Question 1

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

Under the Statutory Close Corporation Supplement to the Model Business Corporation Act (MBCA), there is no requirement for a close corporation to have its bylaws filed with the office of the secretary of state or any other public office. The bylaws are internal documents and do not need to be filed publicly.

Question 2

Big Burger Co. sues Bakum Corporation for breach of contract for $1,000 of hamburger buns that were not delivered. Bakum may assert as a defense to payment that Big Burger is not a de jure corporation.

Accepted Answer

A defense based on the corporate status of Big Burger Co. is not relevant to the breach of contract claim regarding the delivery of hamburger buns. The issue at hand is the fulfillment of the contract, not the corporate status of the plaintiff.

Question 3

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

Accepted Answer

Ultra vires refers to actions that are beyond the legal capacity or authority of a corporation. Therefore, if an act is ultra vires, it is indeed beyond the legal authority of the corporation.

Question 4

The Model Business Corporation Act is a state statute that, like the UCC, 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 (MBCA) is a recommendation for state corporation statutes, but it has not been adopted by all states. States have the option to adopt it in whole, in part, or not at all, leading to variations in corporate law across the United States.

Question 5

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 qualifying it to do business in the state of Kentucky.

Accepted Answer

When a corporation wants to do business in a state where it is not incorporated, it must obtain a certificate of authority or qualification from that state. Therefore, Zeron Corporation must obtain a certificate qualifying it to do business in Kentucky as it is not incorporated in Kentucky.

Question 6

A promoter who enters a preincorporation contract in the name of the corporation usually remains liable on the contract even if the corporation adopts it.

Accepted Answer

A promoter is an individual or group of individuals who initiate and organize the formation of a corporation. Until the corporation is legally formed and registered, the promoter is personally liable for any contracts or agreements entered into in the name of the corporation. Even after the corporation is formed and adopts the preincorporation contract, the promoter may still be held liable for any obligations or liabilities incurred before the corporation was formed.

Question 7

A corporation is considered a citizen under the Fourteenth Amendment provision that, "No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States."

Accepted Answer

The answer of A corporation is considered a citizen under...

Question 8

Title to corporate property belongs to the shareholders.

Accepted Answer

Title to corporate property legally belongs to the corporation itself, which is a separate legal entity from its shareholders.

Question 9

A corporation is a creature of the state and may be formed only by substantial compliance with a state incorporation statute.

Accepted Answer

This is true. A corporation is a legal entity created under state law, therefore it must adhere to the requirements set out in the state's incorporation statute to be legally recognized as a corporation.

Question 10

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

Accepted Answer

The modern approach holds that a corporation can be held criminally liable for certain offenses, such as environmental crimes, antitrust violations, and fraud. This is known as corporate criminal liability.

Question 11

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

Accepted Answer

Piercing the corporate veil refers to a legal doctrine where the courts hold shareholders personally liable for the liabilities of the corporation if the shareholders did not observe corporate formalities, commingled their personal and corporate assets or used the corporation to perpetrate fraud, injustice or illegal acts.

Question 12

The RMBCA has been adopted, in whole or in part, by most states.

Accepted Answer

The RMBCA has been widely adopted by most states in the USA.

Question 13

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

Accepted Answer

This is a standard provision in most jurisdictions' corporate law.

Question 14

Under the RMBCA, the bylaws may be amended and must be publicly filed with the articles of incorporation.

Accepted Answer

Under the Revised Model Business Corporation Act (RMBCA), bylaws may be amended by the corporation's board of directors or shareholders, but unlike the articles of incorporation, bylaws do not need to be filed with the state.

Question 15

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

Accepted Answer

Selling the stock of a corporation does not result in the formation of a new corporation. The company and its structure remain the same, only the ownership of its stocks changes.

Question 16

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

Accepted Answer

A corporation, even if owned by one person, is considered a legal entity separate from its owner(s) and is afforded certain rights and protections under the law. This is known as the concept of "corporate personhood."

Question 17

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 18

A corporation is a domestic corporation in the state in which it is incorporated.

Accepted Answer

A corporation is considered domestic in the state where it is incorporated, meaning it is a resident of that state and subject to that state's laws and regulations.

Question 19

Promoters have a fiduciary relationship with the corporation.

Accepted Answer

Promoters are individuals who initiate the process of setting up a corporation. They have a fiduciary relationship with the corporation, meaning they have a duty to act in the best interests of the corporation and its shareholders. This includes disclosing all relevant information and avoiding conflicts of interest.

Question 20

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 adopt bylaws, elect directors and officers, and transact any other business necessary to properly organize the corporation.

Quiz 33: Nature and Formation of Corporations