Question 1

One of the fiduciary duties of directors is the duty not to compete with the corporation.They may pursue their own business interest, but they may not:

Accepted Answer

All of the choices listed (A, B, C) are examples of actions that would violate a director's duty not to compete with the corporation. This duty prohibits directors from using corporate resources, facilities, or personnel for personal gain or to support their own separate business ventures.

Question 2

The RMBCA states that "all corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed under the direction of, its:

Accepted Answer

The Revised Model Business Corporation Act (RMBCA) specifies that all corporate powers are to be exercised by or under the authority of, and the business and affairs managed under the direction of, the corporation's board of directors. This establishes the board as the primary governing body within a corporation.

Question 3

The type of authority that arises from acts of the corporation that lead third parties to believe reasonably and in good faith that an officer has the requisite authority is:

Accepted Answer

Apparent authority arises when a corporation's actions lead third parties to reasonably believe that an officer has the authority to act on behalf of the corporation, even if such authority has not been formally granted. This is based on the principle of estoppel, preventing the corporation from denying the authority of the agent if third parties were misled into believing such authority existed due to the corporation's conduct.

Question 4

Theodore, as treasurer of Komand Corporation, had the duty to invest corporate earnings as he deemed best for the company.When Komand Corporation went public, the new board decided that a committee of the officers would make such investment decisions.If Theodore thereafter unilaterally contracted to purchase investment securities with corporate earnings as he had done many times before, such contract would be valid:

Accepted Answer

Theodore's unilateral actions could be seen as valid under apparent authority if the seller was aware of his past transactions and believed Theodore still had the authority to make such investments on behalf of the corporation. This is because apparent authority is based on the perceptions of a third party (the seller, in this case) regarding an individual's authority to act on behalf of an organization.

Question 5

The minimum number of board members necessary to be present at a meeting in order to transact business is known as:

Accepted Answer

A quorum is the minimum number of members of a deliberative assembly necessary to conduct the business of that group. This term specifically refers to the required number of members present to make proceedings of the meeting valid.

Question 6

Assume there are no provisions in the corporation's articles of incorporation or bylaws regarding quorum requirements.If there are 13 total directors of General Grain Corporation and the minimum number of directors are present to transact business, how many votes normally would be necessary for those present to act as a board?

Accepted Answer

The answer of Assume there are no provisions in the...

Question 7

The __________ precludes imposing liability on directors and officers for honest mistakes in judgment if they act with due care, in good faith, and in a manner reasonably believed to be in the best interests of the corporation.

Accepted Answer

The business judgment rule protects directors and officers from liability for decisions made in good faith, with due care, and in what they reasonably believe to be in the best interests of the corporation, even if those decisions turn out to be mistakes. This rule acknowledges that the business decision-making process is not perfect and that directors and officers should not be penalized for honest errors in judgment.

Question 8

Tunso Corp.has 1,000 shares of stock outstanding that are permitted to vote for directors.If Tunso Corp.permits cumulative voting, a minority shareholder would need to vote how many shares to elect one of three directors?

Accepted Answer

The answer of Tunso Corp.has 1,000 shares of stock outstanding...

Question 9

An officer or director's responsibility to exercise ordinary care and prudence in discharging duties is the:

Accepted Answer

The duty of diligence refers to the responsibility of an officer or director to exercise ordinary care and prudence in the management and administration of an organization, ensuring they act in the best interest of the organization and its stakeholders.

Question 10

The Rutherford Corporation, a publicly held company, has employed Duncan, Saindon & Associates, PSC, as their accounting firm to perform audit services.Under the Sarbanes-Oxley Act, the lead auditor of Duncan, Saindon & Associates must rotate every:

Accepted Answer

Under the Sarbanes-Oxley Act, the lead auditor must rotate every five years. This requirement is designed to ensure independence and objectivity in the audit process by preventing too close a relationship from developing between the auditor and the client.

Question 11

The right of a shareholder to examine the books and records of the corporation may be denied if the shareholder:

Accepted Answer

The right of a shareholder to examine the books and records can be denied if the purpose is to harm the corporation, such as seeking information to embarrass or cause loss to the corporation.

Question 12

The role of shareholders in managing the corporation is generally restricted to:

Accepted Answer

Shareholders typically have a limited role in the day-to-day management of a corporation, but they do have the power to elect directors, approve certain extraordinary measures, and ratify corporate transactions that might otherwise be void or voidable. These actions are fundamental to their rights and responsibilities in corporate governance.

Question 13

A shareholder would have all of the following rights EXCEPT the right to:

Accepted Answer

Shareholders have rights to bring suit against the corporation for dividends, see financial statements for valuation, and bring suit on behalf of the corporation. However, they do not have the right to inspect corporate records to share confidential information, such as customer lists, with competitors. This would be a breach of their duty to the corporation.

Question 14

Shareholders normally have the right to do all but which one of the following?

Accepted Answer

Shareholders elect the board of directors but do not directly elect the officers of a company. Officers are typically appointed by the board of directors.

Question 15

The board determines corporate policy in a number of areas, including:

Accepted Answer

The board of directors in a corporation is responsible for making key decisions and setting policies in various areas, including determining the corporation's capital structure, initiating fundamental changes, selecting and removing officers, and declaring dividends.

Question 16

In which of the following areas does the board determine corporate policy?

Accepted Answer

The board of directors is responsible for determining corporate policy in all the areas listed: setting management compensation, determining the corporation's capital structure, selecting and removing officers, and initiating fundamental changes and declaring dividends. These responsibilities are part of the board's role in overseeing the management and strategic direction of the company.

Question 17

Most states, as well as the Revised Act, hold that the test for the duty of diligence requires a director or officer to discharge corporate duties:

Accepted Answer

The duty of diligence requires directors or officers to act in good faith, meaning they must act honestly and with a sincere intention to fulfill their responsibilities to the corporation.

Question 18

If shareholders agree in writing to vote in a specified manner for election or removal of directors, this is known as:

Accepted Answer

A shareholder voting agreement is a contract among shareholders to vote their shares in a certain way, for example, on the election or removal of directors. Unlike a voting trust, which involves transferring shares to a trustee, or a proxy, which is an authorization to vote someone's shares, a voting agreement allows shareholders to retain ownership and vote their shares directly in accordance with the agreement. Cumulative voting is a method that allows shareholders to concentrate their votes on fewer candidates than there are positions available.

Question 19

A director may make business decisions in reliance on information provided to him without incurring liability for negligence as long as he:

Accepted Answer

A director can rely on information provided to him as long as he reasonably believes it to be reliable. This is part of the business judgment rule, which protects directors from liability for decisions made in good faith based on adequate information.

Question 20

Arthur is a shareholder of Rowson, Inc.He has evidence to suggest that its president/CEO has allowed the corporation to engage in acts that are ultra vires .Based upon this evidence, Arthur contacts an attorney and sues the corporation on behalf of the corporation.The lawsuit Arthur has filed is known as:

Accepted Answer

Arthur's lawsuit is a derivative suit because he is suing on behalf of the corporation for actions that are beyond the scope of its powers (ultra vires), aiming to address wrongs done to the corporation itself.

Quiz 35: Management Structure of Corporations