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Q:
A stock warrant is a distribution of corporate profits or income.
Q:
Any corporate funds are legally available for paying dividends.
Q:
A corporation cannot refuse a shareholder's request to inspect corporate records.
Q:
Shareholders have a right to inspect corporate books and records.
Q:
A preemptive right is a preference over other shareholders to cast the determining vote on fundamental changes affecting the corporation.
Q:
Shareholder voting agreements are usually held to be invalid and unenforceable.
Q:
Cumulative voting refers to the accumulation of proposals presented annually for a shareholders' vote.
Q:
For action to be taken during a shareholders' meeting, a quorum must be present.
Q:
The article of corporation cannot exclude shareholders' voting rights.
Q:
To vote their shares, shareholders must attend a meeting and vote in person.
Q:
Shareholders' meetings do not have to occur on any regular basis.
Q:
Corporate officers and directors owe no duty to individual shareholders.
Q:
Shareholders have no responsibility for the day-to-day management of a corporation.
Q:
Shareholders own a corporation.
Q:
A director may not sit on the board of more than one corporation at a time.
Q:
Corporate directors and officers are insurers of business success.
Q:
Officers are required to exercise a reasonable amount of supervision over the corporate directors.
Q:
A corporate officer is expected to be informed on corporate matters.
Q:
A director is a fiduciary of a corporation.
Q:
A board of directors can delegate some functions to corporate officers.
Q:
All directors must be present before a board can transact business.
Q:
Directors are rarely compensated, but when they are, they can set their own compensation.
Q:
A board of directors cannot conduct business outside a formal meeting.
Q:
In many corporations, the directors are also the chief corporate officers.
Q:
A director cannot be elected by the other members of the board.
Q:
A director usually serves on a corporation's board for a life term.
Q:
Incorporators appoint a corporation's first board of directors.
Q:
In most states, a director cannot be removed from a corporate board without cause.
Q:
Some states permit a corporate board to have fewer than three directors.
Q:
An individual director does not act as an agent to bind the corporation.
Q:
Corporate shareholders are the ultimate authority in every corporation.
Q:
Guy is Hot Java Company's majority shareholder. Guy decides to sell his Hot Java stock. The sale will be an effective transfer of the control of the company. Does Guy owe a duty to Hot Java or its minority shareholders in this situation?
Q:
Mitch is a director and officer of Numero Uno, Inc. Mitch makes a marketing decision that results in a dramatic decrease in profits for Numero Uno and its shareholders. The shareholders accuse Mitch of breaching his fiduciary duty to the corporation. What is Mitch's best defense against this accusation? Later, the Numero Uno board considers a resolution for the firm to compete with One-of-a-Kind Corporation. Mitch is a director and shareholder of One-of-a-Kind. What is Mitch's responsibility in this situation?
Q:
Clark is a shareholder of Bedrest Mattress Company. Clark will be deemed to have a fiduciary duty to Bedrest and its minority shareholders if he has
A.preferred stock.
B.a right of first refusal.
C.a sufficient number of shares to exercise de facto control.
D.watered stock.
Q:
Orin is a shareholder of Pinkwater Corporation. In some states, Orin might incur personal liability for unpaid Pinkwater debts if he
A.accepts a dividend knowing that it was paid from retained earnings.
B.buys stock for less than its fair-market value.
C.fails to fulfill his fiduciary duty to the majority shareholders.
D.sells his shares.
Q:
Fact Pattern 25-1
Ruben is a shareholder of Speed Bikes Company (SBC). When the directors fail to undertake an action to redress a wrong suffered by SBC, Ruben files a suit on the firm's behalf.
Refer to Fact Pattern 25-1. Any damages recovered by Ruben's suit will normally go to
A.Ruben.
B.SBC.
C.SBC's directors.
D.the state in which SBC is incorporated.
Q:
Fact Pattern 25-1
Ruben is a shareholder of Speed Bikes Company (SBC). When the directors fail to undertake an action to redress a wrong suffered by SBC, Ruben files a suit on the firm's behalf.
