Question 1

Ida,Jerzy,and Kit are the directors of Liberty Convenience Stores,Inc.Liberty has nine officers and forty-six shareholders.Dividends are ordered by the firm's

Accepted Answer

Dividends are ordered by the firm's board of directors, who are responsible for making decisions and setting policies for the company. It is not the responsibility of the incorporators, officers, or shareholders to determine the distribution of dividends.

Question 2

Genna is a director of Fab Stuff Corporation.Without informing Fab,Genna starts up Evertrendy,Inc. ,to compete with Fab.Genna is li?able for breach of

Accepted Answer

Genna has breached the duty of loyalty she owes to Fab Stuff Corporation by starting up a competing business without informing them. The duty of loyalty requires that directors act in the best interest of their corporation and avoid any conflicts of interest. Genna's actions are a clear violation of this duty.

Question 3

Sophie and Tiny incorporate their beverage-container business as U-Twist Products,Inc.The first board of directors may be appointed by the firm's

Accepted Answer

The incorporators are responsible for setting up the corporation and can appoint the first board of directors.

Question 4

Naomi and Ogden are shareholders of MediCare Residences,Inc.As shareholders,they must approve

Accepted Answer

Conducting a merger is a major corporate decision that typically requires shareholder approval, as it can have significant implications for the company and its shareholders. Deciding to pursue new business opportunities or negotiating a contract between management and labor are typically within the purview of company management, while terminating a managerial employee may require board approval but not necessarily shareholder approval.

Question 5

Whit is a director of Vids Corporation.With respect to policymaking decisions necessary to the management of corporate affairs,Whit and the other Vids directors have responsibility for

Accepted Answer

Directors of a corporation are responsible for making policy decisions necessary for the management of corporate affairs. This responsibility includes all decisions, not just those referred to them by shareholders or officers. Therefore, choice A is the best answer.

Question 6

Orin is a shareholder of Pinkwater Corporation.In some states,Orin might in?cur personal liability for Pinkwater obligations if he

Accepted Answer

The answer of Orin is a shareholder of Pinkwater Corporation.In...

Question 7

Viola is a director of Water Pure Corporation.With respect to Water Pure,Viola's most important right is the right of

Accepted Answer

As a director, Viola's most important right is the right of participation, which allows her to be involved in the decision-making process and governance of the corporation.

Question 8

Ogilvie,a director of Pitstop Service Station Corporation,does not attend a board meet?ing for three years.During that time,Noreen,Pitstop's president,makes improper loans that cost the company $100,000.Ogilvie is most likely

Accepted Answer

Ogilvie, as a director, has a legal duty to attend board meetings and participate in the decision-making process. His failure to do so for three years shows negligence or mismanagement, which could result in liability if the company suffers losses due to his absence. Noreen's improper loans, resulting in significant financial losses, could be attributed to Ogilvie's negligence or mismanagement as a director.

Question 9

Darla is a shareholder of Candy Confection Corporation.The right to inspect corporate books and records is

Accepted Answer

Shareholders generally have the right to inspect corporate books and records, but this right may be subject to some restrictions, such as time and place limitations. Therefore, Darla has the right to inspect the books and records, but with some restrictions. The fact that she is not a director does not affect her right to inspect the records.

Question 10

Rocco is a director of Spa Lids & Tubs,Inc.Under the standard of due care owed by di?rectors of a corporation,Rocco's decisions must be

Accepted Answer

Under the standard of due care, directors are expected to make informed and reasonable decisions. This means that their decisions should be based on a reasonable investigation of the relevant facts and circumstances, and should be in the best interests of the corporation and its shareholders. Directors are not expected to be perfect or infallible, but they are expected to act in good faith and with the care that an ordinarily prudent person would exercise in similar circumstances. Therefore, option C is the correct choice.

Question 11

Cara and Dru are officers of EZ Trucking Corporation.As cor?porate officers,the rights of Cara and Dru are

Accepted Answer

The rights of corporate officers like Cara and Dru are primarily determined by their employment contracts, which outline their roles, responsibilities, and compensation.

