Question 1

Once a sale or breakup of the corporation is inevitable,directors have a fiduciary duty to prevent a freeze out of the shareholders.

Accepted Answer

A) True 
 B)False  False

Question 2

Which of the following corporate members do not have a fiduciary duty to the corporation?

Accepted Answer

A) Officers. 
B) Directors. 
C) Shareholders. 
D) Controlling shareholders. 
A) Officers. 
B) Directors. 
C) Shareholders. 
D) Controlling shareholders. C

Question 3

What is a poison pill? What factors favor keeping a poison pill in place?

Accepted Answer

A poison pill is a plan that would make any takeover not approved by the directors prohibitively expensive.Factors in favor of keeping a poison pill in place include (1)a tender offer that is only slightly above the market price of the stock; (2)a tender offer for less than all of the shares; (3)an active attempt by the board to solicit other offers; (4)a conscious effort by the board to allow its outside directors,deemed more disinterested,to make the decisions in this area; and (5)the fact that the tender offer is only in its early stages.

Question 4

In evaluating a buyout proposal,the directors should consider material nonprice provisions of the proposed agreement.

Accepted Answer

A) True 
 B)False

Question 5

The courts have held that officers and directors that usurp a corporate opportunity must disgorge the illegal profits to the

Accepted Answer

A) individual shareholders. 
B) courts. 
C) majority shareholder. 
D) corporation. 
A) individual shareholders. 
B) courts. 
C) majority shareholder. 
D) corporation.

Question 6

A controlling shareholder has a duty not to transfer the power of management to a purchaser that he knows or has reason to believe will use that power to the detriment of the corporation.

Accepted Answer

A) True 
 B)False

Question 7

Once a sale or breakup of the corporation is inevitable,directors have a fiduciary duty to obtain the best available price for the shareholders.

Accepted Answer

A) True 
 B)False

Question 8

The duty of candor refers to

Accepted Answer

A) the duty directors are under when providing information to shareholders. 
B) the duty shareholders are under when discussing matters among themselves. 
C) the duty officers and directors are under when deciding whether to oppose a takeover bid. 
D) the duty shareholders have to directors when informing directors of concerns. 
A) the duty directors are under when providing information to shareholders. 
B) the duty shareholders are under when discussing matters among themselves. 
C) the duty officers and directors are under when deciding whether to oppose a takeover bid. 
D) the duty shareholders have to directors when informing directors of concerns.

Question 9

What is greenmail? What is a standstill agreement? When,if ever,is the process of greenmail protected by the business judgment rule?

Accepted Answer

Greenmail is a purchase of a dissident s

Question 10

Which of the following is true regarding breakup fees?

Accepted Answer

A) They are sometimes characterized as liquidated damages. 
B) The Securities and Exchange Commission prohibits the payment of breakup fees. 
C) Breakup fees are typically 20 to 25 percent of the value of the deal. 
D) They are sometimes characterized as liquidated damages.,and breakup fees are typically 20 to 25 percent of the value of the deal. 
A) They are sometimes characterized as liquidated damages. 
B) The Securities and Exchange Commission prohibits the payment of breakup fees. 
C) Breakup fees are typically 20 to 25 percent of the value of the deal. 
D) They are sometimes characterized as liquidated damages.,and breakup fees are typically 20 to 25 percent of the value of the deal.

Question 11

The ________ requires that officers and directors not take personal advantage of a desirable business investment that rightfully belongs to the corporation.

Accepted Answer

A) right of first refusal 
B) corporate opportunity doctrine 
C) line of business test 
D) expectancy test 
A) right of first refusal 
B) corporate opportunity doctrine 
C) line of business test 
D) expectancy test

Question 12

A ________ is an agreement in a proposed takeover that allows the board of directors to negotiate with other bidders or to terminate a merger agreement.

