Q&A Hero

Q: Atria Corporation wishes to dissolve. How can it do so?

Q: What are the various ways through which a corporation can be dissolved? The various ways through which a corporation can be dissolved are: Voluntary dissolution: This kind of dissolution happens through the action of a corporation's directors and shareholders. Voluntary dissolution becomes effective once the corporation submits the articles of dissolution with the secretary of state and the articles of dissolution are filed by the secretary of state. Administrative dissolution: It requires that the secretary of state give written notice to the corporation of the grounds for dissolution. If, within 60 days, the corporation has not corrected the default or demonstrated that the default does not exist, the secretary dissolves the corporation by signing a certificate of dissolution. Judicial dissolution: The shareholders, secretary of state, or the creditors of a corporation may ask a court to order the involuntary dissolution of a corporation.

Q: Under Rule 10b-5 of the Securities Act of 1934, a plaintiff has the burden of proof to establish that the defendant acted: A. with negligence. B. with scienter. C. with malice. D. in concert with others.

Q: According to the Model Nonprofit Corporation Act (MNCA), which of the following nonprofit corporations can abolish or limit the right of a member to inspect corporate records? A. A tennis club B. A church C. A golf country club D. A cooperative grocery store

Q: After dissolution of a corporation and liquidation of its assets, proceeds of the sale of assets is distributed in the following order: A. preferred shareholders, common shareholders, creditors. B. creditors, preferred shareholders, common shareholders. C. common shareholders, creditors, preferred shareholders. D. preferred shareholders, creditors, common shareholders.

Q: According to the Statutory Close Corporation Supplement to the MBCA who does a shareholder have a fiduciary responsibility to? A. To all the other shareholders of the corporations B. To the Secretary of State C. To individual citizens in the state the corporation is incorporated D. To the CEO of the corporation

Q: Bev Stratton owns 100 shares of Maxom Company, which are traded on the New York Stock Exchange. Maxom's board of directors has approved a merger of Maxom with Vert Company. Bev believes the merger is economically unjustified and intends to seek her dissenters' right. What must Bev do to enforce her dissenters' right?

Q: Gnossis Company has 15,000 outstanding common shares and a total equity of $250,000. Gnossis has an additional 30,000 common shares that are authorized, but not issued or outstanding. Gnossis has $225,000 in excess liquidity that it does not need to pay its currently maturing obligations. Gnossis has paid all currently due dividends to preferred shareholders. What is the maximum share dividend that Gnossis may make to its common shareholders?

Q: Amanda is a shareholder of Abec Corporation. She received an illegal dividend from Abec. Must she return that dividend to Abec? A. Yes, but only if she was aware that the dividend was illegal. B. Yes, regardless of whether she was aware that the dividend was illegal. C. No, once a dividend has been distributed, it may not be recalled. D. No, a shareholder has no liability regarding distributions from the corporation.

Q: Some courts have held that certain shareholders are fiduciaries of each other. These are shareholders of: A. close corporations. B. open corporations. C. publicly traded corporations. D. nonprofit corporations.

Q: What is the term for when controlling shareholders pay themselves high salaries while not employing or not paying out dividends to minority shareholders? A. Quid pro quo B. Squeeze-out C. Collateral D. Liquidity

Q: Tom, Brady, and Alex are members of a golf country club (a nonprofit corporation). Tom holds 5 percent of voting power, Brady holds 8 percent of voting power, and Alex holds 1 percent of voting power in the club. They would like to call a special meeting of the club to discuss renovation of some of its facilities. Who amongst them can call such a meeting? A. Brady and Alex B. Alex and Tom C. Alex, Tom, and Brady D. Tom and Brady

Q: If a shareholder is successful in a derivative suit then the shareholder is entitled to have its attorney fees paid by? A. The Corporation B. The Secretary of State C. The Incorporator D. The Arbitrator

Q: AceCom Corporation issues dividends to its 30 shareholders. Each shareholder is well aware that the corporation will be insolvent and unable to pay its creditors following the dividend distribution. Efone is one such creditor. Under the Model Business Corporation Act (MBCA), primary liability to Efone: A. does not lie with the shareholders because they can never be held liable to creditors of the corporation. B. lies with the shareholders because they received the distribution from the corporation with knowledge of the impending insolvency. C. lies with the directors because they authorized the unlawful distribution of dividends. D. does not lie with the directors because they placed the interests of the shareholders above everything else.

Q: Provided that most of the directors of a corporation are independent, if shareholders bring a derivative action against the directors, the burden of proving that bringing the action is in the best interest of the corporation lies on the: A. company secretary. B. secretary of state. C. board of directors. D. shareholders.

Q: When a majority of the directors of a corporation are not independent and the shareholders bring a derivative action against the directors, the burden of proving that the Zapata test has been met lies on the: A. company secretary. B. secretary of state. C. corporation. D. shareholders.

