted Answer

A) True 
 B)False

Question 15

A basic principle of corporation law is that:

Accepted Answer

A)  shareholders are not free to dispose of their shares by gift. 
B)  shareholders are given the authority to manage the business. 
C)  majority rule applies to both shareholder and director action. 
D)  there is an established market for the stock. 
A)  shareholders are not free to dispose of their shares by gift. 
B)  shareholders are given the authority to manage the business. 
C)  majority rule applies to both shareholder and director action. 
D)  there is an established market for the stock.

Question 16

_____ is a basic restriction governing the transferability of shares in a close corporation.

Accepted Answer

A)  Piercing the veil 
B)  Quo warranto 
C)  Right of first refusal 
D)  Ultra vires 
A)  Piercing the veil 
B)  Quo warranto 
C)  Right of first refusal 
D)  Ultra vires

Question 17

Failure to appoint a registered agent in the state of incorporation is grounds for an involuntary dissolution.

Accepted Answer

A) True 
 B)False

Question 18

A de facto corporation:

Accepted Answer

A)  could not be challenged by a third party. 
B)  existed when the promoters substantially complied with all mandatory provisions. 
C)  did not exist when there was an honest attempt to comply with the mandatory provisions of the corporate statute. 
D)  was permitted to deny its corporate existence. 
A)  could not be challenged by a third party. 
B)  existed when the promoters substantially complied with all mandatory provisions. 
C)  did not exist when there was an honest attempt to comply with the mandatory provisions of the corporate statute. 
D)  was permitted to deny its corporate existence.

Question 19

Governmental corporations always have the power to tax.

Accepted Answer

A) True 
 B)False

Question 20

Under the revised Model Business Corporation Act (MBCA),who will be liable for the business debts if the business has been defectively incorporated?

Accepted Answer

Under the revised Model Business Corpora

Exam 28: Formation and Termination of Corporations

Under the Model Business Corporation Act (MBCA),a corporation can issue shares in return for the promoters' preincorporation service.

Mention the matters that must be included in the articles of incorporation according to the Model Business Corporation Act (MBCA).

According to the Model Business Corporation Act (MBCA),which of the following is an optional content that could be included in the articles of incorporation?

All business corporations derive their existence from the:

A promoter's liability on preincorporation contracts terminates when a novation is signed.

A de facto corporation:

Explain the promoters' liability to third parties before a corporation is formed.

Which of the following statements is true for the dissolution of a corporation by agreement?

Before a corporation comes into existence,it _____.

Both nonprofit corporations and nontaxing governmental corporations are similar because they are formed and operated by private persons.

Which of the following types of corporations sells shares to people who often have little interest in it except as investors?

Joey and his partners have started a corporation in North Dakota.They could get it incorporated in Illinois if:

The function of bylaws is to establish rules for the conduct of the internal affairs of a corporation.

A basic principle of corporation law is that:

_____ is a basic restriction governing the transferability of shares in a close corporation.

Failure to appoint a registered agent in the state of incorporation is grounds for an involuntary dissolution.

A de facto corporation:

Governmental corporations always have the power to tax.

Under the revised Model Business Corporation Act (MBCA),who will be liable for the business debts if the business has been defectively incorporated?

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

Management of the Corporate Business

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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