Question 1

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 2

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 3

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 4

Massachusetts courts require that the parties expressly create a(n) _____ before a corporation can be held liable for preincorporation contracts.

Accepted Answer

A)  adoption agreement 
B)  novation 
C)  incorporation regulation 
D)  operating agreement 
A)  adoption agreement 
B)  novation 
C)  incorporation regulation 
D)  operating agreement

Question 5

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 6

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

Accepted Answer

A) True 
 B)False

Question 7

Which of the following would be a justification for involuntary dissolution of a corporation by a creditor?

Accepted Answer

A)  When there is misapplication or waste of corporate assets 
B)  When directors are in conflict, deadlock cannot be broken by shareholders, and the corporation faces ruin 
C)  When corporation is insolvent and not paying its debts 
D)  When directors are acting illegally or unfairly 
A)  When there is misapplication or waste of corporate assets 
B)  When directors are in conflict, deadlock cannot be broken by shareholders, and the corporation faces ruin 
C)  When corporation is insolvent and not paying its debts 
D)  When directors are acting illegally or unfairly

Question 8

Most incorporated businesses are close corporations.

Accepted Answer

A) True 
 B)False

Question 9

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.

Exam 28: Formation and Termination of Corporations

Nonprofit corporations:

Under the revised Model Business Corporation Act, _____.

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

Massachusetts courts require that the parties expressly create a(n) _____ before a corporation can be held liable for preincorporation contracts.

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

Which of the following would be a justification for involuntary dissolution of a corporation by a creditor?

Most incorporated businesses are close corporations.

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

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 Property

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 Remedies

Formation and Terms of Sales Contracts

Warranties and Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

The Agency Relationship-Creation, Duties, and Termination

Liability of Principals and Agents to Third Parties

Employment Laws

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 Accountants

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance

Negotiable Instruments

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Fund Transfers

Introduction to Security

Security Interests in Personal Property

Bankruptcy

The Antitrust Laws

Consumer Protection Laws

Environmental Regulation

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