Question 1

________ shares are issued for less than par value.

Accepted Answer

A) Capital 
B) Bonus 
C) Discount 
D) Watered 
A) Capital 
B) Bonus 
C) Discount 
D) Watered

Question 2

As per the Model Nonprofit Corporation Act (MNCA),a nonprofit corporation need not have members for its existence.

Accepted Answer

A) True 
 B)False

Question 3

Sharon entered into a preincorporation share subscription agreement on January 1,2006.The corporation was formed on February 1,2006.What is the status of this agreement on March 1,2006,under the Model Business Corporation Act?

Accepted Answer

A) It is binding only if Sharon has already paid for the shares. 
B) It is binding even if Sharon has not already paid for the shares. 
C) It is not binding because the corporation did not exist on January 1,2006. 
D) It is not binding unless Sharon ratifies the agreement after the corporation has been formed. 
A) It is binding only if Sharon has already paid for the shares. 
B) It is binding even if Sharon has not already paid for the shares. 
C) It is not binding because the corporation did not exist on January 1,2006. 
D) It is not binding unless Sharon ratifies the agreement after the corporation has been formed.

Question 4

A passive investor who believes she has invested in a corporation has no liability for the obligations of the business if the corporation has not in fact been formed.

Accepted Answer

A) True 
 B)False

Question 5

Pamela is a corporate promoter for Nulla Corporation,a corporation yet to be formed.Pamela determines that Nulla will need to lease a building in which to conduct its business.Pamela owns an office building that is suitable for Nulla.What should Pamela do if she wants to make a contract for Nulla to lease the building from her?

Accepted Answer

Since it is a breach of fiduciary duty f

Question 6

If the secretary of state's office approves a company's articles of incorporation then it is returned with a stamp indicating "Filed" and with a receipt for the fees paid.

Accepted Answer

A) True 
 B)False

Question 7

To retain its status as a corporation in good standing,a corporation must:

Accepted Answer

A) pay an annual franchise fee or tax. 
B) hold an annual shareholders' meeting. 
C) pay an annual dividend to shareholders. 
D) hold an annual board of directors' meeting. 
A) pay an annual franchise fee or tax. 
B) hold an annual shareholders' meeting. 
C) pay an annual dividend to shareholders. 
D) hold an annual board of directors' meeting.

Question 8

According to the Model Nonprofit Corporation Act (MNCA),what is the minimum number of members that a nonprofit corporation is required to have?

Accepted Answer

A) 50 
B) 1 
C) 10 
D) 0 
A) 50 
B) 1 
C) 10 
D) 0

Question 9

There is no limit on the number of members in a nonprofit corporation.

Accepted Answer

A) True 
 B)False

Question 10

Promoters are personally liable on a preincorporation contract but are released from liability when the corporation adopts the contract.

Accepted Answer

A) True 
 B)False

Question 11

According to the MBCA,who amongst the following is liable for a defective corporation's contracts and torts?

Accepted Answer

A) A shareholder manager who knows that the corporation does not exist. 
B) A passive shareholder who knows that the corporation does not exist. 
C) A nonshareholder manager who believes that the corporation exists. 
D) A member of the board of directors who believes that the corporation exists. 
A) A shareholder manager who knows that the corporation does not exist. 
B) A passive shareholder who knows that the corporation does not exist. 
C) A nonshareholder manager who believes that the corporation exists. 
D) A member of the board of directors who believes that the corporation exists.

Question 12

Because the articles of incorporation embody the basic contract between a corporation and its shareholders,shareholders must approve most changes in the articles.Which of the following is an example of "such changes" in the article?

Accepted Answer

A) Place of shareholder meeting 
B) Increase in the number of authorized shares 
C) Amount of annual dividend 
D) Date of shareholder meeting 
A) Place of shareholder meeting 
B) Increase in the number of authorized shares 
C) Amount of annual dividend 
D) Date of shareholder meeting

Question 13

Which of the following is not a requirement for a de facto corporation?

Accepted Answer

A) An organization meeting was never held. 
B) There is a valid statute under which the corporation could be organized. 
C) The promoters make an honest attempt to organize under the statute. 
D) The promoters exercise corporate powers. 
A) An organization meeting was never held. 
B) There is a valid statute under which the corporation could be organized. 
C) The promoters make an honest attempt to organize under the statute. 
D) The promoters exercise corporate powers.

Question 14

A ________ exists when the incorporators fail in some material respect to comply with all the mandatory provisions of the incorporation statute yet comply with most mandatory provisions.

Accepted Answer

A) de facto corporation 
B) corporation by estoppel 
C) de jure corporation 
D) false corporation 
A) de facto corporation 
B) corporation by estoppel 
C) de jure corporation 
D) false corporation

Question 15

________ shares are shares that have been sold to shareholders.

Accepted Answer

A) Preference 
B) Issued 
C) Authorized 
D) Outstanding 
A) Preference 
B) Issued 
C) Authorized 
D) Outstanding

Question 16

A party who makes a preincorporation contract with a corporate promoter is liable on the preincorporation contract:

Accepted Answer

A) only after the corporation's board of directors adopts the contract after the corporation has come into existence. 
B) only after the corporation's articles have been filed with the secretary of state. 
C) when the party agrees to look only to the prospective corporation for performance of the contract. 
D) only when the promoter is liable on the contract. 
A) only after the corporation's board of directors adopts the contract after the corporation has come into existence. 
B) only after the corporation's articles have been filed with the secretary of state. 
C) when the party agrees to look only to the prospective corporation for performance of the contract. 
D) only when the promoter is liable on the contract.

