Deck 60: Legal Issues in Corporate Governance and Business Operations

Question 1

Liu wants to start up a business enterprise, in Maine, and establish a Web site for it. To choose a name that does not infringe on an established business, Liu will most likely need to consider the names of companies

A) in other parts of the world.
B) only in direct competition with Liu's business.
C) only in Maine.
D) only with a presence on the Web.

Answer 1

C

Question 2

Kipling Metals Corporation is publicly held. Under the Securities and Exchange Commission's "notice and access" model rules, Kipling's dissemination of proxy materials to its shareholders by posting them on a Web site is

A) allowed in any circumstance but not required.
B) allowed only if warranted.
C) not allowed.
D) required.

Answer 2

A

Question 3

Puck posts messages in a Quantum Mechanics, Inc., chat room stating that "Quantum's stock is headed for $20." Over the following six months, the price of Quantum's stock declines significantly. Puck's messages are

A) fraudulent opinions.
B) fraudulent statements of fact.
C) non-fraudulent opinions.
D) non-fraudulent statements of fact.

Answer 3

C

Question 4

Ren is a shareholder of Star Corporation. Ren wants Star to include in its proxy materials a proposal to amend the firm's bylaws to require it to publish the names of shareholder-nominated candidates for positions on the board of directors. One argument in opposition to such a requirement is that it could lead to

A) meaningful dialogue between Star and its shareholders.
B) the board's increased sensitivity to shareholder opinion.
C) the conversion of Star from publicly held to privately held.
D) the shareholders' election of their candidates to the board .

Question 5

Rea, an officer with Sel-Mart Company, misappropriates the firm's property through fraud. Later, Rea and Sel-Mart agree to a mutual release of claims. Still later, Sel-Mart discovers Rea's fraud and files a suit to recover the misappropriated property. Most likely, the court will rule that Rea

A) breached her duty of loyalty by failing to disclose her misconduct.
B) is not liable due to Rea's duty to act in her own self-interest.
C) is not liable due to Sel-Mart's failure to timely discover the fraud.
D) is not liable due to the mutual release of claims.

Question 6

Ilya is an officer with Jetspeed, Inc. Ilya is in a position to acquire assets that would benefit Jetspeed if acquired in its name. Ilya's usurping this opportunity may violate the duty of

A) acting in one's own interest.
B) agency.
C) care.
D) loyalty.

Question 7

Gaia wants to establish a Web site for Home & Hearth, a retail business enterprise located in Iowa. To avoid suits against Home & Hearth in other states and foreign countries, Gaia's best option is to

A) do nothing.
B) make an effort to avoid breaking the law in those jurisdictions.
C) post a disclaimer to limit sales to a certain geographic area.
D) use technology that screens users from certain geographic areas.

Question 8

Logan is a director for Metal Masters Company. Ordinarily, Logan owes fiduciary duties only to

A) himself.
B) Metal Masters's creditors.
C) Metal Masters's personnel.
D) Metal Masters's shareholders.

Question 9

Lex is a shareholder of Master Corporation. Lex wants Master to include in its proxy materials a proposal to amend the firm's bylaws to require it to publish the names of shareholder-nominated candidates for director positions. One argument in favor of such a requirement is that it could lead to

A) additional protections under the Sarbanes-Oxley Act.
B) an increase in the number of shareholder class-action suits.
C) meaningful dialogue between Marvelous and its shareholders.
D) the conversion of Marvelous from publicly held to privately held.

Question 10

Excel Corporation is publicly held. Under the Securities and Exchange Commission's Regulation Fair Disclosure, the dissemination of material nonpublic information about Excel solely through Excel's Web site is

A) allowed in any circumstance but not required.
B) allowed only if warranted.
C) not allowed.
D) required.