Question 1

A person who owns less than a majority of shares in a corporation may still be a controlling shareholder.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following are among the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act in relation to shareholder control of pay for top executives?

Accepted Answer

A)  The act provides that shareholders of all privately held as well as publicly traded companies are entitled to vote and set executive compensation on a yearly basis. 
B)  The act provides that shareholders of public companies have an advisory vote on company payment practices for top executives and that public companies must hold a shareholder advisory vote on golden parachutes for executives. 
C)  The act provides that shareholders of all privately held as well as publicly traded companies are entitled to vote and set executive compensation on a yearly basis and also that the shareholders must specifically approve any golden parachute provisions for executives. 
D)  Based on the belief that ill-informed shareholder input negatively affected nationwide corporate performance,the act provides that shareholders need not be involved in setting executive compensation. 
A)  The act provides that shareholders of all privately held as well as publicly traded companies are entitled to vote and set executive compensation on a yearly basis. 
B)  The act provides that shareholders of public companies have an advisory vote on company payment practices for top executives and that public companies must hold a shareholder advisory vote on golden parachutes for executives. 
C)  The act provides that shareholders of all privately held as well as publicly traded companies are entitled to vote and set executive compensation on a yearly basis and also that the shareholders must specifically approve any golden parachute provisions for executives. 
D)  Based on the belief that ill-informed shareholder input negatively affected nationwide corporate performance,the act provides that shareholders need not be involved in setting executive compensation. B

Question 3

What is required by the Sarbanes-Oxley Act of 2002 in regard to the certification of the accuracy of public companies' SEC filings and the adequacy of internal controls?

Accepted Answer

A)  The chief executive officer,the chief financial officer,and all inside directors must certify the accuracy of public companies' SEC filings and the adequacy of internal controls. 
B)  The chief executive officer,the chief financial officer,and any controlling shareholder must certify the accuracy of public companies' SEC filings and the adequacy of internal controls. 
C)  The chief executive officer and the chief financial officer must certify the accuracy of public companies' SEC filings and the adequacy of internal controls. 
D)  The chief executive officer,the chief financial officer,and all outside directors must certify the accuracy of public companies' SEC filings and the adequacy of internal controls. 
A)  The chief executive officer,the chief financial officer,and all inside directors must certify the accuracy of public companies' SEC filings and the adequacy of internal controls. 
B)  The chief executive officer,the chief financial officer,and any controlling shareholder must certify the accuracy of public companies' SEC filings and the adequacy of internal controls. 
C)  The chief executive officer and the chief financial officer must certify the accuracy of public companies' SEC filings and the adequacy of internal controls. 
D)  The chief executive officer,the chief financial officer,and all outside directors must certify the accuracy of public companies' SEC filings and the adequacy of internal controls. C

Question 4

Controlling shareholders,but not officers or directors,of a corporation may use the corporation's confidential information for personal gain.

Accepted Answer

A) True 
 B)False

Question 5

The Revlon duty can be summed up as:

Accepted Answer

A)  blocking all unwanted takeover attempts. 
B)  controlling the corporation in a fair,just,and equitable manner. 
C)  maximization of the company's value at a sale for the stockholders' benefit. 
D)  ensuring minority shareholder representation to vote a certain percentage of overall shares. 
A)  blocking all unwanted takeover attempts. 
B)  controlling the corporation in a fair,just,and equitable manner. 
C)  maximization of the company's value at a sale for the stockholders' benefit. 
D)  ensuring minority shareholder representation to vote a certain percentage of overall shares.

Question 6

In certain cases,the duty of good faith may be subsumed within the duty of loyalty.

Accepted Answer

A) True 
 B)False

Question 7

The __________ requires that officers and directors not take personal advantage of a desirable business investment that rightfully belongs to the corporation.

