Question 1

Which of the following may be issued to shareholders as proof of ownership in the corporation?

Accepted Answer

A)   Stock subscriptions
B)   Stock acknowledgements
C)   Paper documentation
D)   Stock certificates
E)   Acknowledgement documentsF) A) and B)
G) C) and E)

Question 2

Which of the following is true regarding how directors are chosen during incorporation?

Accepted Answer

A)   Prior to incorporation, either the incorporators appoint them or the corporate articles name them.
B)   Prior to incorporation, either the incorporators appoint them or by a majority vote of the shareholders.
C)   Prior to incorporation, directors may only be named through the incorporators appointing them.
D)   Prior to incorporation, directors may only be named by the corporate articles naming them.
E)   Prior to incorporation, directors may only be named by the president appointing them.F) D) and E)
G) All of the above

Question 3

The French Penal Code adopts what is called the _______ which requires that corporate criminal liability be applied only in cases that pertain to an "express mention in the law or in a French regulation."

Accepted Answer

A)   Strict liability rule
B)   Res ipsa standard
C)   Specialty principal
D)   High priority rule
E)   Protectionist principalF) All of the above
G) A) and E)

Question 4

Mary is a director of a company that develops expensive residential subdivisions. The company is considering attempting to purchase a large section of land on which to put a development. Mary happens to own some of the land. What duty, if any, does she have regarding disclosure and why or why not; and what steps, if any should be taken by the board when considering the matter?

Accepted Answer

Mary has a duty to disclose her self-int...

Question 5

Shareholders are directly responsible for the daily management of a corporation.

Accepted Answer

A) True 
 B)False

Question 6

"Self-Centered President." Tina is president of "We Manage You," a corporation set up to manage physician practices. Tina has never been very concerned with minority shareholders based on her belief that they have little influence over the company because they cannot even elect a director. She is told, however, that her state just instituted the practice of cumulative voting. An election is coming up in which 10 directors will be elected. Minority shareholders own 2,000 shares, while majority shareholders own 8,000 shares. Tina tells her vice president, George, that she wants to ignore minority shareholders and focus her interests on majority shareholders and the directors. She also tells George that she wants to be particularly conscientious toward directors because the directors appoint officers, and she does not believe that she owes any actual duties to shareholders. She further orders George to destroy some documents subpoenaed in a criminal investigation against the company for illegal dumping. When George protests, Tina tells him not to worry because officers cannot be held responsible for criminal actions so long as the actions are done as part of the duties of an officer. She explains to him that only the corporation can be charged with liability in such cases.
-Is Tina correct in that officers cannot be held criminally responsible for their actions on behalf of a corporation?

Accepted Answer

A)   Yes, she is correct.
B)   She is correct only so long as the corporation is solvent.
C)   She is correct only if the board of directors has accepted all liability for acts of officers.
D)   She is correct only if environmental or employment matters are involved.
E)   She is incorrect.F) None of the above
G) C) and E)

Question 7

Which of the following is a term for stock issued to individuals below its fair market value?

Accepted Answer

A)   No-par stock
B)   Reduced stock
C)   Watered stock
D)   Less-value stock
E)   Unapproved stockF) C) and D)
G) B) and D)

Question 8

How are directors typically chosen after the incorporation process?

Accepted Answer

A)   By majority vote of the shareholders.
B)   By majority vote of all officers.
C)   By a two-thirds vote of shareholders.
D)   The president appoints them in his or her discretion.
E)   By a unanimous vote of the shareholders.F) B) and D)
G) All of the above

Question 9

Generally, a quorum of shareholders exists when shareholders holding more than ______ percent of the outstanding shares are present.

Accepted Answer

A)   80
B)   70
C)   60
D)   50
E)   25F) B) and D)
G) C) and D)

Question 10

A shareholder may not be held personally liable to a corporation for receiving watered stock.

Accepted Answer

A) True 
 B)False

Question 11

Shares are ______ when the corporation will not issue physical stock certificates.

Accepted Answer

A)   Approved
B)   Unapproved
C)   Unacknowledged
D)   Acknowledged
E)   UncertificatedF) A) and B)
G) A) and C)

Question 12

How is the number of corporate directors determined?

Accepted Answer

A)   In the discretion of the president of the corporation.
B)   By vote of the stockholders.
C)   According to the corporate articles or bylaws.
D)   According to the number of shares issued.
E)   According to the amount of profit projected by incorporators for the first year.F) C) and D)
G) A) and E)

Question 13

Which of the following is false regarding officers of a corporation?