Question 17

N-Gate Corporation (NGC)was defectively organized.As a result,not even a corporation by estoppel was formed.An NGC truck driver negligently ran over a pedestrian while delivering goods manufactured by NGC.The pedestrian now wants to sue.Who is liable in this situation?

Accepted Answer

A) The managers of NGC only 
B) The truck driver only 
C) The truck driver and the managers of NGC 
D) The truck driver,the managers of NGC,and all purported shareholders of NGC 
A) The managers of NGC only 
B) The truck driver only 
C) The truck driver and the managers of NGC 
D) The truck driver,the managers of NGC,and all purported shareholders of NGC

Question 18

A corporation is required to reimburse a promoter for her reasonable expenses incurred on behalf of the corporation prior to incorporation.

Accepted Answer

A) True 
 B)False

Question 19

The basic governing document of the corporation is the:

Accepted Answer

A) articles of incorporation. 
B) bylaws. 
C) shareholder agreement. 
D) organizational operating agreement. 
A) articles of incorporation. 
B) bylaws. 
C) shareholder agreement. 
D) organizational operating agreement.

Question 20

Under the Model Business Corporation Act,a corporation may not issue its shares in return for any benefit to the corporation.

Accepted Answer

A) True 
 B)False

Exam 42: Organization and Financial Structure of Corporations

________ shares are issued for less than par value.

As per the Model Nonprofit Corporation Act (MNCA),a nonprofit corporation need not have members for its existence.

Sharon entered into a preincorporation share subscription agreement on January 1,2006.The corporation was formed on February 1,2006.What is the status of this agreement on March 1,2006,under the Model Business Corporation Act?

A passive investor who believes she has invested in a corporation has no liability for the obligations of the business if the corporation has not in fact been formed.

If the secretary of state's office approves a company's articles of incorporation then it is returned with a stamp indicating "Filed" and with a receipt for the fees paid.

To retain its status as a corporation in good standing,a corporation must:

According to the Model Nonprofit Corporation Act (MNCA),what is the minimum number of members that a nonprofit corporation is required to have?

There is no limit on the number of members in a nonprofit corporation.

Promoters are personally liable on a preincorporation contract but are released from liability when the corporation adopts the contract.

According to the MBCA,who amongst the following is liable for a defective corporation's contracts and torts?

Because the articles of incorporation embody the basic contract between a corporation and its shareholders,shareholders must approve most changes in the articles.Which of the following is an example of "such changes" in the article?

Which of the following is not a requirement for a de facto corporation?

A ________ exists when the incorporators fail in some material respect to comply with all the mandatory provisions of the incorporation statute yet comply with most mandatory provisions.

________ shares are shares that have been sold to shareholders.

A party who makes a preincorporation contract with a corporate promoter is liable on the preincorporation contract:

N-Gate Corporation (NGC)was defectively organized.As a result,not even a corporation by estoppel was formed.An NGC truck driver negligently ran over a pedestrian while delivering goods manufactured by NGC.The pedestrian now wants to sue.Who is liable in this situation?

A corporation is required to reimburse a promoter for her reasonable expenses incurred on behalf of the corporation prior to incorporation.

The basic governing document of the corporation is the:

Under the Model Business Corporation Act,a corporation may not issue its shares in return for any benefit to the corporation.

The Nature of Law

The Resolution of Private Disputes

Business and the Constitution

Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking

Criminal Law and Procedure

Intentional Torts

Negligence and Strict Liability

Intellectual Property and Unfair Competition

Introduction to Contracts

The Agreement: Offer

The Agreement: Acceptance

Consideration

Reality of Consent

Capacity to Contract

Illegality

Writing

Rights of Third Parties

Performance and Remedies

Formation and Terms of Sales Contracts

Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance Law

Introduction to Credit and Secured Transactions

Security Interests in Personal Property

Bankruptcy

Negotiable Instruments

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Transfers

The Agency Relationship

Third-Party Relations of the Principal and the Agent

Introduction to Forms of Business and Formation of Partnerships

Operation of Partnerships and Related Forms

Partners Dissociation and Partnerships Dissolution and Winding up

Limited Liability Companies, limited Partnerships, and Limited Liability Limited Partnerships

History and Nature of Corporations

Management of Corporations

Shareholders Rights and Liabilities

Securities Regulation

Legal and Professional Responsibilities of Auditors, Consultants, and Securities Professionals

Administrative Law

The Federal Trade Commission Act and Consumer Protection Laws

Antitrust: the Sherman Act

The Clayton Act, the Robinsonpatman Act, and Antitrust Exemptions and Immunities

Employment Law

Environmental Regulation

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