Q: Shareholders may bring a suit on behalf of the corporation against the board of directors. Such a suit is generally called a(n) _____ suit. A. class action B. derivative action C. shareholder action D. injunction

Q: Henry brought a lawsuit against NewAge Inc., claiming that the CEO of NewAge had misappropriated funds last year, as a result of which NewAge ended the year in the red. However, Henry was not a shareholder of NewAge last year and his only motive of buying NewAge shares was to bring this lawsuit in order to gain out-of-court settlements for himself. This kind of lawsuit is known as a: A. double derivative suit. B. derivative action. C. strike suit. D. class action.

Q: Shareholders of a corporation brought a class action against the president, alleging that they missed out on dividends and an increase in the value of their shares because the president misappropriated funds of the corporation. This suit was successful and the president paid $10 million in damages. This money will go to: A. the shareholders who brought the class action. B. the treasury of the corporation. C. the state, as a fine. D. the federal government, as a fine.

Q: For which of the following would a shareholder derivative action be appropriate? A. The shareholder alleges that the board of directors has imprudently managed the corporation. B. The shareholder has been refused a request that his/her accountant be permitted to look at the corporate accounting records. C. The shareholder alleges that the corporation has violated the shareholder's preemptive right. D. The shareholder alleges that the corporation has been paying dividends to a previous shareholder from whom the shareholder purchased his/her shares.

Q: A corporation's decision to issue a dividend, and the size of that dividend, is made by the: A. shareholders. B. board of directors. C. officers of the corporation. D. creditors of the corporation.

Q: Klingon Corporation has only one class of shares, its common shares. Klingon has assets of $200,000 and liabilities of $160,000. It has $40,000 of excess liquidity that it does not need to pay currently maturing obligations. What is the maximum property dividend that Klingon may pay to its common shareholders? A. $60,000 B. $10,000 C. $40,000 D. $30,000

Q: A _____ dividend may be revoked by the board of directors after it has been declared. A. share B. cash C. property D. scrip

Q: A share split within the same class of shares generally: A. increases the net value of the shares following the split. B. decreases the net value of the shares following the split. C. has no effect on the net value of the shares following the split. D. reduces the capital surplus and increases the number of shares authorized.

Q: Repurchase of _____ shares by a corporation is involuntary on the shareholder's part. A. split B. fractional C. outstanding D. preferred

Q: MacTech Corporation is a subsidiary of Clickon Corporation, which owns 90 percent shares of MacTech. The management of Clickon is not happy with the way MacTech is being managed. They believe that MacTech is losing out a huge chunk of potential business to rivals due to mismanagement. As a solution, the board of directors of Clickon approves a merger between Clickon and MacTech and they send a copy of the merger plan to MacTech's shareholders. This form of merger is called a(n): A. semi-merger. B. short-form merger. C. incomplete merger. D. half-merger.

Q: A dissenting shareholder seeking payment of the fair value of his/her shares (dissenters' rights) must have the right to vote on the action to which he/she objects. In which of the following cases does a shareholder have dissenters' rights despite his/her lack of voting power? A. Short-form mergers B. Significant amendments of the articles of incorporation C. Share exchanges D. Sales of all the assets

Q: Under the Model Business Corporation Act (MBCA), shareholders have a qualified but not absolute right to inspect: A. the articles of incorporation and bylaws. B. an alphabetical listing of the shareholders entitled to notice of a meeting. C. the number of shares owned by the shareholders. D. shareholder minutes more than three years old.

Q: The Model Business Corporation Act (MBCA) provides that the _____ right of a shareholder does not exist except to the extent provided by the articles of incorporation. A. preemptive B. information C. dissenters' D. liquidation

Q: A shareholder's preemptive right allows him to: A. increase his proportionate voting power. B. maintain his dissenters' right. C. increase the value of his shares. D. maintain his proportionate share of dividends.

Q: Under the Model Business Corporation Act (MBCA), a corporation that retains at least _____ percent of its business activity and either its income or revenue has not disposed of substantially all its assets. A. 10 B. 25 C. 50 D. 45

Q: The LexCon Corporation takes over the Zebra Corporation. By applying which principle will LexCon become the owner of all the shares of Zebra Corporation? A. Merger B. Acquisition C. Share trading D. Share exchange

Q: Which of the following is true about mergers? A. The shareholders of the surviving corporation must approve the merger. B. The MBCA does not recognize mergers done solely for the profit motive. C. A merger may be invalidated if it freezes out minority shareholders. D. Shareholders of the acquired corporation must be paid a premium on their shares.

Q: The typical dissolution of a corporation requires approval of the: A. board of directors. B. creditors of the company. C. merger company. D. shareholders.

