Question 1

A director or officer is required to exercise the care that an ordinarily prudent person would exercise in similar circumstances.

Accepted Answer

A) True 
 B)False  True

Question 2

An amendment to the articles of incorporation can create a new position on the board of directors.

Accepted Answer

A) True 
 B)False  True

Question 3

Fact Pattern 40-1A (Questions A18–A19 apply)
Ruben is a shareholder of Speed Bikes Company (SBC). When the direc¬tors fail to undertake an action to redress a wrong suffered by SBC, Ruben files a suit on the firm’s behalf.
-Refer to Fact Pattern 40-1A. Any damages recovered by Ruben's suit will normally go to

Accepted Answer

A)  Ruben. 
B)  SBC. 
C)  SBC's directors. 
D)  the state in which SBC is incorporated. 
A)  Ruben. 
B)  SBC. 
C)  SBC's directors. 
D)  the state in which SBC is incorporated. B

Question 4

VeriVisual Company makes HD 3D film and video equipment. VeriVisual is like most corporations in that its officers are hired by the firm's

Accepted Answer

A)  board of directors. 
B)  incorporators. 
C)  other officers. 
D)  shareholders. 
A)  board of directors. 
B)  incorporators. 
C)  other officers. 
D)  shareholders.

Question 5

Luke is a director of Motor Parts Corporation. Luke makes decisions with respect to Motor Parts in good faith, in what Luke believes is the firm's best interest, and without violating any duties owed to it. If, despite these circumstances, Luke exercises poor business judgment, under the business judgment rule Luke is

Accepted Answer

A)  immune from liability. 
B)  liable only to the extent that Luke gains as a result. 
C)  liable only to the extent that Motor Parts suffers as a result. 
D)  wholly liable. 
A)  immune from liability. 
B)  liable only to the extent that Luke gains as a result. 
C)  liable only to the extent that Motor Parts suffers as a result. 
D)  wholly liable.

Question 6

Frida, Gayla, and Hart occupy the positions of director on the board of Integral Components Corporation. With respect to these directors, a quorum is the minimum number

Accepted Answer

A)  who must be at odds in a dispute to call for its resolution. 
B)  who must be present to validly transact business. 
C)  whom the shareholders may remove from office at any one time. 
D)  whose positions must be vacant to warrant an election. 
A)  who must be at odds in a dispute to call for its resolution. 
B)  who must be present to validly transact business. 
C)  whom the shareholders may remove from office at any one time. 
D)  whose positions must be vacant to warrant an election.

Question 7

A director must make a full disclosure of any potential conflict of interest that might arise in any corporate transaction.

Accepted Answer

A) True 
 B)False

Question 8

Thor Power Products Corporation permits the election of its directors by cumulative voting. This

Accepted Answer

A)  allows minority shareholders to be represented on the board. 
B)  assures directors that they will be selected by their peers. 
C)  guarantees Thor's executive officers of the final choice. 
D)  insures against persons who may "cloud" the corporate direction. 
A)  allows minority shareholders to be represented on the board. 
B)  assures directors that they will be selected by their peers. 
C)  guarantees Thor's executive officers of the final choice. 
D)  insures against persons who may "cloud" the corporate direction.

Question 9

Fiona owns one share of stock in GR8 Boards Corporation, as evidenced by a stock certificate. Fiona loses the certificate. Her ownership of the stock is

Accepted Answer

A)  forfeited immediately. 
B)  forfeited within ten days of a third party's claim to ownership. 
C)  forfeited within thirty days if she cannot find the certificate. 
D)  not affected. 
A)  forfeited immediately. 
B)  forfeited within ten days of a third party's claim to ownership. 
C)  forfeited within thirty days if she cannot find the certificate. 
D)  not affected.

Question 10

Shareholders are co-owners of the corporation.

Accepted Answer

A) True 
 B)False

Question 11

An inside director is a director who does not hold a management position in the corporation.

Accepted Answer

A) True 
 B)False

Question 12

Melba and Leon are directors of Fresh Foods, Inc. The right of Melba and Leon to be notified of special meetings of the board is the right to

Accepted Answer

A)  compensation. 
B)  indemnification. 
C)  participation. 
D)  self-dealing. 
A)  compensation. 
B)  indemnification. 
C)  participation. 
D)  self-dealing.

Question 13

Bev is a shareholder of All-Terrain Vehicle Company. As a shareholder, Bev does not have

Accepted Answer

A)  a right to compensation. 
B)  dividend rights. 
C)  inspection rights. 
D)  preemptive rights. 
A)  a right to compensation. 
B)  dividend rights. 
C)  inspection rights. 
D)  preemptive rights.

Question 14

Dividends can be paid in the stock of the corporation that is paying the dividends.

