Exam 47: Management of Corporations

Officers are generally not liable to the corporation for secret profits made at the expense of the business of the corporation.

The stockholders of the Apex Corporation attended a special meeting of the stockholders called to discuss matters of extreme urgency to the corporation. A quorum was not present when the meeting opened, nor was a quorum present when the matters to be treated in the meeting were discussed. Management, however, felt that the importance of the issue was significant enough to warrant continuation of the meeting without a quorum, and the stockholders voted on the issues presented during the meeting. During the last fifteen (15) minutes of the meeting, just prior to the cocktail hour regularly attended by many stockholders, enough stockholders had arrived to constitute a quorum. Were the issues of this meeting dealt with in a valid manner?

Ping was the president and chairman of the board of directors of Oh Imports, Inc. Ping was also a major shareholder. Acting as president, Ping negotiated a series of contracts that caused the corporation serious economic losses. In this role, Ping failed to exercise the care of a reasonably prudent person acting in similar circumstances. When substantial economic losses began to pile up, Ping insisted that the corporation breach a contract with Ory in favor of a larger contract that was later entered into with Magnificent Enterprises. Ping hoped to reverse Oh's economic fortunes through this contract with Magnificent, but the attempt failed. Oh then became insolvent. Ultimately, the corporation failed. Two law-suits were initiated against Ping. In the first, a creditor of Oh who never was paid because the business failed sued Ping alleging that the negligence of Ping had caused Oh to fail to pay the creditor what was owed. The second lawsuit instituted by Ory claimed damages from Ping because Ping caused Oh to breach its contract with Ory. Decide both lawsuits.

Under the responsible corporate officer doctrine a CEO could be criminally liable for failure to prevent the commission of a crime.

Although officers may be agents of the corporation, a third person suing the company has the burden of proving that a particular officer had the authority he purported to have.

A manager who is directly responsible for compliance with federal water quality statutes would be liable under the __________ for toxic waste spilled into the river over a period of six months.

The business judgment rule is a defense that can be used by directors when their actions are challenged.

Which of the following is an incorrect statement about officers?

Extraordinary matters requiring shareholder votes include all of the following except: ______.

The sale of corporate assets outside the regular course of a corporation's business is an example of an extraordinary matter.

If an officer diverts a corporate opportunity, the corporation may not recover from the officer the profits of which the corporation has been deprived.

A corporation is liable to a third person for the act of its agent: ______.

A director is disqualified from taking part in corporate action with respect to a matter in which the director has a disclosed conflicting interest.

A stockholder-approved amendment to the certificate of incorporation may indemnify directors who: ______.

A shareholder vote has legal effect as a corporate act only if such action is taken at a regular or special meeting of the stockholders.

The RMBCA provides that, absent a conflicting provision in the articles of incorporation, directors may be removed: ______.

Officers have a fiduciary obligation not to make any secret financial gain at the expense of the corporation.

A corporation may be prosecuted and convicted of: ______.

The Sarbanes-Oxley Act prohibits all corporate loans to directors and executive officers unless: ______.

Directors do not have the right to evaluate management's performance.