Question 1

Minority shareholders in close corporations cannot be outvoted on salary and employment decisions.

Accepted Answer

A) True 
 B)False

Question 2

A corporation that merges into another is dissolved.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is a useful way of preventing unwanted persons from entering a corporation?

Accepted Answer

A)  Novation 
B)  Consent restraint 
C)  Piercing the corporate veil 
D)  Estoppel 
A)  Novation 
B)  Consent restraint 
C)  Piercing the corporate veil 
D)  Estoppel

Question 4

A _____ existed when there was an honest attempt to comply with the mandatory provisions of the corporate statute,yet the attempt still failed in some material respect.

Accepted Answer

A)  de jure corporation 
B)  de facto corporation 
C)  corporation by estoppel 
D)  close corporation 
A)  de jure corporation 
B)  de facto corporation 
C)  corporation by estoppel 
D)  close corporation

Question 5

According to the traditional judicial rule,courts can pierce the corporate veil when:

Accepted Answer

A)  there is undercapitalization coupled with strict adherence to corporate formalities. 
B)  there is strict adherence to corporate formalities such as holding shareholders' but not directors' meetings. 
C)  there is undercapitalization. 
D)  shareholders deal with their corporate transactions as if all were professional. 
A)  there is undercapitalization coupled with strict adherence to corporate formalities. 
B)  there is strict adherence to corporate formalities such as holding shareholders' but not directors' meetings. 
C)  there is undercapitalization. 
D)  shareholders deal with their corporate transactions as if all were professional.

Question 6

If articles of incorporation provide for a limited life,the corporation _____.

Accepted Answer

A)  automatically terminates at the end of the designated time 
B)  usually appeals to the secretary of state for dissolution 
C)  dissolves only by amendment to the contract 
D)  terminates at the end of the designated time only with the written consent of all shareholders 
A)  automatically terminates at the end of the designated time 
B)  usually appeals to the secretary of state for dissolution 
C)  dissolves only by amendment to the contract 
D)  terminates at the end of the designated time only with the written consent of all shareholders

Question 7

Nonprofit corporations:

Accepted Answer

A)  are similar to nontaxing governmental corporations. 
B)  are formed and operated by public entities. 
C)  do not permit officers and employees to receive salaries. 
D)  have the power to tax. 
A)  are similar to nontaxing governmental corporations. 
B)  are formed and operated by public entities. 
C)  do not permit officers and employees to receive salaries. 
D)  have the power to tax.

Question 8

A corporation is viewed as the alter ego of the shareholder-manager when shareholders mix their personal dealings and corporate transactions as if all were personal.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following steps governing the incorporation process is included in the Model Business Corporation Act (MBCA)?

Accepted Answer

A)  Preparing, signing, and authenticating the articles of incorporation 
B)  Filing the articles with the attorney general 
C)  Filing the articles by paying part of the required fees to the partnership creditor 
D)  Contributing a minimum of $5,000 to receive a certificate of incorporation 
A)  Preparing, signing, and authenticating the articles of incorporation 
B)  Filing the articles with the attorney general 
C)  Filing the articles by paying part of the required fees to the partnership creditor 
D)  Contributing a minimum of $5,000 to receive a certificate of incorporation

Question 10

The bylaws of a corporation:

Accepted Answer

A)  usually set up procedures for the holding of shares. 
B)  do not involve financial matters such as declaring and paying dividends. 
C)  usually set out the duties and authority of the officers and the conduct of meetings. 
D)  need not be consistent with state laws or the articles of incorporation. 
A)  usually set up procedures for the holding of shares. 
B)  do not involve financial matters such as declaring and paying dividends. 
C)  usually set out the duties and authority of the officers and the conduct of meetings. 
D)  need not be consistent with state laws or the articles of incorporation.

Question 11

Which of the following statements is true about the ultra vires doctrine?

Accepted Answer

A)  It is the only stringent limitation on the enforceability of contracts entered into by corporations. 
B)  It permits corporate directors to freely prevent enforcement of unattractive contracts. 
C)  It permits the state attorney general to prevent enforcement of corporate contracts that extend beyond the corporation's authorized powers. 
D)  It does not permit the corporation to bring a suit for damages to the corporation against the officers of the corporation who have entered into an ultra vires contract. 
A)  It is the only stringent limitation on the enforceability of contracts entered into by corporations. 
B)  It permits corporate directors to freely prevent enforcement of unattractive contracts. 
C)  It permits the state attorney general to prevent enforcement of corporate contracts that extend beyond the corporation's authorized powers. 
D)  It does not permit the corporation to bring a suit for damages to the corporation against the officers of the corporation who have entered into an ultra vires contract.

Question 12

Under the right of first refusal,either the corporation or its shareholders are given the right to buy shares offered for sale to an outsider willing to purchase them.

