Question 1

MacTech Corporation is a subsidiary of Clickon Corporation, which owns 90 percent shares of MacTech. The management of Clickon is not happy with the way MacTech is being managed. They believe that MacTech is losing out a huge chunk of potential business to rivals due to mismanagement. As a solution, the board of directors of Clickon approves a merger between Clickon and MacTech and they send a copy of the merger plan to MacTech's shareholders. This form of merger is called a(n):

Accepted Answer

This is a short-form merger as the subsidiary's shareholders are not required to approve the merger agreement. As Clickon already owns 90% of MacTech, they only need board approval and a notice to the shareholders of the subsidiary.

Question 2

The formula for determining the minimum number of shares required to elect a desired number of directors under cumulative voting is _____ where X = number of shares needed to elect the desired number of directors, S = total number of shares voting at the shareholders' meeting, R = number of director representatives desired, and D = total number of directors to be elected at the meeting.

Accepted Answer

The answer of The formula for determining the minimum number...

Question 3

The Model Business Corporation Act (MBCA) provides that the _____ right of a shareholder does not exist except to the extent provided by the articles of incorporation.

Accepted Answer

The MBCA specifically states that the preemptive right of a shareholder does not exist unless it is provided for in the articles of incorporation. The other choices (information, dissenters', and liquidation rights) are all separate and distinct rights granted to shareholders under the MBCA.

Question 4

Normally, how long is the ordinary proxy valid for voting under the Model Business Corporation Act (MBCA)?

Accepted Answer

Normally,the ordinary proxy is valid for voting 11 months under the Model Business Corporation Act (MBCA).

Question 5

The typical dissolution of a corporation requires approval of the:

Accepted Answer

The typical dissolution of a corporation requires approval of the shareholders. The shareholders have the ultimate authority to approve the dissolution of the corporation, as they are the owners of the company. The board of directors may also need to approve the dissolution, but this is not required in all cases. Creditors and merger companies may have a say in the dissolution process, but their approval is not required for the dissolution to take place.

Question 6

A shareholder's preemptive right allows him to:

Accepted Answer

A shareholder's preemptive right allows him to maintain his proportionate share of dividends by allowing him to purchase additional shares before they are offered to the public. This ensures that existing shareholders can maintain their ownership percentage and therefore their share of future earnings.

Question 7

A voting trust:

Accepted Answer

The Model Business Corporation Act (MBCA)limits the duration of voting trusts to 10 years,though all or part of the participating shareholders may agree to extend the term for another 10 years.Also,a voting trust must be made public,with copies of the voting trust document available for inspection at the corporation's offices.

Question 8

The Model Business Corporation Act (MBCA) does not recognize:

Accepted Answer

The Model Business Corporation Act (MBCA)does not recognize consolidations.

Question 9

Under the Model Business Corporation Act (MBCA), a corporation that retains at least _____ percent of its business activity and either its income or revenue has not disposed of substantially all its assets.

Accepted Answer

Under the Model Business Corporation Act (MBCA),a corporation that retains at least 25 percent of its business activity and either its income or revenue has not disposed of substantially all its assets.

Question 10

Camm Corp. has 10,000,000 common shares outstanding. Its four directors are elected by cumulative voting. To elect one director, a shareholder must own at least:

Accepted Answer

To use cumulative voting, shareholders can allocate their votes among the candidates or to distribute all their votes to one candidate. The formula to calculate the number of votes needed to elect a candidate in cumulative voting is:
(Number of shares outstanding) / (Number of directors + 1) + 1 
In this case, the number of shares outstanding is 10,000,000 and the number of directors is 4. 
So the number of votes needed to elect a director is:
(10,000,000 / 5) + 1 = 2,000,001 
Therefore, a shareholder must own at least 2,000,001 shares to elect one director through cumulative voting.

Question 11

A corporation's decision to issue a dividend, and the size of that dividend, is made by the:

Accepted Answer

The board of directors is responsible for making decisions about the corporation's dividend policy, including whether to issue a dividend and the size of that dividend. Shareholders may provide input or express a preference, but ultimately it is the board of directors who makes the decision. The officers of the corporation and creditors do not typically have a role in determining the dividend policy.

Question 12

Tracy is attending the annual general meeting of shareholders of Acor Corporation. Seven directors are going to be elected from twenty nominees during the meeting through cumulative voting. One thousand shares will be voted. What is the minimum number of shares that Tracy needs to have to be able to elect three directors?