Accepted Answer

A)  right of first refusal 
B)  corporate opportunity doctrine 
C)  line of business test 
D)  expectancy test 
A)  right of first refusal 
B)  corporate opportunity doctrine 
C)  line of business test 
D)  expectancy test

Question 8

Define and explain the purpose of the business judgment rule.Under what circumstances would the rule apply? When would the protection not apply? Discuss fully.

Accepted Answer

In cases challenging board decisions for

Question 9

A poison pill is a defensive measure that would make any takeover not approved by the directors prohibitively expensive.

Accepted Answer

A) True 
 B)False

Question 10

The parties to a friendly merger use deal-protection devices,such as no-talk provisions.The Delaware Supreme Court will generally uphold such devices as long as they:

Accepted Answer

A)  have board approval. 
B)  preclude any other options. 
C)  do not permit any type of fiduciary out. 
D)  do not impair the board's ability to exercise its fiduciary duties. 
A)  have board approval. 
B)  preclude any other options. 
C)  do not permit any type of fiduciary out. 
D)  do not impair the board's ability to exercise its fiduciary duties.

Question 11

Which of the following provides procedural fairness when controlling shareholder engages in a transaction,such as a merger,with the company it controls?

Accepted Answer

A)  A determination of the target's intrinsic value regardless of maximum shareholder value 
B)  The use of independent committees,advised by independent financial consultants 
C)  An arm's-length bias 
D)  A no-talk provision 
A)  A determination of the target's intrinsic value regardless of maximum shareholder value 
B)  The use of independent committees,advised by independent financial consultants 
C)  An arm's-length bias 
D)  A no-talk provision

Question 12

Which of the following is considered an inside director of a corporation?

Accepted Answer

A)  A director who is also an officer of the corporation 
B)  A director who is also an officer of any corporation 
C)  A director who is both an officer of any corporation and who stands to personally profit by an action being considered by the board 
D)  A director who is qualified as an expert in regard to any product of the company 
A)  A director who is also an officer of the corporation 
B)  A director who is also an officer of any corporation 
C)  A director who is both an officer of any corporation and who stands to personally profit by an action being considered by the board 
D)  A director who is qualified as an expert in regard to any product of the company

Question 13

The Smith v.Van Gorkom decision underscores which of the following regarding statements of officers or directors?

Accepted Answer

A)  An outside director,but not an inside director,may in good faith rely upon any statement of an executive officer. 
B)  An inside director,but not an outside director,may in good faith rely upon any statement of an executive officer. 
C)  Any director may in good faith rely upon any statement of an executive officer. 
D)  Not every statement of an executive officer can be relied upon in good faith. 
A)  An outside director,but not an inside director,may in good faith rely upon any statement of an executive officer. 
B)  An inside director,but not an outside director,may in good faith rely upon any statement of an executive officer. 
C)  Any director may in good faith rely upon any statement of an executive officer. 
D)  Not every statement of an executive officer can be relied upon in good faith.

Question 14

The Securities and Exchange Commission recognizes the affirmative responsibility of officers and directors under federal securities laws to ensure the accuracy and completeness of public company filings with the SEC.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is true regarding breakup fees?

Accepted Answer

A)  They are sometimes characterized as liquidated damages. 
B)  The Securities and Exchange Commission prohibits the payment of breakup fees. 
C)  Breakup fees are typically 20-25 percent of the value of the deal. 
D)  They are sometimes characterized as liquidated damages,and breakup fees are typically 20-25 percent of the value of the deal. 
A)  They are sometimes characterized as liquidated damages. 
B)  The Securities and Exchange Commission prohibits the payment of breakup fees. 
C)  Breakup fees are typically 20-25 percent of the value of the deal. 
D)  They are sometimes characterized as liquidated damages,and breakup fees are typically 20-25 percent of the value of the deal.

Question 16

A controlling shareholder has a duty not to transfer the power of management to a purchaser the shareholder knows or has reason to believe will use that power to the detriment of the corporation.

Accepted Answer

A) True 
 B)False

Question 17

A __________ occurs when minority shareholders are forced to convert their shares into cash,for example,when a subsidiary merges with its parent.

