Question 1

A director will be criminally liable where he

Accepted Answer

A)  acts as corporate agent to the determent of the corporation. 
B)  uses corporate information to make personal profit. 
C)  directly competes with the corporation in his own business. 
D)  intercepts a corporate opportunity. 
E)  gets involved with insider trading. 
A)  acts as corporate agent to the determent of the corporation. 
B)  uses corporate information to make personal profit. 
C)  directly competes with the corporation in his own business. 
D)  intercepts a corporate opportunity. 
E)  gets involved with insider trading. E

Question 2

Which of the following is not one of the essential powers of the directors of a corporation?

Accepted Answer

A)  to declare dividends 
B)  to adopt by- laws 
C)  to issue shares 
D)  to act as mediators in management and employer disputes 
E)  to call meetings of shareholders 
A)  to declare dividends 
B)  to adopt by- laws 
C)  to issue shares 
D)  to act as mediators in management and employer disputes 
E)  to call meetings of shareholders D

Question 3

The first directors of a corporation hold office until the first meeting of the board of directors.

Accepted Answer

A) True 
 B)False  False

Question 4

What is a derivative action?

Accepted Answer

An order of the court allowing a minorit

Question 5

The decision- making function of the corporation is undertaken by the directors of the corporation.

Accepted Answer

A) True 
 B)False

Question 6

What duties do directors owe to shareholders of the corporation?

Accepted Answer

Directors owe no general duty to the sha

Question 7

Directors owe a duty to act with a view to the best interests of:

Accepted Answer

A)  the creditors 
B)  the employees 
C)  the corporation 
D)  the individual shareholders 
E)  all of the above 
A)  the creditors 
B)  the employees 
C)  the corporation 
D)  the individual shareholders 
E)  all of the above

Question 8

What is the appraisal remedy?

Accepted Answer

The appraisal is the right of

Question 9

There is no legal distinction between the business and affairs of the corporation.

Accepted Answer

A) True 
 B)False

Question 10

Explain how a director must protect him or herself when he or she contracts with the corporation of which he is a director?

Accepted Answer

A director must disclose his interest in

Question 11

Which of the following is NOT a statutory safeguard when considering disclosure?

Accepted Answer

A)  appointment of inspector 
B)  record of insider trading 
C)  pre- emptive rights 
D)  the financial statement 
E)  documents of record 
A)  appointment of inspector 
B)  record of insider trading 
C)  pre- emptive rights 
D)  the financial statement 
E)  documents of record

Question 12

Mary, Martha, Marge, and Alice, incorporate a private corporation for the purpose of wholesaling sports equipment. Each owns an equal number of shares. Their incorporating documents neither specify what business the corporation is in nor restrict the type of business the corporation can operate. Martha, Mary, and Marge are the three directors and officers of the corporation, while Alice is being frozen out of the company's
decision- making. She has never been elected as a director, never had a position in the management, and has not had any of her resolutions passed at the annual shareholder's meeting. Also, the corporation seemed to have abandoned its original purpose and gone into a different business- one that doesn't interest Alice. Explain to Alice the "oppression remedy" and its advantages over two other kinds of remedy.

Accepted Answer

The oppression remedy is being widely ad

Question 13

Which of the following is TRUE regarding the appointment and removal of directors of a corporation?

Accepted Answer

A)  Casual vacancies on the board are normally filled by a special election of the shareholders. 
B)  All directors must hold at least some ownership in the corporation. 
C)  A director's term of office is usually more than three years. 
D)  It takes at least a two- thirds vote to remove a director from the board. 
E)  Cumulative voting is an attempt to achieve proportional representation on the board of directors. 
A)  Casual vacancies on the board are normally filled by a special election of the shareholders. 
B)  All directors must hold at least some ownership in the corporation. 
C)  A director's term of office is usually more than three years. 
D)  It takes at least a two- thirds vote to remove a director from the board. 
E)  Cumulative voting is an attempt to achieve proportional representation on the board of directors.

Question 14

What does it mean when a court lifts the veil of incorporation?

Accepted Answer

Corporations have separate existence or

Question 15

Regarding financial rights, shareholders have a right to

Accepted Answer

A)  dividends paid in the order of preferences assigned to classes of shareholders- starting with the common shareholders. 
B)  dividends when the corporation makes a profit. 
C)  some discrimination in the payment of dividends. 
D)  receive dividends when declared by the corporation. 
E)  capital appreciation as a result of retained earnings. 
A)  dividends paid in the order of preferences assigned to classes of shareholders- starting with the common shareholders. 
B)  dividends when the corporation makes a profit. 
C)  some discrimination in the payment of dividends. 
D)  receive dividends when declared by the corporation. 
E)  capital appreciation as a result of retained earnings.

