Question 1

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. While it is important for Fiona to report the loss of the certificate and obtain a replacement, the loss of the physical certificate does not affect her ownership of the underlying stock. The company's records will still show that she is the owner of the stock.

Question 2

Brad is a shareholder of Concert Promotion Corporation.As a shareholder,Brad can

Accepted Answer

As a shareholder, Brad has the right to vote to amend the corporation's articles of incorporation or bylaws. Shareholders generally do not have the authority to authorize major corporate policy decisions, decide to issue stock and bonds or declare dividends, or select and remove corporate officers. These decisions are typically made by the board of directors or executive management team.

Question 3

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 to have a greater influence in the election of directors. This means that a minority shareholder can cast all their votes for a single candidate, increasing the likelihood of their preferred candidate being elected.

Question 4

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

Accepted Answer

As directors of Gallery Corporation, Denise, Ervin, and Flem have a duty to act in the best interest of the corporation and its shareholders. Supporting businesses that directly compete with Gallery would be a conflict of interest and go against that duty. A, B, and C are all responsibilities and powers of directors.

Question 5

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

Accepted Answer

The board of directors can delegate some of its functions to the officers of the corporation. Incorporators and shareholders are not involved in the day-to-day operations of the corporation and do not typically have the authority to carry out board functions. Option D is incorrect as delegating functions is a common practice in corporations.

Question 6

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 individuals who are responsible for the day-to-day management and operations of the corporation. Board of directors are responsible for overseeing the operations of the company and making major decisions. Incorporators are the individuals who establish the corporation, and shareholders own a portion of the corporation through owning its stock. While all of these groups may be involved with Coast-to-Coast Distribution, Inc., the employees who are responsible for carrying out the company's functions on a regular basis are most likely to be officers.

Question 7

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

Accepted Answer

Eve breached the duty of loyalty as a director, which requires her to act in the best interests of Fab and not enter into business competition with them without their knowledge or consent.

Question 8

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

Accepted Answer

According to state law, corporations must hold an annual shareholders' meeting at least once a year. Therefore, the best choice is B, which states that Niche Stores, Inc. must hold a shareholders' meeting once a year.

Question 9

Luke is a director of Motor Parts Corporation.Luke makes decisions with respect to Motor Parts in good faith,in what he believes is the firm's best interest,and without violating any duties owed to it.If,despite these circumstances,Luke exercises poor business judgment,under the business judgment rule Luke is

Accepted Answer

According to the business judgment rule, if a director exercises good faith and makes decisions in the best interest of the company, they are immune from liability even if they make poor business judgments. Therefore, Luke is not liable in this scenario.

Question 10

Flite-Craft Corporation makes and sells aircraft parts.In most states,the minimum number of directors that must be present before Flite-Craft's board can transact its business is

Accepted Answer

In most states, the minimum number of directors that must be present before the board can transact business is a majority of the number authorized in the articles or bylaws. This means that if the articles or bylaws authorize a board of 10 directors, at least 6 directors must be present for the board to transact business.

Question 11

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 12

Odell,Prince,and Quinn are shareholders of Rite Corporation.Before a shareholders' meeting,they agree in writing to vote their shares together in a certain manner.Usually,such agreements are held to be

Accepted Answer

Shareholder agreements to vote together in a certain manner are generally valid and enforceable as long as they do not violate any laws or the corporation's bylaws.

Question 13

Sol is chairman of the board of Tasty Foods Corporation.Uma,a con?sumer,falls sick after eating a Tasty product.Uma sues Tasty,and Sol individu?ally.Tasty may pay Sal's legal fees

Accepted Answer

As the chairman of the board, Sol has a duty to ensure that Tasty Foods Corporation produces safe products. However, if Uma sues both Tasty and Sol individually, Tasty may pay for Sol's legal fees regardless of the outcome to ensure that their chairman is not financially burdened by the lawsuit. This is a common practice to attract and retain qualified individuals to serve on the board of directors.

Question 14

Chip is a director of Diners Restaurants,Inc.Chip would breach his duty of loyalty if he

Accepted Answer

Chip would breach his duty of loyalty as a director of Diners Restaurants, Inc. if he buys a controlling interest in a competing firm, Gulpin' Foods Corporation, as this would involve a conflict of interest. Chip owes a fiduciary duty to Diners Restaurants, Inc. and cannot engage in activities that could harm the company's interests. Options A and C involve potential self-dealing, which would also breach Chip's duty of loyalty. Option D involves a business judgment decision and would not necessarily breach Chip's duty of loyalty on its own.

Question 15

Lovey is a shareholder of Matchless Corporation with preemptive rights.With these rights,Lovey can

Accepted Answer

Preemptive rights allow a shareholder to purchase a prorated share of a new issue of stock before it is offered to other buyers. This gives the shareholder the opportunity to maintain their proportional ownership in the company and avoid dilution of their shares. The other choices (B, C, and D) are not accurate descriptions of preemptive rights.

Question 16

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 of care and loyalty to the corporation. By not attending board meetings for three years, Rafi is failing to exercise his duty of care. Therefore, he can be held liable for negligence or mismanagement if the president makes improper loans that cost the company $100,000.

Question 17

Reba is a director of Superb Performance Corporation.Reba's rights,as a di?rector,do not include a right of

Accepted Answer

As a director, Reba does not have the right of preemption, which is the right to purchase additional shares in the corporation before they are offered to the public. The other options listed are rights typically granted to directors.

Question 18

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

The standard of due care requires directors to make informed and reasonable decisions. Ambiguity and questions regarding decisions would not meet this standard. Likewise, expecting perfect and unassailable decisions is unrealistic. The decisions must be arguable and defensible but not at the expense of being informed and reasonable. Therefore, the best choice is C.

Question 19

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 directors who must be present to validly transact business. It is usually defined in the corporation's bylaws or Articles of Incorporation, and typically requires a majority or a specific number (e.g. two-thirds) of the directors to be present.

Question 20

Rosa and Sean are directors of Tech,Inc.The right of Rosa and Sam to be notified of special meetings of the board is the right to

Accepted Answer

The right to be notified of special meetings of the board is a right of participation, as it allows Rosa and Sean to attend and participate in important discussions and decisions. Compensation and indemnification are related to financial compensation or legal protection, while preemption refers to a shareholder's right of first refusal before new shares are offered to others.

Quiz 26: Corporate Directors, officers, and Shareholders