Accepted Answer

A) True 
 B)False

Question 15

Gillian is a director of Fizzy Soda Company. As a director, Gillian can act as an agent to bind Fizzy

Accepted Answer

A)  in all circumstances. 
B)  in no circumstances. 
C)  to any contract in which Fizzy does not have a conflict of interest. 
D)  to any contract that represents a corporate opportunity for Gillian. 
A)  in all circumstances. 
B)  in no circumstances. 
C)  to any contract in which Fizzy does not have a conflict of interest. 
D)  to any contract that represents a corporate opportunity for Gillian.

Question 16

Bret and Courtney form Delite Day Care, Inc. Ultimate responsibility for policy decisions necessary to the management of corporate affairs rests with Delite's

Accepted Answer

A)  board of directors. 
B)  incorporators. 
C)  officers. 
D)  shareholders. 
A)  board of directors. 
B)  incorporators. 
C)  officers. 
D)  shareholders.

Question 17

Directors are not obligated to refrain from self-dealing.

Accepted Answer

A) True 
 B)False

Question 18

Shareholders are the ultimate authority in every corporation.

Accepted Answer

A) True 
 B)False

Question 19

Dividends are distributed on the basis of possession of a stock certificate.

Accepted Answer

A) True 
 B)False

Question 20

Clark is a shareholder of Bedrest Mattress Company. Clark will be deemed to have a fiduciary duty to Bedrest and its minority shareholders if he has

Accepted Answer

A)  preferred stock. 
B)  a right of first refusal. 
C)  a sufficient number of shares to exercise de facto control. 
D)  watered stock. 
A)  preferred stock. 
B)  a right of first refusal. 
C)  a sufficient number of shares to exercise de facto control. 
D)  watered stock.

Exam 40: Corporate Directors, Officers, Shareholders

A director or officer is required to exercise the care that an ordinarily prudent person would exercise in similar circumstances.

An amendment to the articles of incorporation can create a new position on the board of directors.

VeriVisual Company makes HD 3D film and video equipment. VeriVisual is like most corporations in that its officers are hired by the firm's

Frida, Gayla, and Hart occupy the positions of director on the board of Integral Components Corporation. With respect to these directors, a quorum is the minimum number

A director must make a full disclosure of any potential conflict of interest that might arise in any corporate transaction.

Thor Power Products Corporation permits the election of its directors by cumulative voting. This

Fiona owns one share of stock in GR8 Boards Corporation, as evidenced by a stock certificate. Fiona loses the certificate. Her ownership of the stock is

Shareholders are co-owners of the corporation.

An inside director is a director who does not hold a management position in the corporation.

Melba and Leon are directors of Fresh Foods, Inc. The right of Melba and Leon to be notified of special meetings of the board is the right to

Bev is a shareholder of All-Terrain Vehicle Company. As a shareholder, Bev does not have

Dividends can be paid in the stock of the corporation that is paying the dividends.

Gillian is a director of Fizzy Soda Company. As a director, Gillian can act as an agent to bind Fizzy

Bret and Courtney form Delite Day Care, Inc. Ultimate responsibility for policy decisions necessary to the management of corporate affairs rests with Delite's

Directors are not obligated to refrain from self-dealing.

Shareholders are the ultimate authority in every corporation.

Dividends are distributed on the basis of possession of a stock certificate.

Clark is a shareholder of Bedrest Mattress Company. Clark will be deemed to have a fiduciary duty to Bedrest and its minority shareholders if he has

Introduction to Law and Legal Reasoning

Courts and Alternative Dispute Resolution

Court Procedures

Constitutional Authority to Regulate Business

Ethics and Business Decision Making

Intentional Torts and Privacy

Negligence and Strict Liability

Intellectual Property and Internet Law

Criminal Law and Cyber Crime

Nature and Terminology

Agreement in Traditional and E-Contracts

Consideration

Capacity and Legality

Mistakes, Fraud, and Voluntary Consent

The Statute of Frauds

Third Party Rights

Performance and Discharge

Breach of Contract and Remedies

The Formation of Sales and Lease Contracts

Title, Risk, and Insurable Interest

Performance Breach of Sales Lease Contracts

Warranties and Product Liability

International Law in a Global Economy

The Function Creation of Negotiable Instruments

Transferability and Holder in Due Course

Liability, Defenses, and Discharge

Checks and Banking in the Digital Age

Creditors Rights and Remedies

Secured Transactions

Bankruptcy Law

Mortgages Foreclosures After the Recession

Agency Formation and Duties

Agency Liability and Termination

Employment, Immigration, and Labor Law

Employment Discrimination

Sole Proprietorships and Franchises

Partnerships and Limited Liability Partnerships

Limited Liability Companies Special Business Forms

Corporate Formation and Financing

Corporate Merger, Consolidation, Termination

Securities Law Corporate Governance

Law for Small Business

Administrative Law

Consumer Law

Environmental Law

Antitrust Law

Professional Liaility and Accountability

Personal Property and Bailments

Real Property Landlord-Tenant Relationships

Insurance

Wills and Trusts

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