Question 1

MegaCorp is incorporated in the state of Delaware and is registered only in Delaware.Jolene purchased a MegaCorp product from a company's sales representative following a presentation in Michigan.Jolene was seriously injured by the product in Michigan.Under the Model Act,if Jolene sues in Michigan,can MegaCorp defend the suit there?

Accepted Answer

According to the Model Act, a corporation can defend against a lawsuit in a state where it is not registered to do business if the lawsuit arises out of the corporation's activities in that state. Since Jolene was injured in Michigan by the product purchased from MegaCorp's sales representative, MegaCorp can defend against the lawsuit in Michigan. MegaCorp's registration in Delaware is not relevant to its ability to defend against the lawsuit in Michigan. Therefore, option C is the correct answer.

Question 2

In incorporating E-prise,the promoter gave an incorrect ZIP Code for the registered agent.All of the other requirements for incorporation were met.E-prise is a(n)

Accepted Answer

E-prise is a de jure corporation because all legal requirements for incorporation were met except for a minor error (incorrect ZIP Code), which does not invalidate the incorporation process.

Question 3

Hank owns 100 shares of cumulative preferred stock in Wayside Transport,Inc.Kelsey owns 50 non-cumulative preferred shares,and Oleg owns 120 shares of common stock.Wayside does not pay dividends in 2015.In 2019

Accepted Answer

Hank's cumulative preferred shares mean he's entitled to dividends missed in previous years before common shareholders like Oleg are paid. Kelsey's non-cumulative preferred shares do not entitle her to back dividends for years when payments were missed, such as 2015. Thus, all statements are correct regarding the dividend payment priorities and the nature of cumulative and non-cumulative preferred shares.

Question 4

What is an exculpatory clause?

Accepted Answer

An exculpatory clause is a provision in a corporation's charter or bylaws that protects directors from personal liability to the corporation and its shareholders for actions taken in their roles as directors, except in cases of certain wrongful acts such as fraud or breach of fiduciary duty.

Question 5

What term identifies stock that has been authorized and sold?

Accepted Answer

Outstanding stock refers to the shares of stock that have been authorized and sold, and are currently owned by shareholders. Option A refers to authorized and paid stock, which is not a commonly used term. Option C refers to stock that has been repurchased by the issuing company and is held by the company, while option D refers to stock that has been authorized but not yet sold.

Question 6

MegaCorp is incorporated under Delaware law.It is registered to do business in New York.Legally,in New York MegaCorp is known as what kind of corporation?

Accepted Answer

MegaCorp is incorporated under Delaware law, therefore, it is considered a foreign corporation in New York where it is registered to do business.

Question 7

Which of the following states that a corporation cannot undertake any transaction unless its charter permits it?

Accepted Answer

The ultra vires doctrine states that a corporation cannot undertake any transaction unless its charter permits it. This doctrine protects shareholders and creditors by preventing the corporation from engaging in activities beyond the scope of its authorized powers.

Question 8

Under most state statutes,a corporation may

Accepted Answer

Most state statutes allow corporations to include in their charters a provision indemnifying directors unless they have engaged in intentional misconduct or bad faith. This provision is designed to ensure that directors are not held liable for actions that they take in good faith while carrying out their duties for the corporation. However, this provision generally does not protect directors who engage in intentional misconduct or bad faith, as these actions are not considered to be within the scope of their duties for the corporation.

Question 9

Wizardry Corporation's purpose clause in its charter states the following: "To operate a home-cleaning service business." After a few years of successful operation,Wizardry is offered the challenge of landscaping a neighboring business.If Wizardry accepts the offer,it would be violating its charter under

Accepted Answer

The ultra vires doctrine states that a corporation cannot engage in activities that are beyond the scope of its stated purpose clause in the charter. Therefore, if Wizardry accepts the offer to do landscaping, it would be violating its charter and the ultra vires doctrine. The de jure doctrine refers to the legal authority of the corporation, the de facto doctrine refers to the actual practice of the corporation, and estoppel theory refers to a legal principle that prevents someone from denying their actions or statements.

