Question 1

Under the Statutory Close Corporation Supplement,a closely held corporation may use a shareholder agreement in place of bylaws.

Accepted Answer

A) True 
 B)False

Question 2

Unissued shares and treasury stock must be counted to see if a quorum exists.

Accepted Answer

A) True 
 B)False

Question 3

The Statutory Close Corporation Supplement has relaxed most of the nonessential corporate formalities.

Accepted Answer

A) True 
 B)False

Question 4

The role of shareholders in managing the corporation is generally restricted to:

Accepted Answer

A) election of directors. 
B) approval of certain extraordinary measures. 
C) the approval of corporate transactions that are void or voidable unless ratified. 
D) All of the above. 
E) None of the above. 
A) election of directors. 
B) approval of certain extraordinary measures. 
C) the approval of corporate transactions that are void or voidable unless ratified. 
D) All of the above. 
E) None of the above.

Question 5

Bill is a member of the board of directors of Telmar Corp.He would like to have the corporation lend him some money so that he can begin another business venture.Which of the following is correct regarding loans of a corporation to one of its directors?

Accepted Answer

A) The Model Act does not permit a corporation to lend money to its directors without authorization in each instance by its shareholders. 
B) The Sarbanes-Oxley Act prohibits any publicly held corporation from making personal loans to its directors, with limited exceptions. 
C) Both the Model Act and the Revised Act prohibit loans to directors in all cases. 
D) Both (a) and (b) are correct. 
A) The Model Act does not permit a corporation to lend money to its directors without authorization in each instance by its shareholders. 
B) The Sarbanes-Oxley Act prohibits any publicly held corporation from making personal loans to its directors, with limited exceptions. 
C) Both the Model Act and the Revised Act prohibit loans to directors in all cases. 
D) Both (a) and (b) are correct.

Question 6

With respect to the voting rights of shareholders,unless the articles of incorporation provide otherwise,a shareholder is entitled to:

Accepted Answer

A) vote only at annual shareholder meetings. 
B) one vote for every two shares of stock owned. 
C) vote only in person and not by proxy. 
D) vote at annual and special shareholder meetings with one vote for each share of stock he owns. 
A) vote only at annual shareholder meetings. 
B) one vote for every two shares of stock owned. 
C) vote only in person and not by proxy. 
D) vote at annual and special shareholder meetings with one vote for each share of stock he owns.

Question 7

Unlike voting trusts,shareholder voting agreements are not limited in duration.

Accepted Answer

A) True 
 B)False

Question 8

Assuming no special provision in the articles of incorporation,special shareholder meetings may be called by:

Accepted Answer

A) the president of the company. 
B) any individual director. 
C) any individual shareholder. 
D) holders of at least 10% of shares. 
A) the president of the company. 
B) any individual director. 
C) any individual shareholder. 
D) holders of at least 10% of shares.

Question 9

The Dodd-Frank Act requires that every year publicly held companies include a provision in proxy statements for a binding shareholder vote on executive compensation..

Accepted Answer

A) True 
 B)False

Question 10

The Dodd-Frank Wall Street Reform and Consumer Protection Act:

Accepted Answer

A) was signed into law in 2009. 
B) authorizes the SEC to issue rules requiring that a publicly held company's proxy solicitation include nominations for the board of directors that have been submitted by shareholders. 
C) authorizes the SEC to issue rules directing the national securities exchanges to require that no member of a listed company's compensation committee be an independent director. 
D) All of the above. 
A) was signed into law in 2009. 
B) authorizes the SEC to issue rules requiring that a publicly held company's proxy solicitation include nominations for the board of directors that have been submitted by shareholders. 
C) authorizes the SEC to issue rules directing the national securities exchanges to require that no member of a listed company's compensation committee be an independent director. 
D) All of the above.

Question 11

In most states,but not under the Revised Act,cumulative voting is permissive and not mandatory.

Accepted Answer

A) True 
 B)False

Question 12

Ace Corporation requires a quorum of five directors.If Richard,a director,shows up at the meeting for a vote on his favorite topic (dividends)and withdraws thereafter,leaving only four directors,they,under the Revised Act,may not act on any further business.

Accepted Answer

A) True 
 B)False

Question 13

Gerhardt is the president of the Pacer Bicycle Company.He also serves as a director of the Flexible Tire Company.It occurs to Gerhardt that both companies could benefit from a contract in which Flexible agrees to supply Pacer with tires for its bicycles.If Gerhardt wishes to negotiate a contract between Pacer and Flexible,which of the following is correct?

Accepted Answer

A) The contract will be void as a conflict of interest. 
B) Under the RMBCA, the contract is permitted if it is fair and reasonable to both corporations, or Gerhardt fully discloses all information relating to the transaction and the contract is approved by either the board of disinterested directors or the shareholders. 
C) The contract is a clear conflict of interest and will be avoidable by either company even with disclosure. 
D) Both (a) and (c) are correct. 
A) The contract will be void as a conflict of interest. 
B) Under the RMBCA, the contract is permitted if it is fair and reasonable to both corporations, or Gerhardt fully discloses all information relating to the transaction and the contract is approved by either the board of disinterested directors or the shareholders. 
C) The contract is a clear conflict of interest and will be avoidable by either company even with disclosure. 
D) Both (a) and (c) are correct.

