Question 1

Corporate managers serve only one master,which is the best interest of the shareholders.

Accepted Answer

False

Question 2

A corporate charter is filed with:

Accepted Answer

A corporate charter is typically filed with a state's Secretary of State office.

Question 3

A director violates the corporate opportunity doctrine if he or she competes with the corporation,unless the disinterested directors approve of the director's actions.

Accepted Answer

The corporate opportunity doctrine requires the director to act in the best interests of the corporation and not to personally compete with it. If a director violates this doctrine, they can be held liable for breach of their fiduciary duty. However, the director's actions may be allowed if they obtain approval from the disinterested directors.

Question 4

A proxy is a vote that is mailed in,like an absentee ballot.

Accepted Answer

A proxy is not a vote itself but rather a form of delegation, where one person authorizes another to vote on their behalf, often seen in corporate settings. An absentee ballot is a method for casting votes in an election when a voter cannot be physically present at the polling place.

Question 5

Laurie is incorporating her business.Laurie's home state is Wisconsin.Business will be conducted in California,Michigan,Pennsylvania,and Virginia.Laurie:

Accepted Answer

Laurie can incorporate her business in any state, regardless of where she lives or where the business operates. Many businesses choose to incorporate in a state with favorable corporate laws and tax structures, such as Delaware, but it is not a requirement.

Question 6

Under corporate law,a corporation that officially states its purpose is "to engage in any lawful activity for which corporations may be organized under the General Corporation Law of Idaho" is too broad.A corporation's purpose must be more narrowly defined.

Accepted Answer

The answer of Under corporate law,a corporation that officially states...

Question 7

Recent legislation has stipulated that boards of directors should be made up of more independent directors who are less likely to simply go along with whatever the CEO wants.

Accepted Answer

This statement is true. Recent legislation and regulatory bodies have been pushing for boards of directors to be more independent and have greater oversight of company decisions, rather than simply following the wishes of the CEO or other top executives. This is seen as a way to improve corporate governance and reduce the risk of conflicts of interest or unethical behavior.

Question 8

In either a derivative lawsuit or a direct shareholder lawsuit,any proceeds awarded by the court must be paid to the corporation,not the shareholders themselves.

Accepted Answer

The answer of In either a derivative lawsuit or a...

Question 9

Zach decided to incorporate his business under the name of "Zamm." In addition to "Zamm," the Model Act requires that Zach include one of the following words:"corporation," "incorporated," "limited," or "company" or an abbreviation thereof.

Accepted Answer

The answer of Zach decided to incorporate his business under...

Question 10

Common stock is last stock in line for any corporate payouts,including dividends and liquidation payments.

Accepted Answer

This is because preferred stockholders have priority over common stockholders in receiving dividends and liquidation payments.

Question 11

A corporation is required to have at least one class of stock with voting rights.

Accepted Answer

According to the laws of most states in the US, corporations must have at least one class of stock with voting rights. This class of stock is typically referred to as common stock.

Question 12

Directors have the authority to manage the corporate business.

Accepted Answer

This is true. Directors are responsible for managing the operations, finances, and overall direction of a corporation. They have the authority to make decisions on behalf of the company and are accountable to shareholders.

Question 13

Larry has owned $5,000 of stock in E-prise,Inc.for the past 18 months.Under SEC rules,Larry can require that one proposal be placed in the company's proxy statement to be voted on at the shareholder meeting.

Accepted Answer

According to SEC rules, shareholders who have continuously held at least $2,000 in market value or 1% of the company's voting securities for at least one year are allowed to propose items to be included in the company's proxy statement. Since Larry has owned $5,000 of stock in E-prise, Inc. for the past 18 months, he meets the requirements and can require one proposal to be placed in the company's proxy statement.

Question 14

Incorporators are required to sign the charter,deliver it to the proper state officials,and purchase a certain percentage of the initial stock offering.

Accepted Answer

Incorporators are required to sign the charter and deliver it to the proper state officials, but they are not required to purchase a certain percentage of the initial stock offering.

Question 15

The "business judgment rule" has been replaced by "good faith statutes" in most states.

Accepted Answer

The business judgment rule is still recognized and applied as a default standard of review in most states, although some states have adopted variations or additions to the rule and some states have statutes that address directors' fiduciary duties, including good faith requirements.

Question 16

A corporation is not allowed to issue dividends to shareholders unless it is solvent.

Accepted Answer

This is correct, a corporation must be solvent (i.e. have assets exceed liabilities) in order to issue dividends to its shareholders. If a corporation distributes dividends while insolvent, it could be considered fraudulent and lead to legal consequences for the company's officers and directors.

Question 17

Carey decided to incorporate her business under the name yStar Inc.Before yStar was incorporated,Carey signed a contract in the name of yStar,Inc.to have some office space remodeled.Which statement is correct?

Accepted Answer

Since the contract was signed before yStar was incorporated, the corporation will only be liable on the contract if it adopts it. Adoption occurs when the corporation accepts the benefits of the contract or acts as if the contract is valid. Prior to incorporation, Carey would have been personally liable on the contract unless the contractor knew that the corporation did not yet exist. Once yStar is incorporated, it becomes a legally separate entity from Carey and is not automatically liable for contracts signed in her name.

Question 18

Terminating a corporation is a three-step process:dissolution,winding up,and termination.

Accepted Answer

Terminating a corporation typically involves a two-step process: dissolution and winding up. Termination is not a separate step but rather the end result of the winding-up process.

Question 19

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 20

MegaCorp purchased 10,000 shares of its own stock that had previously been owned by private investors.The stock MegaCorp repurchased is called:

Accepted Answer

The stock that MegaCorp repurchased is called treasury stock. Treasury stock refers to shares of a company's own stock that it has purchased back from shareholders but has not retired. These shares can be reissued or held by the company for future use, such as to increase earnings per share or to use in employee stock option plans.

Quiz 29: Corporations