Question 1

Under the RMBCA, a pre-incorporation subscription may be revoked at any time without the consent of the subscribers.

Accepted Answer

Under the Revised Model Business Corporation Act (RMBCA), a pre-incorporation subscription for shares is irrevocable for six months unless the subscription agreement provides otherwise or all the subscribers agree to revocation.

Question 2

A corporation is considered to be a person within the Fifth Amendment's clause that protects a person against self­
incrimination.

Accepted Answer

The Fifth Amendment's protection against self-incrimination applies to natural persons, not corporations. Corporations cannot refuse to produce documents or evidence on the grounds that it would incriminate them, as this protection is not extended to collective entities.

Question 3

Once a shareholder sells the stock of the corporation, since the ownership of the corporation changes, a new corporation is formed.

Accepted Answer

The sale of stock by a shareholder does not change the legal entity of the corporation; it only transfers ownership of shares. The corporation remains the same.

Question 4

Under the RMBCA, a newly formed corporation need not hold an organizational meeting.

Accepted Answer

Under the RMBCA, a newly formed corporation is required to hold an organizational meeting to elect officers, adopt bylaws, and complete other organizational tasks.

Question 5

"Doing business" within a particular state will subject a foreign corporation to the litigation, regulation, and taxation of that state.

Accepted Answer

When a foreign corporation does business within a particular state, it becomes subject to the laws, regulations, and taxes of that state. This includes being subject to litigation in that state's courts.

Question 6

"Piercing the corporate veil" will result in personal liability of shareholders.

Accepted Answer

Piercing the corporate veil occurs when a court disregards the separate legal entity of a corporation and holds shareholders personally liable for the corporation's debts or obligations. This can happen if the corporation has not followed proper formalities, commingled funds, engaged in fraudulent activities or engaged in undercapitalization.

Question 7

Under the Model Act, the bylaws may contain any provision for managing the business and regulating the affairs of the corporation as long as it is not contrary to or inconsistent with the law or articles of incorporation.

Accepted Answer

The Model Act allows for broad discretion in the content of bylaws as long as they do not contradict the law or articles of incorporation.

Question 8

The Revised Model Business Corporation Act has been adopted at least in part by more than half of the states.

Accepted Answer

The Revised Model Business Corporation Act has been adopted at least in part by more than half of the states.

Question 9

The modern approach follows the common law rule in holding that a corporation cannot commit a criminal act.

Accepted Answer

The modern approach allows corporations to be held liable for criminal acts committed by their agents or employees, under certain conditions. This is known as corporate criminal liability.

Question 10

In the absence of contractual restrictions, shares in a corporation may be transferred by sale, gift, or pledge.

Accepted Answer

In general, shares in a corporation can be transferred by sale, gift, or pledge, as long as there are no contractual restrictions in place that would prevent the transfer. However, some closely held corporations may have restrictions on the transfer of shares in their bylaws or operating agreements.

Question 11

The Tennessee Valley Authority is an example of a private corporation.

Accepted Answer

The Tennessee Valley Authority (TVA) is a federally owned corporation in the United States, created by congressional charter in 1933 to provide navigation, flood control, electricity generation, and economic development in the Tennessee Valley region.

Question 12

If an act is ultra vires, it is beyond the legal authority of the corporation.

Accepted Answer

Ultra vires means beyond legal authority, so if an act is ultra vires, it is indeed beyond the legal authority of the corporation.

Question 13

Under the Statutory Close Corporation Supplement to the MBCA, a close corporation must have bylaws on file with the Office of the Secretary of State or some other public office.

Accepted Answer

The Statutory Close Corporation Supplement to the Model Business Corporation Act (MBCA) does not require a close corporation to have bylaws on file with the Office of the Secretary of State or any other public office. Bylaws are internal documents and, while essential for the governance of the corporation, they are not typically filed with state offices.

Question 14

A corporation owned by one person is treated under the law as that person.

Accepted Answer

A corporation owned by one person is still considered a separate legal entity from the individual owner. This is known as a "sole proprietorship."

Question 15

The Model Business Corporation Act has been adopted by all of the states in the United States to make state incorporation statutes uniform throughout the United States.

Accepted Answer

The Model Business Corporation Act has not been adopted by all states; while many states have used it as a basis, each state has its own corporation laws.

Question 16

A corporation has perpetual existence unless otherwise stated in its articles of incorporation.

Accepted Answer

This is a basic principle of corporate law. A corporation can continue to exist even if its original founders or shareholders are no longer involved, unless its articles of incorporation specify a limited duration or other provisions for dissolution.

Question 17

A suit may be brought by the state to challenge the existence of a de facto corporation in a quo warranto action.

Accepted Answer

The state can challenge the existence of a de facto corporation through a quo warranto action, which is a legal proceeding that tests a corporation's right to exist.