Accepted Answer

A)   Officers are executive managers.
B)   Officers run the day-to-day business of the corporation.
C)   In most cases an individual may serve as both a director and an officer.
D)   The rules of agency do not apply to the work of officers.
E)   Qualifications required of officers are set forth in the corporate articles and bylaws.F) B) and E)
G) A) and B)

Question 14

Which of the following, if any, is an authorization of a shareholder to allow someone else to vote in his or her place?

Accepted Answer

A)   Approval
B)   Acknowledgement
C)   Proxy
D)   Permissive voucher
E)   There is no such document because a shareholder may not allow someone else to vote in the shareholder's place.F) All of the above
G) A) and E)

Question 15

Which of the following was the result in State of Wisconsin Investment Board v. William Bartlett, the case in the text in which a shareholder sought an injunction blocking the merger of the pharmaceutical company in which it owned shares, Medco, with another pharmaceutical company?

Accepted Answer

A)   That the injunction would be granted because the plaintiff's allegations demonstrated that the Medco board failed to inform itself of all material facts concerning the proposed merger.
B)   That because of disputed issues of material fact, the injunction would be temporarily denied and the case scheduled for a hearing on whether the board adequately informed themselves of all material information necessary to execute the merger agreement.
C)   That the injunction would be granted because the plaintiff's allegations established that the board failed to act in good faith and in the honest belief that the merger was in the best interests of the company.
D)   That the injunction would be granted because the plaintiff's allegations established that the board willfully left themselves uninformed in order to serve their own self-interest.
E)   That the injunction would be denied because the plaintiff's allegations of self-interest did not meet the threshold necessary to rebut the presumption of the business judgment rule.F) None of the above
G) A) and C)

Question 16

Which of the following is false regarding the liability of directors and officers for criminal behavior in the U.S.?

Accepted Answer

A)   Directors and officers can be held personally responsible for their own crimes.
B)   Directors and officers can be held personally responsible for the crimes of other employees within the organization when they have failed to adequately supervise the employee's behavior.
C)   According to the responsible person doctrine, an officer can be held criminally liable for conduct of an employee if the court determines that a responsible person would have known about and could have prevented the illegal activity.
D)   Directors and officers who use insider information to trade the corporation's stock for a profit can be held liable for breaching their fiduciary duty.
E)   A court may not find a corporate officer criminally liable for conduct of an employee unless the officer profited personally from the illegal activity.F) C) and D)
G) B) and C)

Question 17

"Machine Malfunction." Bruno, the president of a health club operation called ABC Health Club, convinced the board of directors to approve a large purchase of a type of fitness machine called "Perfect Body." Bruno had carefully investigated the machine and did a presentation to the board on its purported benefits. Unfortunately, after the purchase, it was announced that "Perfect Body" was actually a very dangerous machine that should not be used. The manufacturer of "Perfect Body" went bankrupt, and ABC lost $200,000 on the purchase of the machines. The shareholders are furious and want to sue Bruno and the directors. In an attempt to appease her, the board of directors agrees to allow Frances, the ring leader of the shareholders, to purchase stock of the company at below its fair market value. Frances purchases a considerable amount of stock on that basis, but says that the shareholders plan to continue with an action against Bruno and the board members.
-Which of the following is true regarding liability of Frances, if any, for purchasing the stock at below its fair market value?

Accepted Answer

A)   If the board wanted to offer it to her, they had that right, and there is no consequence to Frances.
B)   She is liable for double the stated corporate value of the stock in addition to any price she already paid.
C)   She is liable for the stated corporate value of the stock in addition to any price she already paid.
D)   She is liable for paying the difference between the price she paid for the shares and the stated corporate value of the shares.
E)   She is liable for paying the difference between the price she paid for the shares and the stated corporate value of the shares plus a $10,000 penalty.F) A) and C)
G) None of the above

Question 18

Under the Revised Model Business Corporation Act, how long do proxies last if they are not withdrawn?

Accepted Answer

A)   Nine months
B)   Eleven months
C)   One year
D)   Sixteen months
E)   Two yearsF) None of the above
G) A) and C)

Question 19

How much must a shareholder who signs a stock subscription pay for no-par shares?

Accepted Answer

A)   The depreciated value
B)   The value on the last sale
C)   The value as set by the board of directors
D)   The value as voted upon by shareholders
E)   The fair market value of the sharesF) A) and D)
G) None of the above

Question 20

Which of the following is false regarding corporate decisions that might personally benefit a particular director or officer?