Q: When the board of directors of a parent corporation approves its merger with its subsidiary and sends a copy of the merger plan to the subsidiary's shareholders, such a merger is called a(n): A. semi-merger. B. half-merger. C. incomplete merger. D. short-form merger.

Q: A voting trust: A. must be available for inspection by shareholders at the corporation's offices. B. need not be made public and may be kept secret from other shareholders. C. is limited in duration to 20 years, but may be extended for another 10-year period. D. will be specifically enforced by the courts if a shareholder refuses to vote as agreed.

Q: Catz Corporation has two majority shareholders and five minority shareholders. The five minority shareholders created a voting trust in November 2011 to control Catz through the concentration of shareholder voting power in the voting trustees. Under the Model Business Corporation Act (MBCA), this voting trust will be valid till: A. September 2014. B. October 2021. C. September 2026. D. October 2016.

Q: Normally, how long is the ordinary proxy valid for voting under the Model Business Corporation Act (MBCA)? A. 9 months B. 1 year C. 6 months D. 11 months

Q: Which of the following corporate decisions requires an approval vote of the shareholders? A. Merger B. Share trading C. Purchasing land for office D. Joint venture

Q: The Model Business Corporation Act (MBCA) does not recognize: A. mergers. B. acquisitions. C. consolidations. D. joint ventures.

Q: The two most common classes of shareholders are: A. Government and common B. Common and preferred C. Preferred and government D. Watered down and common

Q: Tracy is attending the annual general meeting of shareholders of Acor Corporation. Seven directors are going to be elected from twenty nominees during the meeting through cumulative voting. One thousand shares will be voted. What is the minimum number of shares that Tracy needs to have to be able to elect three directors? A. 374 B. 375 C. 376 D. 377

Q: Camm Corp. has 10,000,000 common shares outstanding. Its four directors are elected by cumulative voting. To elect one director, a shareholder must own at least: A. 5,000,001 shares. B. 2,000,001 shares. C. 2,500,001 shares. D. 5,000,000 shares.

Q: Which of the following is correct concerning the election of directors? A. Straight voting is the cleanest way to allocate equity ownership of the corporation among shareholders. B. In cumulative voting, each share has one vote for each new director to be elected. C. Cumulative voting can prevent harmful coalitions in close corporations. D. Under straight voting, the voting power of minority shareholders is increased.

Q: What is the term for a shareholders' right to offer resolutions, to speak for and against ideas at a shareholders meeting? A. The right of full participation B. The right to proxy C. The right to profit D. The right to incorporate

Q: The formula for determining the minimum number of shares required to elect a desired number of directors under cumulative voting is _____ where X = number of shares needed to elect the desired number of directors, S = total number of shares voting at the shareholders' meeting, R = number of director representatives desired, and D = total number of directors to be elected at the meeting. A. X - 1 = (S R)/(D + 1) B. X = (S R)/(D - 1) C. X - 1 = (S R)/(D - 1) D. X = (S R)/(D + 1)

Q: Karen is attending the annual general meeting of shareholders of Express Corporation. Six directors are going to be elected from seventeen nominees during the meeting through straight voting. Karen owns 372 shares of Express. What is the maximum number of nominees Karen can vote for? A. 1 B. 6 C. 10 D. 17

Q: _____ voting allows a majority shareholder to elect the entire board of directors. A. Preference B. Cumulative C. Ranked D. Straight

Q: Under the Model Nonprofit Corporation Act (MNCA), members have an absolute right to inspect and copy a list of the members.

Q: A person who purports to act on behalf of a terminated corporation has the liability of a person acting for a corporation prior to its incorporation.

Q: If a shareholder receives a dividend with knowledge of it being an illegal distribution then the shareholder is liable to the corporation for the amount of the dividend.

Q: Under the Model Business Corporation Act (MBCA), notice of a(n) _____ meeting of shareholders must list the purpose of the meeting. A. special B. quarterly C. general D. annual

Q: Shareholders who hold at least _____ percent of the shares entitled to vote at the meeting may call a special meeting. A. 10 B. 50 C. 30 D. 25

Q: Corporation law authorizes a shareholder to bring a class action on behalf of the corporation and for its benefit.

Q: Prior to bringing a derivate action a shareholder must first demand that the board of directors bring the suit and they must decline.

Q: A shareholder must repay an illegal distribution if he/she had knowledge of the illegality when he/she received the distribution.

Q: The per share value of the shares of a minority shareholder of a corporation is greater than the per share value of the shares of a majority shareholder.

Q: Under the Model Nonprofit Corporation Act (MNCA), a quorum of 10 percent of the votes entitled to be cast on a matter is required for members to proceed further in a meeting.