Question 14

Assume that 12,000 shares are represented at a shareholder meeting.How many votes are normally necessary to carry a motion?

Accepted Answer

A) 4,001 
B) 8,001 
C) 6,001 
D) 10,000 
A) 4,001 
B) 8,001 
C) 6,001 
D) 10,000

Question 15

Restrictions on transfer of shares:

Accepted Answer

A) exist only for closely held corporations to control who may become shareholders. 
B) are valid under the common law if they are reasonable and adopted for a lawful purpose. 
C) are valid under the Revised Act if the restriction is conspicuously noted on the stock certificate. 
D) All of the above. 
E) Both (b) and (c). 
A) exist only for closely held corporations to control who may become shareholders. 
B) are valid under the common law if they are reasonable and adopted for a lawful purpose. 
C) are valid under the Revised Act if the restriction is conspicuously noted on the stock certificate. 
D) All of the above. 
E) Both (b) and (c).

Question 16

Notice of a shareholder's meeting may be waived in writing.

Accepted Answer

A) True 
 B)False

Question 17

The Revised Act authorizes the articles of incorporation to include a provision eliminating or limiting,with certain exceptions,the liability of a director to the corporation or its shareholders for any action he takes,or fails to take,as director.These limitations or exceptions,for which liability would not be affected,include:

Accepted Answer

A) the amount of any financial benefit the director receives to which he is not entitled, such as a bribe, kickback, or profits from a usurped corporate opportunity. 
B) an intentional infliction of harm on the corporation or the shareholders. 
C) liability under Section 8.33 for unlawful distributions. 
D) an intentional violation of the criminal law. 
E) All of the above. 
A) the amount of any financial benefit the director receives to which he is not entitled, such as a bribe, kickback, or profits from a usurped corporate opportunity. 
B) an intentional infliction of harm on the corporation or the shareholders. 
C) liability under Section 8.33 for unlawful distributions. 
D) an intentional violation of the criminal law. 
E) All of the above.

Question 18

Directors who are also officers or employees of a publicly held corporation are "affiliated directors."

Accepted Answer

A) True 
 B)False

Question 19

A shareholder may bring a direct suit to enforce a claim that she has against the corporation,based on her ownership of shares.

Accepted Answer

A) True 
 B)False

Question 20

The board of directors generally manages the day-to-day affairs of the company.

Accepted Answer

A) True 
 B)False

Exam 35: Management Structure of Corporations

Under the Statutory Close Corporation Supplement,a closely held corporation may use a shareholder agreement in place of bylaws.

Unissued shares and treasury stock must be counted to see if a quorum exists.

The Statutory Close Corporation Supplement has relaxed most of the nonessential corporate formalities.

The role of shareholders in managing the corporation is generally restricted to:

Bill is a member of the board of directors of Telmar Corp.He would like to have the corporation lend him some money so that he can begin another business venture.Which of the following is correct regarding loans of a corporation to one of its directors?

With respect to the voting rights of shareholders,unless the articles of incorporation provide otherwise,a shareholder is entitled to:

Unlike voting trusts,shareholder voting agreements are not limited in duration.

Assuming no special provision in the articles of incorporation,special shareholder meetings may be called by:

The Dodd-Frank Act requires that every year publicly held companies include a provision in proxy statements for a binding shareholder vote on executive compensation..

The Dodd-Frank Wall Street Reform and Consumer Protection Act:

In most states,but not under the Revised Act,cumulative voting is permissive and not mandatory.

Ace Corporation requires a quorum of five directors.If Richard,a director,shows up at the meeting for a vote on his favorite topic (dividends)and withdraws thereafter,leaving only four directors,they,under the Revised Act,may not act on any further business.

Assume that 12,000 shares are represented at a shareholder meeting.How many votes are normally necessary to carry a motion?

Restrictions on transfer of shares:

Notice of a shareholder's meeting may be waived in writing.

Directors who are also officers or employees of a publicly held corporation are "affiliated directors."

A shareholder may bring a direct suit to enforce a claim that she has against the corporation,based on her ownership of shares.

The board of directors generally manages the day-to-day affairs of the company.

Introduction to Law

Business Ethics

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Consideration

Illegal Bargains

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance, Breach, and Discharge

Contract Remedies

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability: Warranties and Strict Liability

Sales Remedies

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits, Collections, and Funds Transfers

Relationship of Principal and Agent

Relationship With Third Parties

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature and Formation of Corporations

Financial Structure of Corporations

Fundamental Changes of Corporations

Secured Transactions and Suretyship

Bankruptcy

Securities Regulation

Intellectual Property

Employment Law

Antitrust

Accountants Legal Liability

Consumer Protection

Environmental Law

International Business Law

Introduction to Property, property Insurance, Bailments, and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

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