Refer to Fact Pattern 25-1. Ruben's suit is a shareholder's
A.indemnification suit.
B.derivative suit.
C.proxy suit.
D.preemptive suit.
Q:
Kelly transfers shares of stock that she owns in Lone Starz Company to Max. A shareholders' meeting takes place before Max's ownership is entered in Lone Starz's stock book. A vote at the meeting can be cast by
A.Kelly and Max.
B.Kelly only.
C.Max only.
D.neither Kelly nor Max.
Q:
Bea is a shareholder of Candy Confections Corporation. The right to inspect corporate books and records is
A.held by Bea only if she is a director.
B.held by Bea, without restrictions.
C.held by Bea, with some restrictions.
D.not held by Bea.
Q:
Natalie is a shareholder of Off-Road Vehicle Company. As a shareholder, Natalie does not have
A.a right to compensation.
B.dividend rights.
C.inspection rights.
D.preemptive rights.
Q:
Marbled Meats Corporation (MMC) proposes to combine with Natural Farms, Inc., and asks MMC shareholders to vote on the proposal. Omar, an MMC shareholder, votes against it, but is outvoted by the other shareholders. Is there an action that Omar can take to avoid being forced to go along with the transaction? If so, what can he do? After the combination, Natural Farms ceases to exist. MMC is the surviving firm. What type of combination is this?
Q:
Incredible eSales Corporation is a new Internet business. How can Incredible eSales obtain capital to finance its operations?
Q:
The term for the legal death of the artificial "person" of Skytop Services, Inc., or any other corporation, is
A.surviving corporation.
B.dissolution.
C.takeover.
D.winding up.
Q:
Salt Corporation wants to acquire or merge with Pepper Corporation. The board and the shareholders of Pepper are resisting. Salt should
A.file a plan of merger with the secretary of state.
B.file an article of merger with Pepper.
C.make a tender offer to the shareholders of Pepper.
D.make a tender offer to the shareholders of Salt.
Q:
Ewa is a shareholder of Farm Fresh Foods, Inc., whose management is considering a tender offer by Growers Market Corporation. Ewa elects appraisal rights. This affects
A.Farm Fresh's consideration of the offer.
B.Ewa's shareholder status.
C.Growers Market's offer.
D.nothing.
Q:
Nadia is a shareholder of Open Air Productions, Inc. Nadia could normally exercise appraisal rights if Open Air participated in
A.a share exchange.
B.a dissolution.
C.a takeover.
D.a winding up.
Q:
Vision Optical Company and Wide Eyes Open, Inc. decide to combine. Xavier, a Wide Eyes shareholder, is dissatisfied with the price that he will receive for his stock. In the absence of fraud or other illegal conduct, Xavier's exclusive remedy is to
A.exercise an appraisal right.
B.file a suit to delay the process.
C.refuse to agree to the deal, which cannot then proceed.
D.urge other shareholders to insist on a higher price.
Q:
Mall Stores Corporation owns 95 percent of the shares of Niche Retail Corporation. Mall Stores combines with Niche Retail, but only Mall Stores continues to exist. This transaction was
A.a consolidation.
B.a share exchange.
C.a short-form merger.
D.a termination.
Q:
Realty Credit Company and Security Mortgage Corporation plan to consolidate. Most likely, the articles of consolidation will be filed with
A.the county recording office.
B.the local realtors' association.
C.the state's secretary of state.
D.the federal Bureau of Land Management.
Q:
Vacation Adventures, Inc., and Wild River Tour Company plan to merge. Most likely, the articles of merger will be filed with
A.the county recording office.
B.the local chamber of commerce.
C.the state's secretary of state.
D.the national travel agents' association.
Q:
Through a certain transaction, Corporate Properties, Inc., acquires all of the shares of Downtown Realty Corporation for some of Corporate Properties's shares. Both Corporate Properties and Downtown Realty continue to exist. This is
A.a consolidation.
B.a share exchange.
C.a short-form merger.
D.a hold-up.
Q:
Like other corporations, Biopesticide Corporation can extend its operations through
A.a share exchange.
B.a dissolution.