Question 16

The only real power shareholders have in a corporation is to

Accepted Answer

A)  control stock splits and dividends. 
B)  fill a sudden vacancy on the board of directors. 
C)  elect the board of directors. 
D)  manage the ownership of the company. 
E)  give the directors guidelines in the investment of capital. 
A)  control stock splits and dividends. 
B)  fill a sudden vacancy on the board of directors. 
C)  elect the board of directors. 
D)  manage the ownership of the company. 
E)  give the directors guidelines in the investment of capital.

Question 17

Sometimes almost all the directors of a company have interests in a contract. They should

Accepted Answer

A)  gather the remaining independent directors and form a quorum. 
B)  vote as a corporate committee of the whole. 
C)  present the contract to a general meeting of shareholders for their ratification after full disclosure has been made. 
D)  present the contract to the management for a decision. 
E)  vote as a total board of directors. 
A)  gather the remaining independent directors and form a quorum. 
B)  vote as a corporate committee of the whole. 
C)  present the contract to a general meeting of shareholders for their ratification after full disclosure has been made. 
D)  present the contract to the management for a decision. 
E)  vote as a total board of directors.

Question 18

If a corporation is profitable, directors must declare a dividend to holders of common shares according to their proportionate shareholding.

Accepted Answer

A) True 
 B)False

Question 19

One of the duties owed by directors to the corporation is that a director must not take an opportunity belonging to the corporation.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is not a duty of the Directors of corporations?

Accepted Answer

A)  to adopt by- laws governing the business 
B)  to call meetings of shareholders 
C)  to issue shares 
D)  to take care of the day- to- day business of the corporation 
E)  to declare dividends 
A)  to adopt by- laws governing the business 
B)  to call meetings of shareholders 
C)  to issue shares 
D)  to take care of the day- to- day business of the corporation 
E)  to declare dividends

Exam 28: The Internal Affairs of Corporations

A director will be criminally liable where he

Which of the following is not one of the essential powers of the directors of a corporation?

The first directors of a corporation hold office until the first meeting of the board of directors.

What is a derivative action?

The decision- making function of the corporation is undertaken by the directors of the corporation.

What duties do directors owe to shareholders of the corporation?

Directors owe a duty to act with a view to the best interests of:

What is the appraisal remedy?

There is no legal distinction between the business and affairs of the corporation.

Explain how a director must protect him or herself when he or she contracts with the corporation of which he is a director?

Which of the following is NOT a statutory safeguard when considering disclosure?

Which of the following is TRUE regarding the appointment and removal of directors of a corporation?

What does it mean when a court lifts the veil of incorporation?

Regarding financial rights, shareholders have a right to

The only real power shareholders have in a corporation is to

Sometimes almost all the directors of a company have interests in a contract. They should

If a corporation is profitable, directors must declare a dividend to holders of common shares according to their proportionate shareholding.

One of the duties owed by directors to the corporation is that a director must not take an opportunity belonging to the corporation.

Which of the following is not a duty of the Directors of corporations?

Law and Society

The Machinery of Justice

The Law of Torts

Professional Liability

Formation of a Contract: Offer and Acceptance

Formation of a Contract: Consideration, and Intention to Create Legal Relations

Formation of a Contract: Capacity to Contract and Legality of Object

Grounds Upon Which a Contract May Be Impeached: Mistake

Grounds Upon Which a Contract May Be Impeached: Misrepresentation, Undue Influence, and Duress

The Requirement of Writing

The Interpretation of Contracts

Privity of Contract and the Assignment of Contractual Rights

The Discharge of Contracts

The Effect of Breach

Remedies for Breach

Sale of Goods

Leasing and Bailment

Insurance and Guarantee

Agency and Franchising

The Contract of Employment

Negotiable Instruments

Intellectual Property

Interests in Land and Their Transfer

Landlord and Tenant

Mortgages of Land and Real Estate Transactions

Sole Proprietorships and Partnerships

The Nature of a Corporation and Its Formation

The External Responsibilities of a Corporation

Secured Transactions

Creditors Rights

Government Regulation of Business

International Business Transactions

Electronic Commerce

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