Question 18

Zeron Corporation is incorporated in the State of West Virginia.It now wants to open a retail outlet in Kentucky.
Zeron must obtain a certificate of authority allowing it to do business in the Commonwealth of Kentucky.

Accepted Answer

A corporation incorporated in one state must obtain a certificate of authority to legally conduct business in another state, such as Kentucky, where it is considered a foreign corporation.

Question 19

Promoters have a fiduciary duty to the corporation.

Accepted Answer

Promoters have a legal obligation to act in good faith and with loyalty towards the corporation they are promoting. This duty is known as a fiduciary duty.

Question 20

A corporation can be formed in the State of New York by complying with New York statutes or with the Federal
Model Corporation Act.

Accepted Answer

A corporation in the State of New York can only be formed by complying with New York statutes, as the Federal Model Corporation Act serves as a model for states to consider but does not have the force of law in any state unless adopted by that state's legislature. New York has its own set of laws governing the formation and operation of corporations.

Quiz 33: Nature, Formation, and Powers

Under the RMBCA, a pre-incorporation subscription may be revoked at any time without the consent of the subscribers.

A corporation is considered to be a person within the Fifth Amendment's clause that protects a person against self incrimination.

Once a shareholder sells the stock of the corporation, since the ownership of the corporation changes, a new corporation is formed.

Under the RMBCA, a newly formed corporation need not hold an organizational meeting.

"Doing business" within a particular state will subject a foreign corporation to the litigation, regulation, and taxation of that state.

"Piercing the corporate veil" will result in personal liability of shareholders.

Under the Model Act, the bylaws may contain any provision for managing the business and regulating the affairs of the corporation as long as it is not contrary to or inconsistent with the law or articles of incorporation.

The Revised Model Business Corporation Act has been adopted at least in part by more than half of the states.

The modern approach follows the common law rule in holding that a corporation cannot commit a criminal act.

In the absence of contractual restrictions, shares in a corporation may be transferred by sale, gift, or pledge.

The Tennessee Valley Authority is an example of a private corporation.

If an act is ultra vires, it is beyond the legal authority of the corporation.

Under the Statutory Close Corporation Supplement to the MBCA, a close corporation must have bylaws on file with the Office of the Secretary of State or some other public office.

A corporation owned by one person is treated under the law as that person.

The Model Business Corporation Act has been adopted by all of the states in the United States to make state incorporation statutes uniform throughout the United States.

A corporation has perpetual existence unless otherwise stated in its articles of incorporation.

A suit may be brought by the state to challenge the existence of a de facto corporation in a quo warranto action.

Zeron Corporation is incorporated in the State of West Virginia.It now wants to open a retail outlet in Kentucky. Zeron must obtain a certificate of authority allowing it to do business in the Commonwealth of Kentucky.

Promoters have a fiduciary duty to the corporation.

A corporation can be formed in the State of New York by complying with New York statutes or with the Federal Model Corporation Act.

Quiz 33: Nature, Formation, and Powers

Under the RMBCA, a pre-incorporation subscription may be revoked at any time without the consent of the subscribers.

A corporation is considered to be a person within the Fifth Amendment's clause that protects a person against self­ incrimination.

Once a shareholder sells the stock of the corporation, since the ownership of the corporation changes, a new corporation is formed.

Under the RMBCA, a newly formed corporation need not hold an organizational meeting.

"Doing business" within a particular state will subject a foreign corporation to the litigation, regulation, and taxation of that state.

"Piercing the corporate veil" will result in personal liability of shareholders.

Under the Model Act, the bylaws may contain any provision for managing the business and regulating the affairs of the corporation as long as it is not contrary to or inconsistent with the law or articles of incorporation.

The Revised Model Business Corporation Act has been adopted at least in part by more than half of the states.

The modern approach follows the common law rule in holding that a corporation cannot commit a criminal act.

In the absence of contractual restrictions, shares in a corporation may be transferred by sale, gift, or pledge.

The Tennessee Valley Authority is an example of a private corporation.

If an act is ultra vires, it is beyond the legal authority of the corporation.

Under the Statutory Close Corporation Supplement to the MBCA, a close corporation must have bylaws on file with the Office of the Secretary of State or some other public office.

A corporation owned by one person is treated under the law as that person.

The Model Business Corporation Act has been adopted by all of the states in the United States to make state incorporation statutes uniform throughout the United States.

A corporation has perpetual existence unless otherwise stated in its articles of incorporation.

A suit may be brought by the state to challenge the existence of a de facto corporation in a quo warranto action.

Zeron Corporation is incorporated in the State of West Virginia.It now wants to open a retail outlet in Kentucky. Zeron must obtain a certificate of authority allowing it to do business in the Commonwealth of Kentucky.

Promoters have a fiduciary duty to the corporation.

A corporation can be formed in the State of New York by complying with New York statutes or with the Federal Model Corporation Act.

A corporation is considered to be a person within the Fifth Amendment's clause that protects a person against self incrimination.