Question 1

As an owner of the corporation,a shareholder always has the right to inspect the books of the corporation for any purpose,regardless of whether the inspection is related to the shareholder's interest as a shareholder.

Accepted Answer

The answer of As an owner of the corporation,a shareholder...

Question 2

A bond:

Accepted Answer

A) is correct as an unsecured bond is called a debenture bond. 
B) is correct as bonds are negotiable securities. 
C) is generally true as bonds typically have a longer life than short-term debt instruments such as commercial paper. Therefore, all options are correct and the answer is D.

Question 3

When an individual owns a share of stock in a corporation,that individual:

Accepted Answer

When an individual owns a share of stock in a corporation, they have an ownership interest in the corporation. This means that they have a claim on the assets and earnings of the corporation, as well as the right to vote on certain matters related to the corporation's management. They are not a creditor of the corporation, as they do not hold a debt security. While some stocks may not have voting rights, it is not true for all stocks, so it is not accurate to say that individuals generally have no voting rights.

Question 4

Shareholders exercise direct control over their corporation.

Accepted Answer

Shareholders exercise control indirectly through the election of the board of directors, who then make decisions on behalf of the corporation.

Question 5

Until a transfer is recorded on its books,a corporation is entitled to treat the person whose name is on its books as the owner of its stock.

Accepted Answer

This is known as the "record date" and is the date the corporation uses to determine who is entitled to receive benefits such as dividends or voting rights.

Question 6

Ordinarily,each shareholder is entitled to one vote for each voting share.

Accepted Answer

This is the standard rule for voting rights of shareholders in most jurisdictions. However, some corporations may have different voting structures or provisions in their bylaws.

Question 7

Statutes sometimes provide that shareholders shall have unlimited liability for the wage claims of corporate employees.

Accepted Answer

Some jurisdictions may have statutes that impose unlimited liability on shareholders for specific obligations, such as wage claims, to protect employees in certain situations.

Question 8

If a shareholder borrows money and delivers stock as collateral security,the creditor has a perfected security interest in the stock without any filing by the creditor.

Accepted Answer

This is known as "pledging" or "hypothecating" the stock, and creates a secured interest for the creditor without the need for a public filing.

Question 9

A shareholder does not:

Accepted Answer

The answer of A shareholder does not:
...

Question 10

A shareholder can give a proxy to vote shares only to another shareholder.

Accepted Answer

A shareholder can give a proxy to vote shares to anyone, including another shareholder, a director, or even a third party. There are no restrictions on who can receive a proxy.

Question 11

A bona fide purchaser of stock is shielded from the claim that the transfer was made in violation of a transfer restriction that was unknown to the purchaser and that was not noted conspicuously on the certificate.

Accepted Answer

A bona fide purchaser is someone who purchases a stock in good faith, with no knowledge of any errors or illegality in the transaction. In such cases, the purchaser is generally protected from any claims arising from violations of transfer restrictions, as long as those restrictions were unknown to the purchaser and were not noted prominently on the certificate. This protection is known as the bona fide purchaser defense.

Question 12

A contract or agreement to purchase a specific number and kind of shares of stock when it is issued is called a stock:

Accepted Answer

A subscription is an agreement to purchase a specific number and kind of shares of stock when it is issued. A guaranty is a promise to answer for the debt, default, or miscarriage of another. A request is a formal or polite demand for something. A warranty is a written guarantee that a product or service will meet certain standards or specifications.

Question 13

Which of the following is an effective means of notice to purchasers of shares that there are restrictions on the sale?

Accepted Answer

Notation on the stock certificate is the most effective means of notice to purchasers of shares that there are restrictions on the sale. This is because individuals purchasing shares will typically examine the stock certificate before making the purchase, and any restrictions noted on the certificate will be binding on the purchaser. Notations in the bylaws or resolutions of shareholders or directors may be less effective in providing notice to purchasers.

Question 14

The net assets of a corporation may be referred to as:

Accepted Answer

Net assets represent the value of a corporation and can be referred to as "capital." Debentures and bonds represent debt, while stock represents ownership in the corporation.

Question 15

Voting trusts are usually illegal.

Accepted Answer

Voting trusts are legal if they comply with certain legal requirements and are approved by government regulatory agencies.

Question 16

Straight voting:

Accepted Answer

Straight voting is the standard method where each shareholder gets one vote per share owned, allowing majority shareholders to have more influence. It does not increase minority shareholders' power or restrict votes to one per shareholder.

Question 17

Delivering stock to a creditor as security for a debt owed by the shareholder:

Accepted Answer

Delivering stock to a creditor as security for a debt owed by the shareholder creates a security interest in the stock. However, to perfect the security interest, the creditor must file the appropriate documents with the relevant authorities. Once the security interest is perfected, the creditor's claim to the stock is superior to that of the shareholder.

Question 18

Which of the following statements is not true of common stock?

Accepted Answer

While some common stocks may be nonvoting, it is not true that they are ordinarily nonvoting. Some common stocks do have voting rights, allowing the holder to participate in corporate governance decisions.

Question 19

If a share certificate is lost,destroyed,or stolen,the ownership of the shareholder is destroyed.

Accepted Answer

If a share certificate is lost, destroyed or stolen, the ownership of the shareholder is not destroyed. The shareholder can request a replacement certificate from the company's registrar or transfer agent. However, the shareholder should also report the loss or theft to prevent any unauthorized transfer of ownership.

Question 20

Ownership of shares of stock may be transferred by any of the following methods except:

Accepted Answer

While the other three methods are valid ways to transfer ownership of shares of stock, delivery of a notice of intent to transfer has no legal effect on the actual ownership of the shares. The transfer must be completed through one of the other methods listed.

Quiz 45: Shareholder Rights in Corporations