Question 1

Reed owns one share of stock in SK8 Boards Corporation, as evidenced by a stock certificate. Reed loses the certificate. Reed's 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. D

Question 2

Restrictions on the transfer of shares in a close corporation are usually void.

Accepted Answer

A) True 
 B)False  False

Question 3

Misha and Nguyen are shareholders of Outsourcing Solutions, Inc. Misha's written authorization to Nguyen to vote her shares at a shareholders' meeting is

Accepted Answer

A)   a violation of the duty of loyalty.
B)   a preemptive right.
C)   a proxy.
D)   a quorum. C

Question 4

Godwin is a director on the board of Health Insurance Corporation. On the receipt of notice of a board meeting, Godwin attends the meeting and takes part in the discussion of business matters and votes on corporate issues. Godwin is entitled to be notified of, and to take part in, these meetings

Accepted Answer

A)   under the director's right to participation.
B)   under the director's right to compensation.
C)   under the director's right to indemnification.
D)   only on his own initiative.

Question 5

In most states, an individual cannot hold more than one corporate office and be both an officer and a director of the corporation.

Accepted Answer

A) True 
 B)False

Question 6

Lewis is a director of Mines & Refineries, Inc. Using information that is not available to the public, Lewis makes a profit trading in Mines & Refineries stock. Lewis is most likely li?able for breach of

Accepted Answer

A)   no duty or rule
B)   the business judgment rule.
C)   the duty of loyalty.
D)   the duty of care.

Question 7

Most states do not permit the corporate articles or bylaws to authorize compensation for directors.

Accepted Answer

A) True 
 B)False

Question 8

Sophie and Tiny incorporate their beverage-container business as U-Twist Products, Inc. The first board of directors may be appointed by the firm's

Accepted Answer

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

Question 9

Shareholders own the corporation, and they have legal title to corporate property.

Accepted Answer

A) True 
 B)False

Question 10

Char and Doug are officers of Eden Cruise & Travel Corporation. As cor?porate officers, the rights of Char and Doug are

Accepted Answer

A)   determined by their employment contracts.
B)   specified in state corporation statutes.
C)   the same as those of the directors.
D)   the same as those of the shareholders.

Question 11

In most states, a director cannot be removed without cause unless the shareholders have reserved the right to do so at the time of election.

Accepted Answer

A) True 
 B)False

Question 12

Donatello is a director and officer of Enzio's Pizza Corporation. Donatello selects an ad campaign that consumers find offensive-a market?ing decision that results in a dramatic decrease in profits for the firm and its shareholders. The shareholders accuse Donatello of breaching his fiduci?ary duty to the corporation. What is Donatello's best defense against this ac?cu?sation? Later, a resolution comes before Enzio's board to expand its menu to compete with Fabio's Pasta Palace Restaurants Inc. Donatello is a director and shareholder of Fabio's. What is Donatello's responsibility in this situation?

Accepted Answer

The answer of Donatello is a director and officer of...

Question 13

A straight majority vote of the shares represented at a shareholders' meeting is usually required to pass resolutions.

Accepted Answer

A) True 
 B)False

Question 14

Orsa is a shareholder in Pickles & Preserves Corporation. In some states, Orsa may be liable to the firm's creditors for unpaid corporate debts if she

Accepted Answer

A)   accepts a dividend knowing that it was paid from retained earn?ings.
B)   receives shares issued by the firm for less than fair-market value.
C)   fails to fulfill her fiduciary duty to the majority shareholders.
D)   sells her shares.

Question 15

Renee is a director of Sharp Focus Lens Corporation. With respect to Sharp Focus, Renee can access the corporation's books and records. Renee has this access under

Accepted Answer

A)   the director's right to participation.
B)   the director's right of inspection.
C)   the director's right to indemnification.
D)   the articles of incorporation or corporate bylaws.

Question 16

Directors cannot use corporate funds or confidential corporate information for personal advantage.

Accepted Answer

A) True 
 B)False

Question 17

A court will dismiss a derivative suit if a majority of the directors or an independent panel determines in good faith that the lawsuit is not in the best interests of the corporation.

Accepted Answer

A) True 
 B)False

Question 18

A director who does not hold a management position in the corporation is an outside director.

Accepted Answer

A) True 
 B)False

Question 19

Kelly transfers shares of stock that she owns in Lone Starz Company to Max. A shareholders' meeting takes place before Max's ownership is entered in Lone Starz's stock book. A vote at the meeting can be cast by

Accepted Answer

A)   Kelly and Max.
B)   Kelly only.
C)   Max only.
D)   neither Kelly nor Max.

Question 20

Normally, a corporate board of directors appoints itself as the first board at the time the corporation is created.

Accepted Answer

A) True 
 B)False

Exam 40: Corporate Directors, Officers, Shareholders

Reed owns one share of stock in SK8 Boards Corporation, as evidenced by a stock certificate. Reed loses the certificate. Reed's ownership of the stock is

Restrictions on the transfer of shares in a close corporation are usually void.

Misha and Nguyen are shareholders of Outsourcing Solutions, Inc. Misha's written authorization to Nguyen to vote her shares at a shareholders' meeting is

Godwin is a director on the board of Health Insurance Corporation. On the receipt of notice of a board meeting, Godwin attends the meeting and takes part in the discussion of business matters and votes on corporate issues. Godwin is entitled to be notified of, and to take part in, these meetings

In most states, an individual cannot hold more than one corporate office and be both an officer and a director of the corporation.

Lewis is a director of Mines & Refineries, Inc. Using information that is not available to the public, Lewis makes a profit trading in Mines & Refineries stock. Lewis is most likely li?able for breach of

Most states do not permit the corporate articles or bylaws to authorize compensation for directors.

Sophie and Tiny incorporate their beverage-container business as U-Twist Products, Inc. The first board of directors may be appointed by the firm's

Shareholders own the corporation, and they have legal title to corporate property.

Char and Doug are officers of Eden Cruise & Travel Corporation. As cor?porate officers, the rights of Char and Doug are

In most states, a director cannot be removed without cause unless the shareholders have reserved the right to do so at the time of election.

A straight majority vote of the shares represented at a shareholders' meeting is usually required to pass resolutions.

Orsa is a shareholder in Pickles & Preserves Corporation. In some states, Orsa may be liable to the firm's creditors for unpaid corporate debts if she

Renee is a director of Sharp Focus Lens Corporation. With respect to Sharp Focus, Renee can access the corporation's books and records. Renee has this access under

Directors cannot use corporate funds or confidential corporate information for personal advantage.

A court will dismiss a derivative suit if a majority of the directors or an independent panel determines in good faith that the lawsuit is not in the best interests of the corporation.

A director who does not hold a management position in the corporation is an outside director.

Kelly transfers shares of stock that she owns in Lone Starz Company to Max. A shareholders' meeting takes place before Max's ownership is entered in Lone Starz's stock book. A vote at the meeting can be cast by

Normally, a corporate board of directors appoints itself as the first board at the time the corporation is created.