C.a termination.
D.a winding up.
Q:
Realty Credit Company and Second Mortgage Corporation plan to consolidate. Most likely, the articles of consolidation will be filed with
A.the county recording office.
B.the Securities and Exchange Commission.
C.the state's secretary of state.
D.the U.S. Department of Justice.
Q:
Office Company and Keen Company wish to combine all assets, stock, and personnel into a new firm to be called OK Corporation. This is
A.a consolidation.
B.a merger.
C.a share exchange.
D.a takeover.
Q:
Penn files a suit against Roadway Sign Company While the suit is pending, Roadway consolidates with Synchronized Signal Corporation to form Traffic Management, Inc. Now, liability in the suit, if any, rests with
A.Traffic.
B.Roadway and Synchronized.
C.Penn.
D.no one.
Q:
A merger between Grain Mills Corporation and Farm2Fork Distribution Inc. can be expressed as Grain Mills + Farm2Fork =
A.Farm2Fork.
B.Harvest Dining Corporation.
C.Harvest Dining Corporation + EZ Brewing Company.
D.EZ Brewing Company.
Q:
Corn Candy Corporation (CCC) has a right of action against Bio Farms, Inc. CCC merges with Agri Sweeteners, Inc., with Agri absorbing CCC. After the merger, CCC's right of action against Bio Farms can be exercised by
A.CCC.
B.Agri Sweeteners.
C.Bio Farms.
D.no one.
Q:
Ridgeway Sand & Gravel Corporation and Quick-Set Paving Company combine so that all that remains after the papers have been signed is Ridgeway. This is
A.a consolidation.
B.a merger.
C.a purchase of assets.
D.a share exchange.
Q:
Jen files a suit against Kopper Kettle Company. While the suit is pending, Kopper Kettle merges with Luminous Pans, Inc., with Luminous absorbing Kopper Kettle. Now, liability in the suit, if any, rests with
A.Jen.
B.Kopper Kettle.
C.Luminous.
D.no one.
Q:
Mari buys 500 shares of common stock in National Livestock Traders, Inc. As a shareholder of record, Mari owns a proportionate interest in terms of
A.control, earnings, and net assets.
B.control only.
C.earnings and net assets only.
D.neither control nor earnings and net assets.
Q:
Omega Corporation makes and markets digital timers, clocks, and related products. Like other business corporations, Omega issues securities to
A.increase its market share.
B.obtain financing.
C.reduce its production costs.
D.safeguard its facilities.
Q:
Rapid Pest Control itself out to others as being a corporation but makes no attempt to incorporate. Ponce signs a contract with Rapid Pest Control that is not performed. Ponce files a suit against the firm. The court will likely hold that Rapid Pest Control is
A.a corporation by estoppel.
B.an alien corporation.
C.an S corporation.
D.ultra vires.
Q:
Wild & Scenic River Tours, Inc., is a corporation. Wild & Scenic has the implied power to
A.issue stocks and bonds.
B.execute contracts and negotiable instruments.
C.buy and sell (or lease) property.
D.perform all acts reasonably appropriate and necessary to accomplish its corporate purposes.
Q:
Superior Home Products, Inc., is a corporation. Superior's implied powers enable it to
A.amend the articles of incorporation.
B.bring a derivative suit.
C.declare dividends.
D.perform all acts reasonably appropriate and necessary to accomplish its corporate purposes.
Q:
Eager Beaver Corporation fails to hold a meeting to adopt bylaws. Under this circumstance, Eager Beaver will still be treated as a legal corporation in those states that recognize the common law doctrine of
A.corporation by estoppel.
B.de facto corporation.
C.de jure corporation.
D.ultra vires.
Q:
Caffeine Caf, Inc., files its articles of incorporation with the appropriate government agency. Least likely to appear in the articles is the name of
A.each of the corporation's incorporators.
B.each of the corporation's shareholders.
C.the corporation.
D.the corporation's initial registered agent.
Q:
Sullivan and Taylor want to form a corporation to provide catering services. The first step in the incorporation procedure is to
A.file the articles of incorporation.
