Deck 27: Corporate Powers and Management

Question 1

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.

Answer 1

D

Question 2

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

Answer 2

False

Question 3

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

Answer 3

True

Question 4

The doctrine of ultra vires is limited to illegal acts of a corporation.

Question 5

Directors derive their power to manage the corporation from statutory law.

Question 6

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

Question 7

The Sarbanes-Oxley Act of 2002 states that a corporate officer or a director cannot be fired without a particular clause.

Question 8

Who among the following have little decision making authority in a corporation?

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

Question 9

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

Question 10

The law does not bar a director from contracting with the corporation he serves.

Question 11

A voting agreement is easier to enter than a voting trust.

Question 12

In the absence of a fair transaction, a contract between the corporation and one of its directors is voidable.

Question 13

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

Question 14

An ultra vires act is not necessarily criminal or tortious.

Question 15

The articles of incorporation may decree a different shareholder quorum but not less than one-third of the total shares entitled to vote.

Question 16

In most states of US, directors need not be residents of the state or shareholders of the corporation unless required by the articles of incorporation.

Question 17

Regular voting is also known as _____ voting.

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

Question 18

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 19

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

Question 20

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 21

An) _____ 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 22

_____ 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 23

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 24

The _____ is a presumption given by the courts to the corporate directors that their actions were informed and done with good faith and with an honest belief that the actions were in the best interests of the corporation.

A) preemptive rule
B) derivative action rule
C) business judgment rule
D) closed shop right
E) runaway shop right

Question 25

An) _____ 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

Question 26

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 27

Outside directors are also known as _____ directors.

A) preemptive
B) biased
C) proxy
D) nonexecutive
E) derivative

Question 28

_____ 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 29

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 30

Differentiate a voting agreement from a voting trust.

Question 31

G&C Inc. has outstanding 10,000 shares with par value of ten dollars and that Tiffany owns 5000. 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 32

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