Accepted Answer

A) termination clause 
B) fiduciary out 
C) revolving door 
D) no talk provision 
A) termination clause 
B) fiduciary out 
C) revolving door 
D) no talk provision

Question 13

Fact pattern 21-1
Tonya is the president of Growth Corporation.Growth is looking for land on which to build a new facility.Tonya locates suitable land,but purchases it for herself with plans to sell it at a profit at a later date.Rick,the majority shareholder of Growth hears about Tonya's purchase and complains to her about it.She tells Rick that she viewed and purchased the land on her own time and that she did not breach any duties owed to the corporation.Rick tells her that she should reconsider and that he plans to discuss the matter with the rest of the board.
-Refer to fact pattern 21-1.Which of the following is the most widely used test for determining whether an opportunity belongs to a corporation?

Accepted Answer

A) The line-of-business test 
B) The time-spent test 
C) The corporate-interest test 
D) The officer-corporate equilibrium test 
A) The line-of-business test 
B) The time-spent test 
C) The corporate-interest test 
D) The officer-corporate equilibrium test

Question 14

Define and explain the purpose of the business judgment rule.Under what circumstances would the rule apply? When would the protection not apply? Discuss fully.

Accepted Answer

Under the business judgment rule,as long

Question 15

Breakup fees are liquidated damages for a terminated proxy fight.

Accepted Answer

A) True 
 B)False

Question 16

A poison pill is a defensive measure that would make any takeover not approved by the directors prohibitively expensive.

Accepted Answer

A) True 
 B)False

Question 17

A shareholder derivative suit is a lawsuit by

Accepted Answer

A) shareholders on behalf of the corporation. 
B) the shareholders directly. 
C) the majority shareholder. 
D) the corporation. 
A) shareholders on behalf of the corporation. 
B) the shareholders directly. 
C) the majority shareholder. 
D) the corporation.

Question 18

The duty of care includes the duty to make informed decisions.

Accepted Answer

A) True 
 B)False

Question 19

The action of an officer or director in taking personal advantage of a business opportunity that rightfully belongs to the corporation is known as ________.

Accepted Answer

A) ownership of another corporation 
B) payment of hushmail 
C) payment of greenmail 
D) seizing of a corporate opportunity 
A) ownership of another corporation 
B) payment of hushmail 
C) payment of greenmail 
D) seizing of a corporate opportunity

Question 20

In a ________,someone wishing to replace the board with his or her own candidates must acquire a sufficient number of shareholder votes to do so.

Accepted Answer

A) shareholder contest 
B) proxy contest 
C) director conflict 
D) governance conflict 
A) shareholder contest 
B) proxy contest 
C) director conflict 
D) governance conflict

Exam 21: Directors, Officers, and Controlling Shareholders

Once a sale or breakup of the corporation is inevitable,directors have a fiduciary duty to prevent a freeze out of the shareholders.

Which of the following corporate members do not have a fiduciary duty to the corporation?

What is a poison pill? What factors favor keeping a poison pill in place?

In evaluating a buyout proposal,the directors should consider material nonprice provisions of the proposed agreement.

The courts have held that officers and directors that usurp a corporate opportunity must disgorge the illegal profits to the

A controlling shareholder has a duty not to transfer the power of management to a purchaser that he knows or has reason to believe will use that power to the detriment of the corporation.

Once a sale or breakup of the corporation is inevitable,directors have a fiduciary duty to obtain the best available price for the shareholders.

The duty of candor refers to

What is greenmail? What is a standstill agreement? When,if ever,is the process of greenmail protected by the business judgment rule?

Which of the following is true regarding breakup fees?

The ________ requires that officers and directors not take personal advantage of a desirable business investment that rightfully belongs to the corporation.

A ________ is an agreement in a proposed takeover that allows the board of directors to negotiate with other bidders or to terminate a merger agreement.

Define and explain the purpose of the business judgment rule.Under what circumstances would the rule apply? When would the protection not apply? Discuss fully.

Breakup fees are liquidated damages for a terminated proxy fight.

A poison pill is a defensive measure that would make any takeover not approved by the directors prohibitively expensive.

A shareholder derivative suit is a lawsuit by

The duty of care includes the duty to make informed decisions.

The action of an officer or director in taking personal advantage of a business opportunity that rightfully belongs to the corporation is known as ________.

In a ________,someone wishing to replace the board with his or her own candidates must acquire a sufficient number of shareholder votes to do so.

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product liability

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civil rights and employment discrimination

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