Accepted Answer

A) True 
 B)False

Question 13

Jones Corp.is a business concern in the process of being set up.Benito,its promoter has entered into preincorporation contracts.After the corporation comes into existence,Benito can be released from liability on the preincorporation contracts through:

Accepted Answer

A)  an agreement with Jones Corp., wherein Jones Corp. agrees that it will be substituted for Benito. 
B)  an agreement with the third party before adoption of the preincorporation agreement. 
C)  an agreement with Jones Corp., Benito, and their third party, wherein all agree that Jones Corp. will be substituted for Benito. 
D)  another preincorporation contract with the third party. 
A)  an agreement with Jones Corp., wherein Jones Corp. agrees that it will be substituted for Benito. 
B)  an agreement with the third party before adoption of the preincorporation agreement. 
C)  an agreement with Jones Corp., Benito, and their third party, wherein all agree that Jones Corp. will be substituted for Benito. 
D)  another preincorporation contract with the third party.

Question 14

Under the revised Model Business Corporation Act,_____.

Accepted Answer

A)  the filing of the articles of incorporation, evidenced by the return of the copy stamped by secretary of state, is conclusive proof of incorporation 
B)  liability will never be imposed on promoters who participated in management and policy decisions 
C)  the issuance of the certificate of incorporation is conclusive proof of incorporation to the corporate status, except a quo warranto action brought by the secretary of state 
D)  managers will be released from any liability in excess of their initial investment 
A)  the filing of the articles of incorporation, evidenced by the return of the copy stamped by secretary of state, is conclusive proof of incorporation 
B)  liability will never be imposed on promoters who participated in management and policy decisions 
C)  the issuance of the certificate of incorporation is conclusive proof of incorporation to the corporate status, except a quo warranto action brought by the secretary of state 
D)  managers will be released from any liability in excess of their initial investment

Question 15

Generally,businesses start out as publicly traded corporations.

Accepted Answer

A) True 
 B)False

Question 16

An enterprise that conducts its affairs in interstate commerce cannot be incorporated in a state other than the state in which the principal offices are located.

Accepted Answer

A) True 
 B)False

Question 17

In a de facto corporation,the promoters substantially comply with all mandatory provisions.

Accepted Answer

A) True 
 B)False

Question 18

A corporation domiciled in another country but doing business in the United States cannot be called an alien corporation.

Accepted Answer

A) True 
 B)False

Question 19

Under general incorporation laws,_____.

Accepted Answer

A)  incorporation is a legislative privilege, not a right 
B)  the secretary of state has to issue a certificate of incorporation 
C)  the corporation's shareholders have to make a decision regarding incorporation 
D)  incorporation is a legislative privilege as well as a right 
A)  incorporation is a legislative privilege, not a right 
B)  the secretary of state has to issue a certificate of incorporation 
C)  the corporation's shareholders have to make a decision regarding incorporation 
D)  incorporation is a legislative privilege as well as a right

Question 20

Esther and Salim are promoters for Kale Inc.Prior to its incorporation,Esther negotiated several preincorporation contracts with Ian,an investor.She signed each contract in the name of Kale Inc.Kale subsequently was incorporated,but the Kale Board of Directors refused to adopt the contracts.Ian later sues Kale,Esther,and Salim on the contracts.Which of the following statements is true of this case?

Accepted Answer

A)  Only Kale and Esther are liable as Esther, a promoter of Kale, negotiated several preincorporation contracts with Ian. 
B)  Esther is solely liable as she signed each contract in the name of Kale Inc. 
C)  Kale, Esther, and Salim are liable as they are sued by Ian. 
D)  Esther and Salim are liable as they are promoters of Kale Inc. 
A)  Only Kale and Esther are liable as Esther, a promoter of Kale, negotiated several preincorporation contracts with Ian. 
B)  Esther is solely liable as she signed each contract in the name of Kale Inc. 
C)  Kale, Esther, and Salim are liable as they are sued by Ian. 
D)  Esther and Salim are liable as they are promoters of Kale Inc.

Exam 28: Formation and Termination of Corporations

Minority shareholders in close corporations cannot be outvoted on salary and employment decisions.

A corporation that merges into another is dissolved.

Which of the following is a useful way of preventing unwanted persons from entering a corporation?

A _____ existed when there was an honest attempt to comply with the mandatory provisions of the corporate statute,yet the attempt still failed in some material respect.

According to the traditional judicial rule,courts can pierce the corporate veil when:

If articles of incorporation provide for a limited life,the corporation _____.

Nonprofit corporations:

A corporation is viewed as the alter ego of the shareholder-manager when shareholders mix their personal dealings and corporate transactions as if all were personal.

Which of the following steps governing the incorporation process is included in the Model Business Corporation Act (MBCA)?

The bylaws of a corporation:

Which of the following statements is true about the ultra vires doctrine?

Under the right of first refusal,either the corporation or its shareholders are given the right to buy shares offered for sale to an outsider willing to purchase them.

Jones Corp.is a business concern in the process of being set up.Benito,its promoter has entered into preincorporation contracts.After the corporation comes into existence,Benito can be released from liability on the preincorporation contracts through:

Under the revised Model Business Corporation Act,_____.

Generally,businesses start out as publicly traded corporations.

An enterprise that conducts its affairs in interstate commerce cannot be incorporated in a state other than the state in which the principal offices are located.

In a de facto corporation,the promoters substantially comply with all mandatory provisions.

A corporation domiciled in another country but doing business in the United States cannot be called an alien corporation.

Under general incorporation laws,_____.

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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