Question 1

Shareholders have the right to bring a derivative action on behalf of a corporation that refuses to exercise its right to bring such action.

Accepted Answer

This is known as a shareholder derivative lawsuit, where a shareholder can bring a lawsuit on behalf of the corporation when the corporation itself has failed to do so.

Question 2

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

Accepted Answer

Net assets, also known as shareholders' equity, represents the residual interest in the assets of the corporation after deducting all its liabilities. This is also sometimes referred to as capital. Debentures and bonds are both forms of debt, while stock represents ownership in the corporation but not necessarily the net assets.

Question 3

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 4

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

Accepted Answer

Transfer of ownership of shares of stock can be done by delivering the stock endorsed by its owner in blank, delivering the stock endorsed by its owner to a specified person, or delivering the certificate and a separate power of attorney executed by the owner. However, delivering a notice of intent to transfer is not a valid method of transferring ownership.

Question 5

Because corporate stock has the quality of negotiability:

Accepted Answer

The answer of Because corporate stock has the quality of...

Question 6

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 a contract or agreement to purchase a specific number and kind of shares of stock when it is issued. A guaranty is a promise to make good on the debt or default of another. A warranty is a guarantee given to the purchaser by the seller that the product is as represented and will perform satisfactorily. A request is a formal or polite expression of asking for something.

Question 7

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 gives rise to a perfected security interest. This means that the creditor has a legally recognized interest in the stock that takes priority over other claims or interests in the stock. However, to perfect the security interest, the creditor must file a UCC financing statement or take other steps required by state law.

Question 8

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 share certificate and ownership will be restored once the replacement is received.

Question 9

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 statement is true. The corporation is only bound to recognize the legal owner of the stock as the person whose name is on its books until the transfer is properly recorded.

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, not just another shareholder.

Question 11

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

When a shareholder borrows money and uses their stock as collateral, the creditor automatically has a perfected security interest in the stock. This does not require any filing by the creditor because the stock serves as the collateral itself.

Question 12

A shareholder does not:

Accepted Answer

The answer of A shareholder does not:
...

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 the stock certificate is the physical representation of ownership and is often required to be presented in order to sell or transfer shares. Any notation on the stock certificate would clearly communicate the restrictions to any potential buyer or transferee.

Question 14

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

Accepted Answer

While common stock can be nonvoting, it is not necessarily always nonvoting. In some cases, common stock does come with voting rights that allow shareholders to vote on certain matters such as the election of board members or proposed mergers and acquisitions.

Question 15

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

Question 16

Voting trusts are usually illegal.

Accepted Answer

Voting trusts are not necessarily illegal, but they are subject to regulation under securities laws to ensure that they do not impede competition or violate anti-trust laws.

Question 17

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 one who purchases stock in good faith, without notice of any defect in the title of the seller. If a transfer restriction was not known to the purchaser and not noted on the certificate, the purchaser is shielded from any claim that the transfer was made in violation of that restriction.

Question 18

Which of the following need not be included in writing to satisfy the Statute of Frauds concerning a contract for the sale of securities?

Accepted Answer

The answer of Which of the following need not be...

Question 19

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

Accepted Answer

This is true according to most corporate laws and bylaws. However, some corporations may have different rules regarding voting rights.

Question 20

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 they have a claim on the company's assets and earnings and may have voting rights in company decisions. They are not a creditor of the corporation and do not hold a debt security.

Quiz 45: Shareholder Rights in Corporations