Deck 34: Management and Dissolution of a Corporation

Question 1

Explain the two devices used to give minority stockholders a voice on the board of directors. ​

Answer 1

The two devices used to give minority stockholders a voice on the board of directors are cumulative voting and voting trusts.
Cumulative voting allows a stockholder to cast as many votes in the aggregate for any one or more directors as is equal to the number of shares owned multiplied by the number of directors to be elected.  Under this plan minority stockholders may have some representation on the board of directors, although still a minority.
Under a voting trust stockholders give up their voting privileges by transferring their stock to a trustee and receiving in return voting trust certificates.  Thisgives minority stockholders a voice on the board of directors and in large corporations it may give them a controlling voice.

Question 2

The board of directors is the primary policy-making body of the corporation.

Answer 2

True

Question 3

Only stockholders shown by the stockholders' record book have a right to vote.

Answer 3

True

Question 4

As fiduciaries of the corporation, directors incur liability for losses when they are caused by bad faith.

Question 5

The officers of a corporation:

A)Are the agents of the corporation.
B)Are selected and removed by the stockholders.
C)Have their positions specified by federal law.
D)​M ust be elected by a two-thirds vote.

Question 6

A merger occurs when two corporations combine to form a new corporation.

Question 7

Which of the following best describes a preemptive right?

A)It is the right to purchase additional stock on the stock exchange.
B)It is the right to sell existing shares back to the corporation.
C)It is the right to purchase shares before the incorporation of a company.
D)It is the right to purchase new capital stock in proportion to shares owned.

Question 8

Which of the following is true of a corporation?

A)It is an artificial being, existing only in contemplation of law.
B)Shareholders of a corporation represent the corporation as agents.
C)Stockholders perform all the administrative functions of the corporation.
D)Stockholders directly control the day to day activities of a corporation.

Question 9

Which of the following is true of a quorum?

A)It is the maximum number of proxies that are allowed
B)Statutes, bylaws, or the articles of incorporation ordinarily require a majority of outstanding stock to constitute a quorum.
C)A stockholder's proxy cannot be counted in reaching a quorum in a convened meeting.
D)At common law, a quorum consisted of the number of proxies at a properly convened meeting.

Question 10

Which of the following best describes whistleblowers?

A)They are people who take part in insider trading activities.
B)They are a group of people engaged in stock taxation.
C)They are people who expose wrongdoing in an organization.
D)They are people who subscribe for fresh capital stock.

Question 11

Which of the following is an example of cumulative voting?

A)Dan and Ben own ten shares together and two directors are to be elected, so they receive the right to cast 12 votes.
B)Dan owns two shares and two directors are to be elected, but he receives no right to cast a vote.
C)Dan owns six shares and two directors are to be elected, so he receives the right to cast six votes.
D)Dan owns ten shares, and five directors are to be elected, so he receives the right to cast 50 votes.

Question 12

Stockholders have the absolute right to inspect the corporation's books.

Question 13

A foreign corporation who has authority to do business in the state is allowed to form contracts.

Question 14

Stockholders, by virtue of their investment in a corporation, have the right to act as its agent. ​

Question 15

A corporation must give notice specifying the subjects to be discussed for a special meeting of shareholders.

Question 16

When a corporation terminates its existence it must surrender its articles of incorporation.

Question 17

Attempts by competing sides to secure majority of stockholders' votes are known as proxy wars.

Question 18

The dissolution of a corporation:

A)Can never be voluntary on the part of stockholders.
B)May be sought by the state for failure to pay specified taxes for a given number of years
C)Allows it to make contracts to carry on business for six months.
D)May require the stockholders to pay debts the corporation's assets cannot cover.

Question 19

Which of the following best describes a proxy?

A)A person authorized to vote for another
B)A person who relinquishes his right to vote
C)A person authorized to sell the company's stock
D)A document required by law to be in a specified form

Question 20

The directors of a corporation do not have the power to delegate authority to any of its members to act for the corporation.