Question 1

An) _____ is a situation where directors of two different companies serve jointly on the board of a third company.

Accepted Answer

An indirect interlock is a situation where directors of two different companies serve jointly on the board of a third company. Sequestration course, preemptive action, derivative action, and nonderivative action are not related to this situation.

Question 2

_____ is a shareholder voting method that permits the holder to distribute his or her total votes in any manner that he or she chooses-all for one candidate or several shares for different candidates.

Accepted Answer

Cumulative voting allows shareholders to distribute their total votes in any manner they choose, giving them more flexibility in voting for candidates. With cumulative voting, shareholders can allocate all of their votes to one candidate, or distribute them across multiple candidates. This method is often used in situations where minority shareholders want to ensure representation on the board of directors.

Question 3

In the context of corporate powers and management, what is indemnification?

Accepted Answer

Indemnification is a method of protecting directors and officers whereby the corporation agrees to pay legal expenses incurred by the directors or officers. This is done to incentivize individuals to join and remain on the board of directors, as they are often exposed to legal liability for their actions on behalf of the company. By providing indemnification, the company is essentially promising to support its directors and officers in the face of legal challenges, which can minimize personal risk and increase confidence in the corporate leadership.

Question 4

The _____ is a presumption given by the courts to the corporate directors that their actions were informed and done with good faith and with an honest belief that the actions were in the best interests of the corporation.

Accepted Answer

The business judgment rule is a presumption given by the courts to the corporate directors that their actions were informed and done with good faith and with an honest belief that the actions were in the best interests of the corporation. The other choices are not relevant to the question or are incorrect.

Question 5

An) _____ is a situation where one person sits on the board of directors of two different companies.

Accepted Answer

A direct interlock occurs when one person sits on the board of directors of two different companies.

Question 6

What is a preemptive right?

Accepted Answer

A preemptive right is the right of shareholders to protect dilution of their percentage of share ownership, which means they have the right to maintain their proportional ownership by purchasing new shares of the company before they are offered to outside investors.

Question 7

Outside directors are also known as _____ directors.

Accepted Answer

Outside directors are typically not involved in the day-to-day operations of a company and do not hold executive positions, hence they are referred to as nonexecutive directors.

Question 8

_____ is a method whereby a shareholder elects a representative, commonly another individual or a written document, through which the shareholder casts his vote at the annual meeting.

Accepted Answer

The method whereby a shareholder elects a representative, commonly another individual or a written document, through which the shareholder casts his vote at the annual meeting is called a proxy. The other options (embezzlement, larceny, battery, estoppel) are unrelated to this concept.

Question 9

What is a derivative action?

Accepted Answer

A derivative action is a lawsuit brought by a shareholder in the name of the corporation against directors, officers, or third parties when the directors refuse to act. The shareholder is seeking to enforce the corporation's rights because the directors have failed to do so.

Question 10

Differentiate a voting agreement from a voting trust.

Accepted Answer

The answer of Differentiate a voting agreement from a voting...

Question 11

G&C Inc. has outstanding 10,000 shares with par value of ten dollars and that Tiffany owns 5000. At the annual meeting, the shareholders decide to issue an additional 10,000 shares at par and to sell them to Sharon. Tiffany vehemently objects in order to protect dilution of her percentage of share ownership. Tiffany is exercising her _____ in this scenario.

Accepted Answer

Tiffany is exercising her preemptive rights, which give existing shareholders the right to maintain their proportional ownership of the company by purchasing new shares before they are offered to external parties. By objecting to the issuance of new shares, Tiffany is trying to prevent her ownership percentage from being diluted.

Question 12

State the four main responsibilities of the director of a company.

Accepted Answer

The answer of State the four main responsibilities of the...

Quiz 27: Corporate Powers and Management