Question 1

Which of the following is true of preemptive rights?

Accepted Answer

A)  They allow existing shareholders to sell their shares back to the corporation. 
B)  They may be exercised by shareholders only for a given period of time. 
C)  They help in diluting a shareholder's interest in the company. 
D)  They enable shareholders to procure new shares issued by the corporation. 
A)  They allow existing shareholders to sell their shares back to the corporation. 
B)  They may be exercised by shareholders only for a given period of time. 
C)  They help in diluting a shareholder's interest in the company. 
D)  They enable shareholders to procure new shares issued by the corporation. D

Question 2

Explain cumulative voting and its differences from noncumulative voting.

Accepted Answer

Cumulative voting is a system in which a shareholder can accumulate all of his or her votes and vote them all for one candidate or split them among several candidates.Noncumulative or straight voting is a system in which each shareholder votes the number of shares he or she owns on candidates for each of the positions open.Noncumulative voting favors candidates who possess the majority of the votes while cumulative voting gives a minority shareholder a better opportunity to elect someone to the board of directors.Since it involves weighted voting,cumulative voting systems tend to normalize the role that the number of shares plays in a voting scenario.

Question 3

Denizence Informatics has expanded its board to incorporate more members.Emma,the chief technology officer at Denizence,has been appointed to serve on the board.Which of the following roles has Emma adopted in the above scenario?

Accepted Answer

A)  ombudsman 
B)  outside director 
C)  inside director 
D)  shareholder 
A)  ombudsman 
B)  outside director 
C)  inside director 
D)  shareholder C

Question 4

The right of first refusal gives existing shareholders the option of subscribing to new shares being issued in proportion to their current ownership interests.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is true of a derivative action?

Accepted Answer

A)  A settlement of a derivative action requires court approval. 
B)  A shareholder's successful derivative action entails the damages to be awarded solely to the shareholder. 
C)  A derivative action is brought by the corporation against an offending party. 
D)  A board member who causes harm to the corporation is legally protected from a derivation action. 
A)  A settlement of a derivative action requires court approval. 
B)  A shareholder's successful derivative action entails the damages to be awarded solely to the shareholder. 
C)  A derivative action is brought by the corporation against an offending party. 
D)  A board member who causes harm to the corporation is legally protected from a derivation action.

Question 6

The duty of care is a fiduciary duty.

Accepted Answer

A) True 
 B)False

Question 7

The corporate officers are elected by the board of directors at such time and by such manner as prescribed in the corporation's bylaws.

Accepted Answer

A) True 
 B)False

Question 8

Anne,a shareholder of an insurance company,is unable to attend the shareholders' meeting held by the board of directors of the company.In order to make her vote count,she appoints Dexter,a friend,to attend the meeting and cast a vote in her name.This is an example of a ________.

Accepted Answer

A)  liability 
B)  proxy 
C)  dividend 
D)  scienter 
A)  liability 
B)  proxy 
C)  dividend 
D)  scienter

Question 9

Describe the role of a corporate officer and its relation to the board of directors and the corporation.

Accepted Answer

A corporate officer is an employee of a

Question 10

The ________ is responsible for formulating policy decisions that affect the management and operation of the corporation.

Accepted Answer

A)  ombudsman 
B)  board of directors 
C)  shareholder 
D)  corporate officer 
A)  ombudsman 
B)  board of directors 
C)  shareholder 
D)  corporate officer

Question 11

Describe the business judgment rule and analyze its importance with an example.

Accepted Answer

The business judgment rule states that d

Question 12

A shareholder's authorization of another person to vote the shareholder's shares at the shareholders' meetings in the event of the shareholder's absence is called a ________.

Accepted Answer

A)  liability 
B)  dividend 
C)  proxy 
D)  quorum 
A)  liability 
B)  dividend 
C)  proxy 
D)  quorum

Question 13

Analyze derivative lawsuits and their purpose.

Accepted Answer

A derivative lawsuit or derivative actio

Question 14

Duty of loyalty requires directors to subordinate their personal interests to those of the corporation and its shareholders.

Accepted Answer

A) True 
 B)False

Question 15

________ are employees of a corporation who are appointed by the board of a corporation to manage the day-to-day operations of the corporation.

Accepted Answer

A)  Ombudsmen 
B)  Corporate officers 
C)  Outside directors 
D)  Non-executive directors 
A)  Ombudsmen 
B)  Corporate officers 
C)  Outside directors 
D)  Non-executive directors

Question 16

Officers are liable on an unauthorized contract if the corporation does not ratify it.

