Question 1

Directors can use corporate funds and confidential information for personal advantage as long as they disclose that they are doing so.

Accepted Answer

A) True 
 B)False  False

Question 2

Rhea is a director of Spex Corporation, which makes and sells sunglasses and other eyewear. As a Spex director, Rhea sits on the board, which

Accepted Answer

A)  governs Spex. 
B)  is governed by the Spex incorporators. 
C)  is governed by the Spex officers. 
D)  is governed by the Spex shareholders. 
A)  governs Spex. 
B)  is governed by the Spex incorporators. 
C)  is governed by the Spex officers. 
D)  is governed by the Spex shareholders. A

Question 3

Etta is a director of Trendy Stuff Corporation. Without informing Trendy, Etta goes into business with GR8 Things, Inc., in competition with Trendy. Etta is liable for breach of

Accepted Answer

A)  no duty or rule 
B)  the business judgment rule. 
C)  the duty of care. 
D)  the duty of loyalty. 
A)  no duty or rule 
B)  the business judgment rule. 
C)  the duty of care. 
D)  the duty of loyalty. D

Question 4

In certain instances of fraud, a court may "pierce the corporate veil" to hold the shareholders individually liable.

Accepted Answer

A) True 
 B)False

Question 5

In most states, a director cannot be removed from a corporate board for a breach of duty.

Accepted Answer

A) True 
 B)False

Question 6

Guy is Hot Java Company's majority shareholder. Guy decides to sell his Hot Java stock. The sale will be an effective transfer of the control of the company. Does Guy owe a duty to Hot Java or its minority shareholders in this situation?

Accepted Answer

Yes. A single shareholder-or a few share

Question 7

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 8

Frawsty Corporation distributes beverages in the greater Northwest. Frawsty's board of directors can delegate some of its functions to

Accepted Answer

A)  Frawsty's incorporators. 
B)  Frawsty's officers. 
C)  Frawsty's shareholders. 
D)  no one. 
A)  Frawsty's incorporators. 
B)  Frawsty's officers. 
C)  Frawsty's shareholders. 
D)  no one.

Question 9

A director usually serves on a corporation's board for a life term.

Accepted Answer

A) True 
 B)False

Question 10

The board of directors of Integral Components Corporation consists of Frida, Gayla, and Hart. A quorum is the minimum number of these directors

Accepted Answer

A)  who must be at odds in a dispute to call for its resolution. 
B)  who must be present to validly transact business. 
C)  that the shareholders may remove from office at any one time. 
D)  whose positions must be vacant to warrant an election. 
A)  who must be at odds in a dispute to call for its resolution. 
B)  who must be present to validly transact business. 
C)  that the shareholders may remove from office at any one time. 
D)  whose positions must be vacant to warrant an election.

Question 11

Josh is a director of Sippy Soups, Inc. Josh opposes a tender offer that is in Sippy's best interest because its acceptance would cost him his position as a director. Josh is liable for a breach of duty of

Accepted Answer

A)  no duty or rule. 
B)  the business judgment rule. 
C)  the duty of care. 
D)  the duty of loyalty. 
A)  no duty or rule. 
B)  the business judgment rule. 
C)  the duty of care. 
D)  the duty of loyalty.

Question 12

RayAnn is a corporate officer for Timmy's Trees, Inc. As a corporate officer, RayAnn is

Accepted Answer

A)  the head of the board of directors. 
B)  involved in the day-to-day operations of Timmy's Trees. 
C)  not involved in the day-to-day operations of Timmy's Trees. 
D)  in charge of selecting members of the board of directors. 
A)  the head of the board of directors. 
B)  involved in the day-to-day operations of Timmy's Trees. 
C)  not involved in the day-to-day operations of Timmy's Trees. 
D)  in charge of selecting members of the board of directors.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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 15

Shareholders' meetings must occur at least annually.

Accepted Answer

A) True 
 B)False

Question 16

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 17

If a director fails to use a reasonable amount of supervision over corporate officers and employees, then the director can be held liable for negligence.

Accepted Answer

A) True 
 B)False

Question 18

Fact Pattern 30-1
Ray is a shareholder of Small Biz Company (SBC). When the directors fail to undertake an action to redress a wrong suffered by SBC, Ray files a suit on the firm's behalf.
-Refer to Fact Pattern 30-1. Any damages recovered by Ray's suit will go to

Accepted Answer

A)  Ray. 
B)  SBC. 
C)  SBC's directors. 
D)  the state in which SBC is incorporated. 
A)  Ray. 
B)  SBC. 
C)  SBC's directors. 
D)  the state in which SBC is incorporated.

Question 19

Philip is elected as a director for Fatless Foods, Inc. His term of office will most probably last for

Accepted Answer

A)  three months. 
B)  six months. 
C)  nine months. 
D)  one year. 
A)  three months. 
B)  six months. 
C)  nine months. 
D)  one year.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 30: Management and Ownership of a Corporation

Directors can use corporate funds and confidential information for personal advantage as long as they disclose that they are doing so.

Rhea is a director of Spex Corporation, which makes and sells sunglasses and other eyewear. As a Spex director, Rhea sits on the board, which

Etta is a director of Trendy Stuff Corporation. Without informing Trendy, Etta goes into business with GR8 Things, Inc., in competition with Trendy. Etta is liable for breach of

In certain instances of fraud, a court may "pierce the corporate veil" to hold the shareholders individually liable.

In most states, a director cannot be removed from a corporate board for a breach of duty.

Guy is Hot Java Company's majority shareholder. Guy decides to sell his Hot Java stock. The sale will be an effective transfer of the control of the company. Does Guy owe a duty to Hot Java or its minority shareholders in this situation?

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

Frawsty Corporation distributes beverages in the greater Northwest. Frawsty's board of directors can delegate some of its functions to

A director usually serves on a corporation's board for a life term.

The board of directors of Integral Components Corporation consists of Frida, Gayla, and Hart. A quorum is the minimum number of these directors

Josh is a director of Sippy Soups, Inc. Josh opposes a tender offer that is in Sippy's best interest because its acceptance would cost him his position as a director. Josh is liable for a breach of duty of

RayAnn is a corporate officer for Timmy's Trees, Inc. As a corporate officer, RayAnn is

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

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.

Shareholders' meetings must occur at least annually.

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

If a director fails to use a reasonable amount of supervision over corporate officers and employees, then the director can be held liable for negligence.

Fact Pattern 30-1 Ray is a shareholder of Small Biz Company (SBC). When the directors fail to undertake an action to redress a wrong suffered by SBC, Ray files a suit on the firm's behalf. -Refer to Fact Pattern 30-1. Any damages recovered by Ray's suit will go to

Philip is elected as a director for Fatless Foods, Inc. His term of office will most probably last for

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

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