B.hold the first organizational meeting.
C.secure a corporate name.
D.select a state in which to incorporate.
Q:
The abbreviation "P.A." in the name "Painless Dental, P.A." means that this organization is
A.a private association.
B.a professional association.
C.a public association.
D.a publicly administered corporation.
Q:
Fact Pattern 24-2
Bertram, Claudia, and Dynah form Eat Local, Inc., a closely held corporation, and agree to restrict the transfer of its stock to anyone else. The agreement provides that if one of the shareholders dies, his or her shares of stock in Eat Local will be divided to maintain the proportionate control of the survivors.
Refer to Fact Pattern 24-2. Later, Bertram dies. With respect to the stock transfer restriction agreement, Bertram's death most likely
A.triggers the division provision.
B.invalidates the entire agreement.
C.voids the division provision only.
D.violates the entire agreement.
Q:
Fact Pattern 24-2
Bertram, Claudia, and Dynah form Eat Local, Inc., a closely held corporation, and agree to restrict the transfer of its stock to anyone else. The agreement provides that if one of the shareholders dies, his or her shares of stock in Eat Local will be divided to maintain the proportionate control of the survivors.
Refer to Fact Pattern 24-2. A reasonable purpose for a stock transfer restriction in a closely held corporation, like the agreement between Bertram, Claudia, and Dynah, is
A.a desire to limit the participation of outsiders in the firm.
B.a goal to restrain insiders from taking advantage of their position.
C.an attempt to restrain the free flow of commerce among investors.
D.a wish to restrict the transfer of the shareholders' physical assets.
Q:
Gelato Ice, Inc., is incorporated in the state of New Jersey and is doing business in the state of New York. In New York, Gelato is properly referred to as
A.a domestic corporation.
B.a foreign corporation.
C.an alien corporation.
D.a de jure corporation.
Q:
Raw Resources Corporation authorizes Stefan, its employee, to oversee its mining operation. In the course of this employment, Stefan commits a tort. Liability for this tort most likely rests with
A.neither Raw Resources nor Stefan.
B.Raw Resources and Stefan.
C.Raw Resources but not Stefan.
D.Stefan but not Raw Resources.
Q:
Fact Pattern 24-1
Mountaintop Clearview Corporation authorizes Niles, its employee, to oversee its timber operation. In the course of his employment, Niles disposes of the operation's waste illegally. Orson is a Mountaintop shareholder.
Refer to Fact Pattern 24-1. Liability for Niles's act most likely rests with Orson to
A.no extent.
B.the proportionate extent of the number of shares Orson owns.
C.the amount of Orson's investment in the firm.
D.the full extent.
Q:
Fact Pattern 24-1
Mountaintop Clearview Corporation authorizes Niles, its employee, to oversee its timber operation. In the course of his employment, Niles disposes of the operation's waste illegally. Orson is a Mountaintop shareholder.
Refer to Fact Pattern 24-1. With respect to Mountaintop and Niles, liability for this crime most likely rests with
A.neither Mountaintop nor Niles.
B.Mountaintop and Niles.
C.Mountaintop only.
D.Niles only.
Q:
Ivy and Justin want to form and do business as Kayak Adventures Corporation. A corporation can be owned by
A.natural persons only.
B.artificial persons only.
C.artificial or natural persons.
D.neither "artificial" nor "natural" persons.
Q:
Inez and Jason are the shareholders and directors of Kleen Kustodial Corporation. Lily and Moe are Kleen's officers. As in other corporations, the responsibility for the overall management of Kleen rests with
A.the board of directors.
B.the officers.
C.the owners.
D.the shareholders.
Q:
Felicity and Gideon want to form and do business as Home Healthcare Corporation. A corporation is
A.a natural being.
B.a tangible thing.
C.an artificial person.
D.a visible radiance.
Q:
In some circumstances, a shareholder may petition a court to have the corporation dissolved.
Q:
The state can bring an action to dissolve a corporation that has failed to pay its annual taxes.
Q:
When a corporation is dissolved voluntarily, the corporation must file articles of dissolution with the state.