Q: Under the Model Business Corporation Act (MBCA), dissenters' rights apply only if the shareholders' shares are not traded on a national securities exchange.

Q: A corporation may not declare and distribute dividends unless it has excess solvency.

Q: A proxy is appointed by the corporation to discuss corporate matters with the public.

Q: The first corporation is liable for its debt, even after a merger.

Q: Only those shareholders who sign a shareholder voting agreement are bound by it.

Q: A corporation's sale of substantially all of the assets of the business must be approved by its shareholders.

Q: Minutes of the meetings are usually kept by the board of directors.

Q: Shareholders have a right of full participation in board of directors' meetings.

Q: Corporations must give notice of the annual meeting and special meetings to shareholders.

Q: Unless established differently in the Articles of Incorporation, a quorum for a shareholders meeting is a simple majority.

Q: A corporation may have several classes of common shares with unequal voting rights.

Q: Nordex Corporation is in the business of manufacturing furniture. Because the industry has matured, Nordex is considering adding a new product line, manufacturing plastic products such as casings for telephones and videotapes. No director will have a personal interest in the decision to expand into those lines. To avoid liability for making a poor decision, what standard of conduct should Nordex's board of directors comply with? Briefly explain what the board must do to comply with that standard.

Q: The board of directors of Lorantan Corporation has 12 members. Lorantan's bylaws provide that a majority of seven or more directors is necessary to form a quorum. At a meeting of the board of directors, a resolution is adopted authorizing the sale of a substantial portion of the corporate assets to Pam Park, a director. Pam is one of the eight directors present. What must the directors do for Pam to avoid liability for buying the assets from the corporation?

Q: Ed is an officer and director in Baldwin Properties Inc. Ed is primarily responsible for finding and purchasing property for development. While on a business trip financed by Baldwin, Ed found property for sale at 65 percent of the fair market value. Ed wanted to purchase the property for himself. May he do so? Discuss.

Q: Tim and Julia are the majority shareholders of Eduventures, Inc. Together they own 800 of the company's shares. The remaining 200 shares are held by passive shareholders. The profits of Eduventures dwindled to just 8 percent last year. Furthermore, Tim and Julia realized that as much as 3 percent of profits are being spent in complying with the rules of public ownership. Suggest a way for them to "go private" without forming a new corporation.

Q: Shareholders are owners as well as managers of a corporation.

Q: Tony is employed as a truck driver for Soprano Corporation (SC). While making a delivery for SC, Tony negligently ran over a pedestrian. Who is liable for this accident? A. Tony only. B. Tony and SC, because of strict liability. C. Tony and SC, because of vicarious liability. D. Neither Tony nor SC, because this was an accident, not an intentional injury.

Q: Which of the following rules is applicable to determine the liability of a corporation for any torts committed by its agents? A. Principle-agent relationship B. Joint and severally liable C. Strict liability D. Vicarious liability

Q: Under the Model Business Corporations Act, a director who is sued in connection with his/her duties to the corporation may be indemnified by the corporation when: A. the director acted in good faith and his conduct was lawful. B. the director failed to act in the best interests of the corporation. C. the director's actions were grossly negligent but not intentional. D. the director received unqualified financial benefits.

Q: Alan, Bob, Charles, David, and Edward are the only shareholders of Harbin Corporation. It is a close corporation. Each owns 20 percent of the shares. There are five director positions and each serves as a director. One day the other four find out that Edward has committed a serious crime. They decide that they wish to expel him from the corporation. What action may the others take? Discuss. Edward is a shareholder. The only way he may be divested of his shares is if there is language in the share certificate or shareholder agreement that permits the corporation to buy out Edward under such circumstances. However, the MBCA permits directors to be removed with or without cause. Provided at least three of the shareholders agreed, there are enough votes to remove Edward from the board of directors, thus effectively taking away any ability to manage or direct the organization.

Q: Gath Meat Packing Company is a meat processing business. To reduce costs and increase profits, the president and CEO of Gath orders Gath's employees to violate federal criminal meat processing laws. The United States Department of Justice prosecutes Gath for criminal violations of the meat processing law. Has Gath committed criminal violations? A. Yes, because the president and CEO, a high-level administrator of Gath, authorized the commissions of the crimes. B. Yes, because a corporation is always liable for all the crimes committed by its agents. C. No, because the board of directors did not authorize the president and CEO or the other employees to violate federal law. D. No, because a corporation is not liable for most crimes committed by its agents.

Q: Tom is the sole director and largest shareholder of Newage Corporation, a close corporation. Jim and Janice, the two other shareholders of Newage Corporation, allege that though Tom is paying himself a large salary, no dividend has been paid in the last three years. Tom also refuses to hire them as employees of the corporation. Jim and Janice are complaining of: A. oppression. B. novation. C. right of appraisal. D. maltreatment.