Deck 45: Corporate Powers and Management

Question 1

For most state corporation statutes, the articles of incorporation may indicate different kinds of quorums for annual meetings, but in no case can the articles specify that a quorum is less than one-third of the total shares entitled to vote.

Answer 1

True

Question 2

Who among the following have the least decision-making authority in the management of a corporation's daily affairs?

A) A company's director
B) A company's employee
C) A company's manager
D) A company's officer
E) A company's stockholder

Answer 2

E

Question 3

The delegation of authority to a committee does not, by itself, relieve a director from the duty to exercise due care.

Answer 3

True

Question 4

Shareholders are permitted to adopt, amend, and repeal the corporation's bylaws.

Question 5

A corporation's top managers cannot be found criminally responsible even if they did not directly participate in the corporation's illegal activity.

Question 6

Directors derive their right to manage the corporation from appointment by corporate officers such as the CEO.

Question 7

Proxies are generally valid for a period of 24 months from the time they are received by the corporation.

Question 8

In a shareholder derivative action lawsuit, the "real party in interest" is the shareholder.

Question 9

The _____ doctrine is a doctrine holding that certain legal consequences attach to an attempt by a corporation to carry out acts that are outside its lawful powers.

A) promissory estoppel
B) delectus respondeat
C) family purpose
D) ultra vires
E) inter vivos

Question 10

Usually, a corporation's directors do not have to be residents of the state where the company is incorporated, unless such residency is required by the articles of incorporation.

Question 11

What is a shareholder quorum?

A) It is the minimum number of shareholders needed to have a valid vote.
B) It is a method whereby a shareholder elects a representative, commonly another individual or a written document, through which the shareholder casts his vote at the annual meeting.
C) It is an agreement made in advance among shareholders to vote in a particular manner.
D) It is the rights of shareholders to protect dilution of their percentage of share ownership.
E) It is a lawsuit brought on behalf of the corporation by a shareholder when the directors refuse to act.

Question 12

A contract between the corporation and one of its directors may be voidable if it is unfair to the corporation.

Question 13

A majority of the members of the board constitutes a quorum, unless the articles of incorporation specify a larger number.

Question 14

State corporate laws generally do bar a director from contracting with the corporation he serves.

Question 15

An implied power differs from an express power in that the implied power:

A) is a power with limitations.
B) is a power that relates to the external environment of a corporation.
C) is granted to a corporation through statute and its articles of incorporation.
D) is beyond a corporate power that is explicitly established.
E) is a power that relates to the internal environment of a corporation.

Question 16

A corporation's implied powers go beyond those expressly stated in the articles of incorporation.

Question 17

A voting agreement is easier to enter into than a voting trust but requires shareholders to turn over their shares to a third party.

Question 18

An officer of a corporation may be held liable for his corporation's violation of laws or regulations, regardless of the fact that he or she had no knowledge about it.

Question 19

Regular voting is also known as _____ voting.

A) allonge
B) statutory
C) proxy
D) arson
E) scienter

Question 20

The doctrine of ultra vires only applies to the criminal acts of a corporation.

Question 21

Differentiate a voting agreement from a voting trust.

Question 22

_____ is a method whereby a shareholder elects a representative, commonly another individual or a written document, through which the shareholder casts his vote at the annual meeting.

A) Embezzlement
B) Larceny
C) Battery
D) Estoppel
E) Proxy

Question 23

Directors all have duties of due care to the company,

A) but are not liable for any sub-committee decisions.
B) and cannot delegate decisions regarding dividends and mergers
C) and are personally liable for criminal acts by managers whom they appoint
D) but may delegate decisions to one or more directors and avoid liability
E) a and d

Question 24

G&C Inc. has outstanding 10,000 shares with par value of ten dollars and Tiffany owns 5,000 of those shares. At the annual meeting, the shareholders decide to issue an additional 10,000 shares at par and to sell them to Sharon. Tiffany vehemently objects in order to protect dilution of her percentage of share ownership. Tiffany is exercising her _____ in this scenario.

A) cumulative voting rights
B) preemptive rights
C) abatement rights
D) proxy rights
E) divestiture rights

Question 25

In the context of corporate powers and management, what is indemnification?

A) It is a situation where one person sits on the board of directors of two different companies.
B) It is a situation where directors of two different companies serve jointly on the board of a third company.
C) It is a lawsuit brought on behalf of the corporation by a shareholder when the directors refuse to act.
D) It is a method whereby a shareholder elects a representative, commonly another individual or a written document, through which the shareholder casts his vote at the annual meeting.
E) It is a method of protecting directors and officers whereby the corporation agrees to pay legal expenses incurred by the directors or officers.

Question 26

A corporation may effectively limit the liability of directors' duty of due ________

A) Using corporate funds to buy directors liability insurance
B) Using the derivative action rule
C) Specifying in the articles of incorporation that directors will not be liable for willful negligence.
D) a and b
E) b and c

Question 27

A(n) _____ is a situation where directors of two different companies serve jointly on the board of a third company.

A) sequestration course
B) indirect interlock
C) preemptive action
D) derivative action
E) nonderivative action

Question 28

What is a preemptive right?

A) It is the right of shareholders to create a trust and elect a commissioner for the trust.
B) It is the right of shareholders to make an advance voting agreement among them to vote in a specific manner.
C) It is the right of shareholders to protect dilution of their percentage of share ownership.
D) It is the right of shareholders to elect a representative, commonly another individual or a written document, through which they can cast their votes at the annual meeting.
E) It is the right of shareholders to distribute their total votes in any manner they choose-all for one candidate or several shares for different candidates.

Question 29

_____ is a shareholder voting method that permits the holder to distribute his or her total votes in any manner that he or she chooses-all for one candidate or several shares for different candidates.

A) Deprivation voting
B) Divestiture voting
C) Cumulative voting
D) Derivative action
E) Proxy voting

Question 30

What is a derivative action?

A) It is a lawsuit brought on behalf of the corporation by a shareholder when the directors refuse to act.
B) It is a right of shareholders to protect dilution of their percentage of share ownership.
C) It is an agreement made in advance among shareholders to vote in a particular manner.
D) It is a shareholder voting method permitting the holder to distribute his total votes in any manner that he chooses-all for one candidate or several shares for different candidates.
E) It is a doctrine holding that certain legal consequences attach to an attempt by a corporation to carry out acts that are outside its lawful powers.

Question 31

State the four main responsibilities of the director of a company.

Question 32

A(n) _____ is a situation where one person sits on the board of directors of two different companies.

A) direct interlock
B) sequestration course
C) preemptive action
D) derivative action
E) nonderivative action