Question 1

Directors should be shareholders of the corporation on whose board they serve.

Accepted Answer

Directors need not be shareholders of the corporation on whose board they serve.

Question 2

Corporate constituency statutes permit the board of directors to consider the interests of persons other than the corporation's shareholders when the directors make corporate decisions.

Accepted Answer

Corporate constituency statutes allow the board of directors to take into account the interests of other parties such as employees, customers, suppliers, and the community, not just the shareholders.

Question 3

Under the Model Business Corporation Act (MBCA), ultra vires may be asserted by:

Accepted Answer

Under the Model Business Corporation Act (MBCA),ultra vires may be asserted by a shareholder seeking to enjoin a corporation from executing a proposed action that is ultra vires.

Question 4

In order to facilitate the operation of the board of directors, many tasks and decisions are delegated to a committee of the board.

Accepted Answer

Committees of the board are delegated specific tasks and responsibilities to help the board function efficiently.

Question 5

Most states have enacted _____ statutes, which broaden the legal objectives of corporations.

Accepted Answer

Corporate constituency statutes broaden the legal objectives of corporations to include consideration of stakeholders beyond shareholders, such as employees, customers, and the community. Good Samaritan statutes protect individuals or entities from liability when they act in good faith to assist someone in need. Control share acquisition and business combination statutes regulate mergers and acquisitions. Therefore, option B is the best choice.

Question 6

The two easiest ways to freeze out minority shareholders are the freeze-out acquisition and the share split.

Accepted Answer

The two easiest ways to freeze out minority shareholders are the freeze-out merger and the reverse share split.

Question 7

Delta Corporation's board of directors is considering a resolution that may cause severe liability to the directors. Wayne, a board member, disagrees with the decision. Unless he clearly registers his dissent, he may be liable.

Accepted Answer

According to the legal concept of "dissenting directors," if a board member objects to a decision but does not clearly register their dissent, they may be held liable for the consequences of that decision. Therefore, Wayne should clearly register his dissent to protect himself from potential liability.

Question 8

The primary corporate objective is to make money for the shareholders.

Accepted Answer

This is a widely accepted and commonly practiced objective of corporations, as they are primarily responsible to their shareholders for generating profitable returns on their investments.

Question 9

The traditional objective of the business corporation has been to:

Accepted Answer

The traditional objective of a business corporation is to enhance corporate profits and shareholder gain. This means that the corporation primarily focuses on generating profits for its shareholders by maximizing its revenue, minimizing its expenses, and increasing the value of its stock. This objective is based on the premise that a corporation exists to serve its shareholders, who have invested their money in the business in the hope of earning a return on their investment. While many corporations do strive to act in a socially and morally responsible manner and serve their community, their primary goal is to generate profits.

Question 10

Under the MBCA, only directors of a corporation are entitled to mandatory indemnification rights.

Accepted Answer

The MBCA allows for mandatory indemnification of both directors and officers of a corporation.

Question 11

Under the doctrine of respondeat superior, a corporation is liable for an employee's tort that is reasonably connected to the authorized conduct of the employee.

Accepted Answer

Respondeat superior is a legal doctrine that holds an employer or principal responsible for the torts committed by their employees or agents within the course and scope of their employment or agency. This means that if an employee commits a tort while performing their job duties, the employer can be held liable for the employee's actions. The connection between the employee's conduct and their job duties must be reasonably related in order for respondeat superior to apply.

Question 12

The Model Business Corporation Act has made the inclusion of a purpose clause in the articles compulsory.

Accepted Answer

The Model Business Corporation Act does not require a purpose clause in the articles of incorporation; it allows corporations to be formed for any lawful business purpose.

Question 13

The traditional view is that a corporation is not liable for a crime because criminal guilt requires presence of intent.

Accepted Answer

The traditional view is that a corporation is not liable for a crime because criminal guilt requires the presence of intent, and a corporation is not capable of forming intent as it is a legal entity and not a natural person. However, this view has been challenged in recent years, and some jurisdictions hold corporations criminally liable for certain offenses committed by their employees or agents.

Question 14

Straight voting permits a single holder of more than 30 percent of the shares of a corporation to dominate the management of the corporation.

Accepted Answer

Straight voting permits a holder of more than 50 percent of the shares of a corporation to dominate the corporation by electing a board of directors that will manage the corporation as he wants it to be managed.

Question 15

Which of the following corporate actions is included in a corporation's board of directors' authority?

Accepted Answer

The power to adopt and amend bylaws is included in a corporation's board of directors' authority.

Question 16

Alvin and Billy own 70 percent of Beta Corporation. Claude owns 30 percent of Beta Corporation. Alvin and Billy consistently vote and act in ways that benefit them but harm Claude. Claude may claim oppression as a minority shareholder.

Accepted Answer

Minority shareholders have the right to claim oppression if the majority shareholders consistently act in a way that unfairly prejudices their interests. In this case, if Alvin and Billy consistently vote and act in a way that harms Claude, he may have a valid claim for oppression.

Question 17

Unless the articles of incorporation state otherwise, directors cannot be removed with or without cause.

Accepted Answer

Unless the articles of incorporation state otherwise, directors can generally be removed with or without cause by the shareholders.

Question 18

A director has a right to inspect corporate books and records that contain corporate information essential to the director's performance of her duties.

Accepted Answer

According to the law, directors have a right to inspect corporate books and records that are necessary to fulfill their duties as a director. This right is granted to them so that they may make informed decisions and properly oversee the management of the corporation.

Question 19

The ultra vires doctrine states that:

Accepted Answer

The ultra vires doctrine states that any action of a corporation beyond its stated powers is void. This means that if a corporation takes an action that goes beyond what it is authorized to do in its articles of incorporation, that action may be invalidated by a court.

Question 20

The total fairness test permits a shareholder to require the corporation to purchase his shares at a fair price.

Accepted Answer

A right of appraisal permits a shareholder to require the corporation to purchase his shares at a fair price.

Quiz 43: Management of Corporations