Question 1

Cole is a shareholder of Donut Holes,Inc.Cole will be deemed to have a fiduci-ary duty to Donut Holes and its minority share-holders if he has

Accepted Answer

A) a restriction on the transferability of his shares. 
B) a right of first refusal. 
C) a sufficient number of shares to exercise de facto control. 
D) voting rights. 
A) a restriction on the transferability of his shares. 
B) a right of first refusal. 
C) a sufficient number of shares to exercise de facto control. 
D) voting rights. C

Question 2

Quorum requirements are the same in all jurisdictions.

Accepted Answer

A) True 
 B)False  False

Question 3

The articles of corporation cannot exclude or limit shareholders' voting rights.

Accepted Answer

A) True 
 B)False  False

Question 4

The ownership right to stock exists independently of a stock certificate.

Accepted Answer

A) True 
 B)False

Question 5

A preemptive right is a preference over other shareholders to cast the determining vote on fundamental changes affecting the corporation.

Accepted Answer

A) True 
 B)False

Question 6

If the corporate directors fail to sue in the corporate name to redress a wrong suffered by the corporation,then the shareholders can do nothing.

Accepted Answer

A) True 
 B)False

Question 7

Dividends can be paid only in stock in other corporations.

Accepted Answer

A) True 
 B)False

Question 8

Ida,Jerzy,and Kit are the directors of Liberty Convenience Stores,Inc.Liberty has nine officers and forty-six shareholders.Dividends are ordered by the firm's

Accepted Answer

A) board of directors. 
B) incorporators 
C) officers. 
D) shareholders. 
A) board of directors. 
B) incorporators 
C) officers. 
D) shareholders.

Question 9

Generally,Sports Fitness Club Company and other corporations can pay dividends if

Accepted Answer

A) the corporation can continue to pay its debts as they come due. 
B) the amount of the dividends exceed the corporation's net worth. 
C) the shareholders approve. 
D) the corporation's assets equal its total liabilities. 
A) the corporation can continue to pay its debts as they come due. 
B) the amount of the dividends exceed the corporation's net worth. 
C) the shareholders approve. 
D) the corporation's assets equal its total liabilities.

Question 10

After the first board,the directors are chosen by the corporate officers.

Accepted Answer

A) True 
 B)False

Question 11

Jaycee is a shareholder for Designer Pet Clothes,Inc.Designer Pet Clothes uses cumulative voting to elect directors.This means that the number of Jaycee's votes is determined by

Accepted Answer

A) how long Jaycee has been a shareholder. 
B) the number of members of the board to be elected multiplied by the total number of voting shares Jaycee holds. 
C) the number of shareholders present at the most recent shareholders' meeting. 
D) the number of shareholders' meetings Jaycee has attended in the past year. 
A) how long Jaycee has been a shareholder. 
B) the number of members of the board to be elected multiplied by the total number of voting shares Jaycee holds. 
C) the number of shareholders present at the most recent shareholders' meeting. 
D) the number of shareholders' meetings Jaycee has attended in the past year.

Question 12

Cumulative voting refers to the accumulation of proposals presented annually for a shareholders' vote.

Accepted Answer

A) True 
 B)False

Question 13

Kelly transfers shares of stock that she owns in Lone Starz Company to Max.A shareholders' meeting takes place before Max's ownership is entered in Lone Starz's stock book.A vote at the meeting can be cast by

Accepted Answer

A) Kelly and Max. 
B) Kelly only. 
C) Max only. 
D) neither Kelly nor Max. 
A) Kelly and Max. 
B) Kelly only. 
C) Max only. 
D) neither Kelly nor Max.

Question 14

Shareholders' meetings must occur at least annually.

Accepted Answer

A) True 
 B)False

Question 15

Rafi,a director of Super Service Station Corporation,does not attend a board meet-ing for three years.During that time,Twyla,Super's president,makes improper loans that cost the company $100,000.Rafi is most likely

Accepted Answer

A) liable for negligence or mismanagement. 
B) liable for violation of the business judgment rule. 
C) not liable because missing meetings is an honest mistake. 
D) not liable because missing meetings is only poor judgment. 
A) liable for negligence or mismanagement. 
B) liable for violation of the business judgment rule. 
C) not liable because missing meetings is an honest mistake. 
D) not liable because missing meetings is only poor judgment.

Question 16

Mitch is a director and officer of Numero Uno,Inc.Mitch makes a market-ing decision that results in a dramatic decrease in profits for Numero Uno and its shareholders.The shareholders accuse Mitch of breaching his fiduci-ary duty to the corporation.What is Mitch's best defense against this ac-cu-sation? Later,the Numero Uno board considers a resolution for the firm to compete with One-of-a-Kind Corporation.Mitch is a director and shareholder of One-of-a-Kind.What is Mitch's responsibility in this situation?

Accepted Answer

The best defense in this context is the

Question 17

Every shareholder is entitled to inspect corporate records for a proper purpose.

Accepted Answer

A) True 
 B)False

Question 18

Shareholder voting agreements are usually held to be invalid and unenforceable.

Accepted Answer

A) True 
 B)False

Question 19

A director is a fiduciary of a corporation.

Accepted Answer

A) True 
 B)False

Question 20

Because stock is intangible personal property,a stockholder's ownership of the stock

Accepted Answer

A) exists independently of the stock certificate itself. 
B) cannot exist without a tangible stock certificate. 
C) cannot exist without the original stock certificate 
D) cannot be transferred to another person. 
A) exists independently of the stock certificate itself. 
B) cannot exist without a tangible stock certificate. 
C) cannot exist without the original stock certificate 
D) cannot be transferred to another person.

Exam 25: Corporate Directors, officers, and Shareholders

Cole is a shareholder of Donut Holes,Inc.Cole will be deemed to have a fiduci-ary duty to Donut Holes and its minority share-holders if he has

Quorum requirements are the same in all jurisdictions.

The articles of corporation cannot exclude or limit shareholders' voting rights.

The ownership right to stock exists independently of a stock certificate.

A preemptive right is a preference over other shareholders to cast the determining vote on fundamental changes affecting the corporation.

If the corporate directors fail to sue in the corporate name to redress a wrong suffered by the corporation,then the shareholders can do nothing.

Dividends can be paid only in stock in other corporations.

Ida,Jerzy,and Kit are the directors of Liberty Convenience Stores,Inc.Liberty has nine officers and forty-six shareholders.Dividends are ordered by the firm's

Generally,Sports Fitness Club Company and other corporations can pay dividends if

After the first board,the directors are chosen by the corporate officers.

Jaycee is a shareholder for Designer Pet Clothes,Inc.Designer Pet Clothes uses cumulative voting to elect directors.This means that the number of Jaycee's votes is determined by

Cumulative voting refers to the accumulation of proposals presented annually for a shareholders' vote.

Kelly transfers shares of stock that she owns in Lone Starz Company to Max.A shareholders' meeting takes place before Max's ownership is entered in Lone Starz's stock book.A vote at the meeting can be cast by

Shareholders' meetings must occur at least annually.

Rafi,a director of Super Service Station Corporation,does not attend a board meet-ing for three years.During that time,Twyla,Super's president,makes improper loans that cost the company $100,000.Rafi is most likely

Every shareholder is entitled to inspect corporate records for a proper purpose.

Shareholder voting agreements are usually held to be invalid and unenforceable.

A director is a fiduciary of a corporation.

Because stock is intangible personal property,a stockholder's ownership of the stock

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