Question 1

Coast-to-Coast Distribution,Inc.,is a direct-mail distribution company.Like most corporations,Coast-to-Coast's employees include its

Accepted Answer

Officers are the top management of a corporation and are responsible for running the day-to-day operations. Board of directors and shareholders are not employees of the corporation, and incorporators are only involved in the initial stages of creating a corporation.

Question 2

Because stock is intangible personal property,a stockholder's ownership of the stock

Accepted Answer

A stockholder's ownership of the stock exists independently of the stock certificate itself, as ownership of a stock is reflected in the records of the issuer or transfer agent, and can be transferred electronically without the need for a physical certificate.

Question 3

The board of directors of Integral Components Corporation consists of Frida,Gayla,and Hart.A quorum is the minimum number of these directors

Accepted Answer

A quorum is the minimum number of members required to be present at a meeting in order to validly transact business. It is not related to disputes, removal from office, or vacancies.

Question 4

Rosa and Sean are directors of Tech,Inc.Rosa's written authorization to Sean to vote Rosa's shares at a Tech shareholders' meeting is

Accepted Answer

Rosa's written authorization for Sean to vote her shares at a Tech shareholders' meeting is a proxy, which is a common method of representing shareholders who cannot or do not wish to attend meetings in person. This is not a violation of the duty of care or preemptive right, and it does not relate to a quorum.

Question 5

Nina is a director of Omega,Inc.Under the standard of due care owed by di?rectors of a corporation,Nina's decisions must be

Accepted Answer

Under the standard of due care, directors are required to make decisions that are informed and reasonable, taking into account all available information and considering the best interests of the company and its stakeholders. The other choices (A, B, and D) are not accurate descriptions of the standard of due care.

Question 6

Etta is a director of Fab Stuff Corporation.Without informing Fab,Etta goes into business with GR8 Things,Inc.,in competition with Fab.Etta is li?able for breach of

Accepted Answer

Etta is breaching the duty of loyalty by going into business with a competitor without informing Fab Stuff Corporation. As a director, Etta has a duty to act in good faith and in the best interest of the corporation, and this duty includes not competing with the corporation without permission. This duty of loyalty is a fundamental duty of directors and is required by law.

Question 7

Niche Stores,Inc.,must hold a shareholders' meeting

Accepted Answer

According to corporate law, a publicly traded company like Niche Stores, Inc. is required to hold an annual shareholders' meeting. This meeting is an opportunity for shareholders to elect members of the board of directors, vote on important issues, and discuss the company's financial performance. While a company may choose to hold additional meetings throughout the year, it is mandatory that they hold at least one annual meeting.

Question 8

Jaycee is a shareholder for Designer Pet Clothes,Inc.Designer Pet Clothes uses cumulative voting to elect directors.This means that the number of Jaycee's votes is determined by

Accepted Answer

Cumulative voting allows shareholders to distribute their votes among multiple candidates for the board of directors. The number of votes a shareholder has is determined by multiplying the number of board members to be elected by the total number of voting shares the shareholder holds. Therefore, Jaycee's number of votes will be determined by B.

Question 9

Corporate business matters are presented at a shareholders' meeting in the form of

Accepted Answer

Resolutions are proposals that are presented at a shareholders' meeting for their approval or disapproval. These could be related to corporate business matters such as changes to the company's policies, financial planning, or appointment of directors. Proxies, articles of incorporation, and bylaws are other documents related to corporate business matters, but they do not specifically present matters for approval at a shareholders' meeting like resolutions do.

Question 10

Frawsty Corporation distributes beverages in the greater Northwest.Frawsty's board of directors can delegate some of its functions to

Accepted Answer

Frawsty's board of directors can delegate some of its functions to the officers of the company. Officers are appointed by the board of directors and are responsible for the day-to-day operations of the company.

Question 11

Denise,Ervin,and Flem occupy the positions of directors on the board of Gallery Corporation.As directors,they may NOT

Accepted Answer

Directors have a fiduciary duty to act in the best interest of the corporation, and must not subordinate the corporation's welfare to their personal interests. However, directors are typically responsible for authorizing major corporate policy decisions, deciding to issue stock and bonds, and selecting and removing corporate officers.

