Q&A Hero

Q: When a corporation is dissolved voluntarily, the corporation must file articles of dissolution with the state.

Q: Only a board of directors can initiate the dissolution of a corporation.

Q: If a corporation is dissolved, its assets can be liquidated without further notice to a party with a claim against the firm.

Q: Dissolution is the legal death of the artificial "person" of a corporation.

Q: To resist a takeover, a target company can make a self-tender.

Q: A target corporation's attempted takeover of an acquiring corporation is referred to as the poison pill defense.

Q: Winding up is the process by which corporate assets are liquidated.

Q: A target corporation is a corporation being acquired through the purchase of a substantial number of the voting shares of its stock.

Q: No state has passed an antitakeover statute.

Q: Federal securities laws strictly control the terms under which most tender offers are made.

Q: Generally, an acquiring corporation deals directly with a target company's shareholders in seeking to purchase the shares they hold.

Q: A sale of all of a corporation's assets requires the approval of its shareholders.

Q: When a sale of assets amounts to what in fact is a consolidation, the acquiring corporation inherits the selling corporation's liabilities.

Q: Appraisal rights normally extend to regular mergers and consolidations.

Q: An appraisal right is available only when a state statute specifically provides for it.

Q: A corporation that is acquiring all or substantially all of the assets of another corporation by direct purchase must obtain shareholder approval for the purchase.

Q: A short-form merger is the legal combination of two or more corporations online.

Q: The board of directors of each corporation involved must approve a merger.

Q: State law establishes the specific procedures for mergers.

Q: In a short-form merger, neither corporation's shareholders need to approve the merger.

Q: In most cases, a corporation's common stockholders need to approve a merger.

Q: The officers and other employees of each corporation involved must approve a share exchange plan.

Q: In a share exchange, some or all of the shares of one corporation are exchanged for the shares of another, and both corporations cease to exist.

Q: A merger involves the legal combination of one or more corporations.

Q: In a consolidation, the consolidating corporations become subsidiaries of the new corporation.

Q: A merger and a consolidation are not two legally distinct proceedings.

Q: In a share exchange, one corporation will issue shares or pay some fair consideration to the shareholders of another corporation that will then cease to exist.

Q: In a consolidation, two or more corporations combine in such a way that each corporation ceases to exist.

Q: Whether a combination is merger or a consolidation, the rights and liabilities of the shareholders are the same.

Q: Philip is elected as a director for Fatless Foods, Inc. His term of office will most probably last for a. three months. b. six months. c. nine months. d. one year.

Q: Lexy and Mort act as the incorporators for NuGame Corporation. After the first board of directors is chosen, subsequent directors are elected by a vote of NuGame's a. board of directors. b. employees. c. officers. d. shareholders.

Q: Rhea is a director of Spex Corporation, which makes and sells sunglasses and other eyewear. As a Spex director, Rhea sits on the board, which a. governs Spex. b. is governed by the Spex incorporators. c. is governed by the Spex officers. d. is governed by the Spex shareholders.

Q: A majority shareholder does not owe a fiduciary duty to minority shareholders under any circumstances.

Q: In certain instances of fraud, a court may "pierce the corporate veil" to hold the shareholders individually liable.

Q: If a corporation fails, the shareholders are all individually liable.

Q: If the corporate directors fail to sue in the corporate name to redress a wrong suffered by the corporation, then the shareholders can do nothing.

Q: Persons whose names appear in a corporation's stock book are ordinarily entitled to notice of shareholders' meetings and the right to vote.

Q: Every shareholder is entitled to inspect corporate records for a proper purpose.

Q: Dividends can be paid only in stock in other corporations.

Q: The ownership right to stock exists independently of a stock certificate.

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: The articles of corporation cannot exclude or limit shareholders' voting rights.

Q: Shareholders' meetings must occur at least annually.

Q: Shareholders do not need to approve fundamental changes affecting the corporation before the changes can be effected.

Q: Shareholders own a corporation.

Q: A director does not need to disclose any conflict of interest before voting on a proposal.

Q: Directors can use corporate funds and confidential information for personal advantage as long as they disclose that they are doing so.

Q: Corporate directors and officers are insurers of business success.

Q: If a director fails to use a reasonable amount of supervision over corporate officers and employees, then the director can be held liable for negligence.

Q: A board of directors can delegate some functions to corporate officers.

Q: A director is a fiduciary of a corporation.

Q: Corporate officers can usually be removed by the board of directors without cause.

Q: A corporate officer cannot act as an agent of the corporation.

Q: Quorum requirements are the same in all jurisdictions.

Q: The minimum number of members of a body of officials that must be present before business can validly be transacted is known as a quorum.

Q: Hiring corporate officers and determining their compensation are decisions that would be made by a corporation's board of directors.

Q: Pursuing a new product line is a decision that would be made by shareholders.

Q: After the first board, the directors are chosen by the corporate officers.

Q: A director can be elected by the other members of the board.

Q: In most states, a director cannot be removed from a corporate board for a breach of duty.

Q: A director usually serves on a corporation's board for a life term.

Q: Some states permit a corporate board to have fewer than three directors.

Q: The initial board of directors of a corporation is normally elected at the first annual shareholders' meeting by a majority vote of the shareholders.

Q: A corporation's officers and other executive employees are hired by corporate shareholders.

Q: A board of directors govern every corporation.

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: 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: Cole is a shareholder of Donut Holes, Inc. Cole will be deemed to have a fiduciary duty to Donut Holes and its minority shareholders if he has a. a restriction on the transferability of his shares. b. a right of first refusal. c. a sufficient number of shares to exercise de facto control. d. voting rights.

Q: Larry is a shareholder for Custom Colors, Inc. If Custom Colors fails, Larry will a. be liable for Custom Colors' debts. b. not be liable for Custom Colors' debts. c. be able to reclaim his initial investment in Custom Colors. d. be able to reclaim his initial investment in Custom Colors plus damages.

Q: Ray is a shareholder of Small Biz Company (SBC). When the directors fail to undertake an action to redress a wrong suffered by SBC, Ray files a suit on the firm's behalf. Any damages recovered by Ray's suit will go to a. Ray. b. SBC. c. SBC's directors. d. the state in which SBC is incorporated.

Q: Ray is a shareholder of Small Biz Company (SBC). When the directors fail to undertake an action to redress a wrong suffered by SBC, Ray files a suit on the firm's behalf. Ray's suit is a shareholder's a. business-judgment rule suit. b. derivative suit. c. duty-of-care suit. d. duty-of-loyalty 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: Generally, Sports Fitness Club Company and other corporations can pay dividends if a. the corporation can continue to pay its debts as they come due. b. the amount of the dividends exceed the corporation's net worth. c. the shareholders approve. d. the corporation's assets equal its total liabilities.

Q: 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 a. board of directors. b. incorporators. c. officers. d. shareholders.

Q: Lovey is a shareholder of Matchless Corporation with preemptive rights. With these rights, Lovey can a. buy a prorated share of a new issue of stock before other buyers. b. choose to have Matchless act exclusively in a certain area. c. "preempt" managerial decisions that affect shareholders. d. sell a prorated share of a new issue of stock before other sellers.

Q: Because stock is intangible personal property, a stockholder's ownership of the stock a. exists independently of the stock certificate itself. b. cannot exist without a tangible stock certificate. c. cannot exist without the original stock certificate. d. cannot be transferred to another person.