Question 12

Zero Sum Games Corporation has forty-three shareholders.The minimum number that must be present at a meeting for a shareholders' vote is

Accepted Answer

A quorum is the minimum number of shareholders required to be present at a meeting in order for official business to be conducted. The exact number needed for a quorum may be stated in the corporation's bylaws, but generally it is a majority of the total number of shareholders. In this case, we do not know the exact number needed for a quorum, but it is certainly not all of the shareholders, which is not practical or necessary for most corporations. Similarly, a proxy is not relevant to determining the minimum number needed for a shareholders' vote. Three shareholders may not be enough to constitute a quorum, depending on the total number of shareholders.

Question 13

Sylvia is an officer of Triad Hotel Company.As an officer,with respect to the corporation,Sylvia is

Accepted Answer

As an officer of the corporation, Sylvia has a fiduciary duty to act in the best interest of Triad Hotel Company and its shareholders.

Question 14

Bret and Courtney form Delite Day Care,Inc.Ultimate responsibility for pol?icy decisions necessary to the management of corporate affairs rests with Delite's

Accepted Answer

According to the standard corporate structure, the ultimate responsibility for policy decisions necessary to the management of corporate affairs rests with the board of directors. The incorporators are typically only involved in the initial creation of the corporation, and the officers are responsible for the day-to-day operations but still report to the board of directors. Shareholders have a say in major decisions, but do not have ultimate responsibility for policy decisions.

Question 15

Flite-Craft Corporation makes and sells aircraft parts.In most states,the minimum number of directors that must be present before Flite-Craft's board could transact its business is

Accepted Answer

In most states, a majority of the number of directors authorized in the articles or bylaws is required to transact business. This ensures that important decisions are made with the input and agreement of a significant portion of the board.

Question 16

Raul is chairman of the board of Swif-Vac Corporation.Pinky,a con?sumer,is injured while using a Swif-Vac product.Pinky sues Swif-Vac,and Raul individu?ally.Swif-Vac may pay Raul's legal fees under

Accepted Answer

The director's right to indemnification allows a company to pay for the legal fees and damages incurred by a director or officer who is named in a lawsuit. As Raul is the chairman of the board of Swif-Vac Corporation, he may be covered under this provision.

Question 17

Niche Stores,Inc. ,must hold a shareholders' meeting

Accepted Answer

According to most jurisdictions' legal requirements, corporations are required to hold an annual shareholders' meeting to discuss important corporate matters and elect the board of directors. Therefore, it is best for Niche Stores, Inc. to hold its shareholders' meeting annually.

Question 18

Odell,Prince,and Quinn are shareholders of Rite Corporation.Before a shareholders' meeting,they agree in writing to vote their shares together in a certain manner.Usually,such agreements are held to be

Accepted Answer

Shareholder agreements to vote their shares together, also known as voting trusts, are generally valid and enforceable as long as they meet certain requirements, such as being in writing and not violating any laws or the corporation's articles of incorporation or bylaws.

Question 19

Roth and Starr are shareholders of Triumph Hotel Corporation.Triumph's directors fail to declare a dividend.Roth and Starr could succeed in asking a court to order the directors to meet and declare a dividend

Accepted Answer

Shareholders have limited rights to force a corporation to declare a dividend, but one of the ways they can succeed is by showing that the directors' decision to withhold a dividend is an abuse of their discretion. If the directors have acted reasonably and in good faith, a court is unlikely to interfere with their decision. The availability of earnings or cash reserves is not necessarily the determining factor.

Question 20

Denise,Ervin,and Flem occupy the positions of directors on the board of Gallery Corporation.As directors,they may not

Accepted Answer

As directors of Gallery Corporation, Denise, Ervin, and Flem have a duty of loyalty to the company and therefore cannot support businesses that directly compete with Gallery. However, they have the authority to authorize major corporate policy decisions, decide to issue stock and bonds, and declare dividends, as well as select and remove corporate officers.

Quiz 40: A: Corporate Directors,officers, Shareholders