Question 12

Mickey is a director of Fine Art Dealers,Inc.Mickey is trained in art valuation.Fine Art Dealers makes several purchases in which it pays too much money for artwork.Mickey approves all the transactions without reading the details.Mickey is most likely

Accepted Answer

As a director, Mickey has a duty of care to perform his tasks with the level of care that a reasonably prudent person would exercise in a similar position. By approving transactions without reading the details and thereby causing Fine Art Dealers to pay too much money for artwork, Mickey breached this duty. Therefore, he may be held liable for breach of the duty of care.

Question 13

Louise is a director for Icy Ices,Inc.Louise is also a director for Creamy Creams,Inc.When Icy Ices enters into a contract with Creamy Creams,Louise

Accepted Answer

Louise has a conflict of interest as a director for both companies. Thus, she must disclose the conflict and abstain from voting on the proposed transaction to avoid any ethical or legal issues. Choosing A or B (resigning from one or both boards) may not be necessary or feasible, depending on the circumstances. Option D is not correct because Louise needs to take action to address the conflict of interest.

Question 14

Dave is an officer for Sweet Somethings Candies,Inc.In 2012,chocolate hearts were very popular.Acting within his managerial authority and the powers of the corporation,Dave signs a contract for an increase in chocolate heart production for 2013.In 2013 chocolate hearts do not sell well and Sweet Somethings Candies loses money.Dave is most likely

Accepted Answer

Dave acted within his managerial authority and the powers of the corporation. The failure of the chocolate hearts cannot be attributed to Dave's actions alone as market conditions can change unpredictably, and product performance cannot be guaranteed. Therefore, Dave is not liable for breach of duty of care, breach of duty of loyalty, or violation of the business judgment rule.

Question 15

Fiona owns one share of stock in GR8 Boards Corporation,as evidenced by a stock certificate.Fiona loses the certificate.Her ownership of the stock is

Accepted Answer

Fiona's ownership of the stock is not affected by losing the stock certificate. She would simply need to contact the corporation's transfer agent to request a replacement certificate. The transfer agent would typically require proof of ownership and a fee to issue a replacement certificate.

Question 16

Cara and Dru are officers of EZ Trucking Corporation.As cor?porate officers,the rights of Cara and Dru are

Accepted Answer

The answer of Cara and Dru are officers of EZ...

Question 17

Odell is a director of Price Rite,Inc.As a director,with respect to the corporation,Odell is

Accepted Answer

As a director, Odell is a fiduciary. This means that he has a duty to act in the best interests of the corporation and its shareholders, and must avoid any conflicts of interest. This is a fundamental responsibility of directors.

Question 18

Josh is a director of Sippy Soups,Inc.Josh opposes a tender offer that is in Sippy's best interest because its acceptance would cost him his position as a director.Josh is liable for a breach of duty of

Accepted Answer

Josh's opposition to a tender offer that is in Sippy's best interest solely for his own personal gain (to maintain his position as director) breaches his duty of loyalty as a director. A director's duty of loyalty requires them to act in good faith and in the best interests of the company and its shareholders. Opposing a tender offer that is in the company's best interest solely for personal gain is a violation of this duty.

Question 19

Thor Power Products Corporation permits its directors to be elected by cumulative voting.This

Accepted Answer

Cumulative voting allows minority shareholders to pool their votes and elect a candidate of their choice. This ensures that minority shareholders are represented on the board.

Question 20

Rafi,a director of Super Service Station Corporation,does not attend a board meet?ing for three years.During that time,Twyla,Super's president,makes improper loans that cost the company $100,000.Rafi is most likely

Accepted Answer

As a director, Rafi has a duty to actively participate in board meetings and oversee the operations of the company, including decisions made by the president. By not attending board meetings for three years, Rafi has breached this duty and may be liable for negligence or mismanagement. The improper loans made by Twyla also fall under the scope of Rafi's responsibilities as a director, and he may be held accountable for any losses incurred by the company due to Twyla's actions. The fact that Rafi's absence from meetings was a mistake or poor judgment does not excuse him from his duties and potential liability.

Quiz 31: Management and Ownership of a Corporation