Accepted Answer

With cumulative voting, the minimum number of shares needed to elect x directors can be found using the formula:
Minimum shares = (x / (m+1)) + 1
where x is the number of directors to be elected and m is the number of nominees.
In this case, x = 3 and m = 20.
So, Minimum shares = (3 / (20+1)) + 1 = 0.146 rounded up to the nearest whole number = 1.
Thus, Tracy needs to have at least 1 + 1 + 1 = 3 shares to be able to elect three directors. 
Therefore, the minimum number of shares Tracy needs to have is 376 (1 + 1 + 1/20 of 1000). Thus, the correct answer is C.

Question 13

Which of the following is true about mergers?

Accepted Answer

Ordinarily,shareholders of both the surviving and the dissolved/acquired corporation must approve a merger.

Question 14

When the board of directors of a parent corporation approves its merger with its subsidiary and sends a copy of the merger plan to the subsidiary's shareholders, such a merger is called a(n):

Accepted Answer

A short-form merger, also known as a parent-subsidiary merger, is when the parent corporation merges with its wholly-owned subsidiary without the need for a shareholder vote or approval from the subsidiary's board of directors. Therefore, the board of directors of the parent corporation can approve the merger and send a copy of the merger plan to the subsidiary's shareholders, allowing for a quicker and more efficient merger process.

Question 15

Under the Model Business Corporation Act (MBCA), shareholders have a qualified but not absolute right to inspect:

Accepted Answer

The Model Business Corporation Act (MBCA)grants shareholders an absolute right of inspection of an alphabetical listing of the shareholders entitled to notice of a meeting,including the number of shares owned.The MBCA also grants an absolute right of inspection of,among other things,the articles,bylaws,and minutes of shareholder meetings within the past three years.Shareholders have a qualified right to inspect other records,however.To inspect accounting records,board and committee minutes,and shareholder minutes more than three years old,a shareholder must make the demand in good faith and have a proper purpose.

Question 16

Klingon Corporation has only one class of shares, its common shares. Klingon has assets of $200,000 and liabilities of $160,000. It has $40,000 of excess liquidity that it does not need to pay currently maturing obligations. What is the maximum property dividend that Klingon may pay to its common shareholders?

Accepted Answer

The maximum property dividend that Klingon can pay is equal to its excess liquidity, which is $40,000. Choice A is incorrect because it assumes that all of the assets are available to pay dividends when in reality some of the assets are needed to cover the company's liabilities. Choice B is incorrect because it assumes that the excess liquidity is the same as the total shareholder equity, which is not necessarily true. Choice D is incorrect because it does not take into account the company's liabilities.

Question 17

The LexCon Corporation takes over the Zebra Corporation. By applying which principle will LexCon become the owner of all the shares of Zebra Corporation?

Accepted Answer

A share exchange is a transaction by which one corporation becomes the owner of all of the outstanding shares of a second corporation through a compulsory exchange of shares.LexCon Corporation will be able to become owner of all the shares of Zebra Corporation through a share exchange.

Question 18

Catz Corporation has two majority shareholders and five minority shareholders. The five minority shareholders created a voting trust in November 2011 to control Catz through the concentration of shareholder voting power in the voting trustees. Under the Model Business Corporation Act (MBCA), this voting trust will be valid till:

Accepted Answer

The Model Business Corporation Act (MBCA)limits the duration of voting trusts to 10 years,though all or part of the participating shareholders may agree to extend the term for another 10 years.So,unless the participating shareholders agree to extend the term,the voting trust created by the five minority shareholders of Catz will be valid till October 2021.

Question 19

A dissenting shareholder seeking payment of the fair value of his/her shares (dissenters' rights) must have the right to vote on the action to which he/she objects. In which of the following cases does a shareholder have dissenters' rights despite his/her lack of voting power?

Accepted Answer

A dissenting shareholder seeking payment of the fair value of his/her shares must have the right to vote on the action to which he/she objects;however,a shareholder of a subsidiary in a short-form merger has dissenters' rights despite his/her lack of voting power.

Question 20

Which of the following corporate decisions requires an approval vote of the shareholders?

Accepted Answer

A merger is a major corporate decision that can have a significant impact on shareholders. It involves combining two companies, which could result in changes to the ownership structure and the value of shareholders' investments. As such, it usually requires an approval vote of the shareholders to ensure that they support the merger and its terms. Share trading, purchasing land for an office, and joint ventures are not typically subject to shareholder approval votes.

Quiz 44: Shareholders Rights and Liabilities