Question 1

Death of a corporation occurs in which of the following phases?

Accepted Answer

The "death" of a corporation occurs in two phases: dissolution, the legal termination of the corporation, and liquidation, the process by which the board of directors converts the corporation's assets into cash and distributes them among the corporation's creditors and shareholders.

Question 2

Which of the following was the result on appeal in J-Mart Jewelry Outlets, Inc. v. Standard Design, the case in the text in which a creditor of a defunct corporation sued the major shareholder seeking to pierce the corporate veil and hold the shareholder personally responsible for corporate debts after the shareholder paid off his personal credit cards using corporate funds and paid the corporation $1 for a new Cadillac?

Accepted Answer

The court ruled that in order for the veil to be pierced, there must be evidence of abuse of the corporate form and that the jury's verdict against the shareholder was proper.

Question 3

In which of the following does an aggressor pay cash to target shareholders?

Accepted Answer

A type of takeover in which the aggressor corporation offers to pay the target shareholders cash for their stock.

Question 4

In a merger situation, which of the following is a term for the corporation that does not continue to exist?

Accepted Answer

A useful way to understand a merger is to think of one corporation absorbing another corporation (called an "absorbed corporation" or a "disappearing corporation"), yielding a single surviving corporation.

Question 5

In a consolidation, shareholders of the new corporation create new articles of incorporation called _______________.

Accepted Answer

In a consolidation, the shareholders of the new corporation create new articles of incorporation, called articles of consolidation, according to the details of the consolidation.

Question 6

In which of the following does a shareholder sue alleging that he has suffered damages caused by the corporation?

Accepted Answer

In a shareholder's direct suit, the shareholder alleges that she has suffered damages caused by the corporation.

Question 7

Which of the following was the result on appeal in Campbell, Kessser, and Williams v. Pothas Corporation, the case in the text in which the defendant alleged that golden parachute agreements were not enforceable because they violated public policy?

Accepted Answer

The court ruled that the "golden parachutes" did not violate public policy, and subsequently ordered enforcement of the severance agreements.

Question 8

Which of the following may be redeemed for a certain number of shares at a specified price within a given time period?

Accepted Answer

A stock warrant is a type of security issued by a corporation (usually together with a bond or preferred stock) that gives the holder the right to purchase a certain amount of common stock at a stated price.

Question 9

In a hostile takeover situation, what does the term "going private" reference?

Accepted Answer

A leveraged buyout (LBO) occurs when a group within a corporation (usually management) buys all the outstanding corporate stock held by the public; and, thus, the group gains control over corporate operations by "going private," or becoming a privately held corporation.

Question 10

ABC Corporation suffered damages when a supplier failed to deliver as agreed. The president of ABC did not institute suit as Garrett, a major shareholder, believed was proper. Garrett complained to the board of directors, but they refused to do anything. Which of the following is an option to Garrett in regard to a lawsuit against the supplier?

Accepted Answer

If corporate directors fail to sue when the corporation has been harmed by an individual, another corporation, or a director, individual shareholders can file a shareholder's derivative suit on behalf of the corporation.

Question 11

Which of the following is generally used to determine the value of stock when a dissenting shareholder exercises an appraisal right when a proposed merger is involved?

Accepted Answer

While shareholders and corporations often clash when determining the value of dissenting shareholders shares, generally, they use the value of the shares on the day before the shareholder vote.

Question 12

Which of the following is generally false when a consolidation occurs?

Accepted Answer

The consolidated corporation takes on the rights, privileges, and powers of the original companies.

Question 13

Which of the following is generally false regarding the surviving entity in a merger situation?

Accepted Answer

The surviving corporation becomes liable for all debts and obligations of the absorbed corporation.

Question 14

Which of the following occurs when a legal contract combines two or more corporations such that only one of the corporations continues to exist?

Accepted Answer

A merger occurs when a legal contract combines two or more corporations and only one of the corporations continues to exist.

Question 15

Which of the following references a right of a corporation or its shareholder to purchase any shares of stock offered for resale by a shareholder within a specified period of time?

Accepted Answer

If a corporation establishes the right of first refusal in its bylaws, the corporation or its shareholders have the right to purchase any shares of stock offered for resale by a shareholder within a specified period of time.

Question 16

Which of the following occurs when a target corporation offers to buy its shareholders' stock?

Accepted Answer

In a self-tender offer, in which the target corporation offers to buy its shareholders' stock.

Question 17

In which of the following are two or more corporations combined with neither of the original corporations continuing to exist legally?

Accepted Answer

In a consolidation, however, neither of the original corporations continues to exist legally.

Question 18

If corporate directors fail to sue when the corporation has been harmed by an individual, another corporation, or a director, individual shareholders can file a[n] _______________ on behalf of the corporation.

Accepted Answer