Accepted Answer

A)   There must be full disclosure of the interest by a director who might personally benefit from a corporate decision.
B)   There must be full disclosure of the interest by an officer who might personally benefit from a corporate decision.
C)   The director to benefit may vote on the issue although a majority of all directors must approve the transaction.
D)   The duty to disclose an interest that might personally benefit a director is a fiduciary duty.
E)   The duty to disclose an interest that might personally benefit an officer is a fiduciary duty.F) A) and C)
G) C) and D)

Exam 39: Corporations: Directors, Officers, and Shareholders

Which of the following is true regarding how directors are chosen during incorporation?

Correct Answer
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Which of the following may be issued to shareholders as proof of ownership in the corporation?

Correct Answer
verified

Correct Answer
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Mary has a duty to disclose her self-int...
View Answer

Which of the following is a term for stock issued to individuals below its fair market value?

Correct Answer
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Generally, a quorum of shareholders exists when shareholders holding more than ______ percent of the outstanding shares are present.

Correct Answer
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A shareholder may not be held personally liable to a corporation for receiving watered stock.

Correct Answer
verified

Which of the following is false regarding corporate decisions that might personally benefit a particular director or officer?

Correct Answer
verified

How are directors typically chosen after the incorporation process?

Correct Answer
verified

Which of the following is false regarding the liability of directors and officers for criminal behavior in the U.S.?

Correct Answer
verified

How is the number of corporate directors determined?

Correct Answer
verified

The French Penal Code adopts what is called the _______ which requires that corporate criminal liability be applied only in cases that pertain to an "express mention in the law or in a French regulation."

Correct Answer
verified

Which of the following is false regarding officers of a corporation?

Correct Answer
verified

Which of the following, if any, is an authorization of a shareholder to allow someone else to vote in his or her place?

Correct Answer
verified

How much must a shareholder who signs a stock subscription pay for no-par shares?

Correct Answer
verified

Which of the following was the result in State of Wisconsin Investment Board v. William Bartlett, the case in the text in which a shareholder sought an injunction blocking the merger of the pharmaceutical company in which it owned shares, Medco, with another pharmaceutical company?

Correct Answer
verified

Shareholders are directly responsible for the daily management of a corporation.

Correct Answer
verified

Shares are ______ when the corporation will not issue physical stock certificates.

Correct Answer
verified

Under the Revised Model Business Corporation Act, how long do proxies last if they are not withdrawn?

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Exam 39: Corporations: Directors, Officers, and Shareholders

Which of the following is true regarding how directors are chosen during incorporation?

Correct AnswerverifiedShow Answer

Which of the following may be issued to shareholders as proof of ownership in the corporation?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedMary has a duty to disclose her self-int...View AnswerShow Answer

Which of the following is a term for stock issued to individuals below its fair market value?

Correct AnswerverifiedShow Answer

Generally, a quorum of shareholders exists when shareholders holding more than ______ percent of the outstanding shares are present.

Correct AnswerverifiedShow Answer

A shareholder may not be held personally liable to a corporation for receiving watered stock.

Correct AnswerverifiedShow Answer

Which of the following is false regarding corporate decisions that might personally benefit a particular director or officer?

Correct AnswerverifiedShow Answer

How are directors typically chosen after the incorporation process?

Correct AnswerverifiedShow Answer

Which of the following is false regarding the liability of directors and officers for criminal behavior in the U.S.?

Correct AnswerverifiedShow Answer

How is the number of corporate directors determined?

Correct AnswerverifiedShow Answer

The French Penal Code adopts what is called the _______ which requires that corporate criminal liability be applied only in cases that pertain to an "express mention in the law or in a French regulation."

Correct AnswerverifiedShow Answer

Which of the following is false regarding officers of a corporation?

Correct AnswerverifiedShow Answer

Which of the following, if any, is an authorization of a shareholder to allow someone else to vote in his or her place?

Correct AnswerverifiedShow Answer

How much must a shareholder who signs a stock subscription pay for no-par shares?

Correct AnswerverifiedShow Answer

Which of the following was the result in State of Wisconsin Investment Board v. William Bartlett, the case in the text in which a shareholder sought an injunction blocking the merger of the pharmaceutical company in which it owned shares, Medco, with another pharmaceutical company?

Correct AnswerverifiedShow Answer

Shareholders are directly responsible for the daily management of a corporation.

Correct AnswerverifiedShow Answer

Shares are ______ when the corporation will not issue physical stock certificates.

Correct AnswerverifiedShow Answer

Under the Revised Model Business Corporation Act, how long do proxies last if they are not withdrawn?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Mary has a duty to disclose her self-int...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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