Accepted Answer

A)  hostile takeover 
B)  sale of assets 
C)  freeze-out 
D)  tender offer 
A)  hostile takeover 
B)  sale of assets 
C)  freeze-out 
D)  tender offer

Question 18

In the context of takeovers,board members cannot reject an offer without taking sufficient time to analyze its merit.

Accepted Answer

A) True 
 B)False

Question 19

A(n)__________ gives the person to whom it is granted the right to buy a certain number of shares at a fixed price for a fixed number of years during the __________ period,which is not usually longer than __________.

Accepted Answer

A)  call right; exercise; 12 months 
B)  option; redemption; 12 months 
C)  IRS option; redemption; 10 years 
D)  stock option; exercise; 10 years 
A)  call right; exercise; 12 months 
B)  option; redemption; 12 months 
C)  IRS option; redemption; 10 years 
D)  stock option; exercise; 10 years

Question 20

Which of the following is true regarding hostile takeovers in the European Union?

Accepted Answer

A)  All member states must observe the neutrality rule and the breakthrough rule. 
B)  Member states may opt out of the neutrality rule and the breakthrough rule. 
C)  Member states may opt out of the neutrality rule,but all member states must observe the breakthrough rule. 
D)  Member states may opt out of the breakthrough rule,but all member states must observe the neutrality rule. 
A)  All member states must observe the neutrality rule and the breakthrough rule. 
B)  Member states may opt out of the neutrality rule and the breakthrough rule. 
C)  Member states may opt out of the neutrality rule,but all member states must observe the breakthrough rule. 
D)  Member states may opt out of the breakthrough rule,but all member states must observe the neutrality rule.

Exam 20: Directors Officers And Controlling Shareholders

A person who owns less than a majority of shares in a corporation may still be a controlling shareholder.

Which of the following are among the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act in relation to shareholder control of pay for top executives?

What is required by the Sarbanes-Oxley Act of 2002 in regard to the certification of the accuracy of public companies' SEC filings and the adequacy of internal controls?

Controlling shareholders,but not officers or directors,of a corporation may use the corporation's confidential information for personal gain.

The Revlon duty can be summed up as:

In certain cases,the duty of good faith may be subsumed within the duty of loyalty.

The __________ requires that officers and directors not take personal advantage of a desirable business investment that rightfully belongs to the corporation.

Define and explain the purpose of the business judgment rule.Under what circumstances would the rule apply? When would the protection not apply? Discuss fully.

A poison pill is a defensive measure that would make any takeover not approved by the directors prohibitively expensive.

The parties to a friendly merger use deal-protection devices,such as no-talk provisions.The Delaware Supreme Court will generally uphold such devices as long as they:

Which of the following provides procedural fairness when controlling shareholder engages in a transaction,such as a merger,with the company it controls?

Which of the following is considered an inside director of a corporation?

The Smith v.Van Gorkom decision underscores which of the following regarding statements of officers or directors?

The Securities and Exchange Commission recognizes the affirmative responsibility of officers and directors under federal securities laws to ensure the accuracy and completeness of public company filings with the SEC.

Which of the following is true regarding breakup fees?

A controlling shareholder has a duty not to transfer the power of management to a purchaser the shareholder knows or has reason to believe will use that power to the detriment of the corporation.

A __________ occurs when minority shareholders are forced to convert their shares into cash,for example,when a subsidiary merges with its parent.

In the context of takeovers,board members cannot reject an offer without taking sufficient time to analyze its merit.

A(n)__________ gives the person to whom it is granted the right to buy a certain number of shares at a fixed price for a fixed number of years during the __________ period,which is not usually longer than __________.

Which of the following is true regarding hostile takeovers in the European Union?

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A(n) gives the person to whom it is granted the right to buy a certain number of shares at a fixed price for a fixed number of years during the period,which is not usually longer than __.