Accepted Answer

A) True 
 B)False

Question 17

The Inkilwas Corporation has 30,000 shares outstanding.A shareholders' meeting is duly called to amend the articles of incorporation.According to the RMBCA,what is the minimum outstanding shares that must be represented in this case to have a quorum?

Accepted Answer

A)  12,001 
B)  18,501 
C)  15,001 
D)  17,501 
A)  12,001 
B)  18,501 
C)  15,001 
D)  17,501

Question 18

The RMBCA establishes a majority of ________ as a quorum to hold a meeting of the shareholders.

Accepted Answer

A)  outstanding shares 
B)  treasury stock 
C)  treasury shares 
D)  reacquired stock 
A)  outstanding shares 
B)  treasury stock 
C)  treasury shares 
D)  reacquired stock

Question 19

Each director in a board of directors has only one vote.

Accepted Answer

A) True 
 B)False

Question 20

The ________ advocates that a greater than majority of shares constitutes a quorum of the vote of the shareholders.

Accepted Answer

A)  supramajority requirement 
B)  simple majority rule 
C)  business judgment rule 
D)  alter ego doctrine 
A)  supramajority requirement 
B)  simple majority rule 
C)  business judgment rule 
D)  alter ego doctrine

Exam 28: Corporate Governance and the Sarbanes-Oxley Act

Which of the following is true of preemptive rights?

Explain cumulative voting and its differences from noncumulative voting.

Denizence Informatics has expanded its board to incorporate more members.Emma,the chief technology officer at Denizence,has been appointed to serve on the board.Which of the following roles has Emma adopted in the above scenario?

The right of first refusal gives existing shareholders the option of subscribing to new shares being issued in proportion to their current ownership interests.

Which of the following is true of a derivative action?

The duty of care is a fiduciary duty.

The corporate officers are elected by the board of directors at such time and by such manner as prescribed in the corporation's bylaws.

Anne,a shareholder of an insurance company,is unable to attend the shareholders' meeting held by the board of directors of the company.In order to make her vote count,she appoints Dexter,a friend,to attend the meeting and cast a vote in her name.This is an example of a ________.

Describe the role of a corporate officer and its relation to the board of directors and the corporation.

The ________ is responsible for formulating policy decisions that affect the management and operation of the corporation.

Describe the business judgment rule and analyze its importance with an example.

A shareholder's authorization of another person to vote the shareholder's shares at the shareholders' meetings in the event of the shareholder's absence is called a ________.

Analyze derivative lawsuits and their purpose.

Duty of loyalty requires directors to subordinate their personal interests to those of the corporation and its shareholders.

________ are employees of a corporation who are appointed by the board of a corporation to manage the day-to-day operations of the corporation.

Officers are liable on an unauthorized contract if the corporation does not ratify it.

The Inkilwas Corporation has 30,000 shares outstanding.A shareholders' meeting is duly called to amend the articles of incorporation.According to the RMBCA,what is the minimum outstanding shares that must be represented in this case to have a quorum?

The RMBCA establishes a majority of ________ as a quorum to hold a meeting of the shareholders.

Each director in a board of directors has only one vote.

The ________ advocates that a greater than majority of shares constitutes a quorum of the vote of the shareholders.

Legal Heritage and the Digital Age

Constitutional Law for Business and E-commerce

Courts and Jurisdiction

Judicial Alternative Administrative and E-Dispute Resolution

Intentional Torts and Negligence

Criminal Law and Cyber Crimes

Intellectual Property and Cyber Piracy

Ethics and Social Responsibility of Business

Nature of Traditional and E-Contracts

Agreement and Consideration

Capacity and Legality

Genuineness of Assent and Statute of Frauds

Third-Party Rights and Discharge

Breach of Contract and Remedies

Digital Law and E-Commerce

Formation of Sales and Lease Contracts

Title to Goods and Risk of Loss

Remedies for Breach of Sales and Lease Contracts

Warranties and Product Liability

Creation and Transfer of Negotiable Instruments

Holder in Due Course and Liability of Parties

Banking System and Electronic Financial Transactions

Credit, Real Property Financing, and Secured Transactions

Bankruptcy and Reorganization

Agency law

Small Business, Entrepreneurship, and Partnerships

Corporate Formation and Financing

Corporate Acquisitions and Multinational Corporations

Limited Liability Companies and Limited Liability Partnerships

Franchise and Special Forms of Business

Investor Protection, E-Securities, and Wall Street Reform

Antitrust Law and Unfair Trade Practices

Consumer Safety and Environmental Protection

Labor, Worker Protection, and Immigration Laws

Equal Opportunity in Employment

Personal Property, Bailment, and Insurance

Real Property, Landlord-Tenant Law, and Land Use Regulation

Family Law, Wills, and Trusts

Accountants' Duties and Liability

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