Question 10

Fashions,Inc.has 12 shareholders.There is no shareholder agreement concerning the board of directors.The company is subject to the Model Act.How many directors is Fashions,Inc.required to have?

Accepted Answer

The answer of Fashions,Inc.has 12 shareholders.There is no shareholder agreement...

Question 11

Who elects the officers of a corporation?

Accepted Answer

The directors of a corporation are responsible for managing the corporation and electing the officers, such as the CEO, CFO, and COO. Shareholders may also have a say in electing the directors through their votes during the annual meeting. Incorporators are only involved in the initial setup of the corporation and do not have a say in the ongoing management. Agents are employees or contractors working for the corporation and do not have the authority to elect officers.

Question 12

What is the first step that must be taken to terminate a corporation?

Accepted Answer

The first step to terminate a corporation is for the shareholders to vote on the decision to dissolve the corporation. Without a shareholder vote, the corporation cannot be terminated. Once the vote is taken, the board of directors would then take the necessary steps to wind up the affairs of the corporation and file the appropriate paperwork with the state to formally dissolve the corporation.

Question 13

Mike is planning on incorporating his business in the state of Delaware.Which of the following regarding the name of Mike's business is TRUE?

Accepted Answer

CIn Delaware, businesses are allowed to use words like "Association" or "Institute" in their company names, providing flexibility in how they present themselves. Additionally, Delaware law requires that the name of a corporation must contain one of the words "Corporation," "Incorporated," "Company," or "Limited," or their abbreviations, ensuring that the corporate status of the entity is clear. This means that options B and D are incorrect because Delaware does allow the use of abbreviations like "Inc." or "Corp." in company names, and it does not permit a company to have the same name as another existing corporation in the state to avoid confusion and ensure distinctiveness in business identities.

Question 14

Fashions,Inc.has 12 shareholders.The company is subject to the Model Act.What officers is Fashions,Inc.required to have?

Accepted Answer

The Model Business Corporation Act allows corporations to have the officers described in their bylaws, providing flexibility in determining necessary positions.

Question 15

Who signs the charter and files it with the secretary of state?

Accepted Answer

The incorporator is the one who signs the charter and files it with the secretary of state. This is because the incorporator is the person or entity responsible for creating the corporation and getting it up and running.

Question 16

What are some of the advantages for a business to incorporate in Delaware?

Accepted Answer

The answer of What are some of the advantages for...

Question 17

Corporate stock can be divided into categories called ________,which can be further divided into ________.

Accepted Answer

Corporate stock can be divided into categories called classes, which can be further divided into series. This allows corporations to issue different types of stock with varying rights, privileges, and preferences.

Question 18

The executives of Jornaginn Corporation have decided they need to sell 50,000 additional shares of stock to finance their expansion plans.The executives

Accepted Answer

The number of shares that a corporation is allowed to sell is limited by the number of shares authorized in the corporate charter. However, this number can be increased by amending the charter and paying a fee. Therefore, the executives of Jornaginn Corporation can sell 50,000 additional shares if they amend the corporate charter and pay the required fee. Option A is incorrect because shares need to be authorized in the corporate charter before it can be sold. Option B is incorrect because there is a limit to the number of shares a corporation can sell, and it cannot simply sell as many as the market will bear. Option D is incorrect because a corporation can sell shares at any par value, and it does not need to be close to the current market price.

Question 19

Under the Model Act,a corporation must have at least one director unless all shareholders agree to eliminate the board or the corporation has fewer than _____ shareholders.

Accepted Answer

Under the Model Act, a corporation must have at least one director, unless all shareholders agree to eliminate the board or the corporation has fewer than 50 shareholders. Therefore, the correct answer is C) 50.

Question 20

Conversion rights

Accepted Answer

Conversion rights allow investors to convert their shares from one class to another. This may allow them to benefit from different dividend payouts or other rights associated with a different class of stock. Conversion rights do not relate to payment priority upon dissolution or dilution protection.

Quiz 33: Life and Death of a Corporation