Deck 40: B: Corporate Directors,officers, Shareholders

Question 1

Officers hire the directors and other executive employees.

Answer 1

False

Question 2

Directors are entitled to use corporate funds for their personal advantage.

Answer 2

False

Question 3

A director must make a full disclosure of any potential conflict of interest that might arise in any corporate transaction.

Answer 3

True

Question 4

An inside director is a director who does not hold a management position in the corporation.

Question 5

Many qualifications are required for directors.

Question 6

Committees of the board of directors focus on individual subjects.

Question 7

Shareholders' meetings need not occur at any certain interval.

Question 8

The ordinary rules of agency normally do not apply to the employment of corporate officers.

Question 9

Directors are not obligated to refrain from self-dealing.

Question 10

In some states,obtaining the unanimous written consent of sharehold?ers is a permissible alternative to holding a shareholders' meeting.

Question 11

Every shareholder is entitled to examine specified corporate records.

Question 12

Dividends are distributed on the basis of possession of a stock certificate.

Question 13

When a third party harms a corporation,only the shareholders can bring a suit in the corporation's name against that party.

Question 14

A director or officer is required to exercise the care that an ordinarily prudent person would exercise in similar circumstances.

Question 15

Shareholders are co-owners of the corporation.

Question 16

Dividends can be paid in the stock of the corporation that is paying the dividends.

Question 17

Directors have a right to participate in all board of directors' meetings.

Question 18

Shareholders are the ultimate authority in every corporation.

Question 19

Shareholders are personally liable for the debts of a corporation.

Question 20

An amendment to the articles of incorporation can create a new position on the board of directors.

Question 21

Bret and Courtney form Delite Day Care,Inc.Ultimate respon?sibility for pol?icy decisions necessary to the management of corporate affairs rests with Delite's

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

Question 22

Thor Power Products Corporation permits the election of its directors by cumulative voting.This

A)allows minority shareholders to be represented on the board.
B)assures directors that they will be selected by their peers.
C)guarantees Thor's executive officers of the final choice.
D)insures against persons who may "cloud" the corporate direction.

Question 23

Gillian is a director of Fizzy Soda Company.As a director,Gillian can act as an agent to bind Fizzy

A)in all circumstances.
B)in no circumstances.
C)to any contract in which Fizzy does not have a conflict of interest.
D)to any contract that represents a corporate opportunity for Gillian.

Question 24

Odell is a director of Price Rite,Inc.As a director,with respect to the corporation,Odell is

A)a fiduciary.
B)a forum.
C)a proxy.
D)a quorum.

Question 25

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

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

Question 26

Frida,Gayla,and Hart occupy the positions of director on the board of Integral Components Corporation.With respect to these directors,a quorum is the minimum number

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

Question 27

Fact Pattern 40-1A
Ruben is a shareholder of Speed Bikes Company (SBC).When the direc?tors fail to undertake an action to redress a wrong suffered by SBC,Ruben files a suit on the firm's behalf.
Refer to Fact Pattern 40-1A.Any damages recovered by Ruben's suit will normally go to

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

Question 28

Fact Pattern 40-1A
Ruben is a shareholder of Speed Bikes Company (SBC).When the direc?tors fail to undertake an action to redress a wrong suffered by SBC,Ruben files a suit on the firm's behalf.
Refer to Fact Pattern 40-1A.Ruben's suit is a shareholder's

A)indemnification suit.
B)derivative suit.
C)proxy suit.
D)preemptive suit.

Question 29

Fiona owns one share of stock in GR8 Boards Corporation,as evidenced by a stock certificate.Fiona loses the certificate.Her ownership of the stock is

A)forfeited immediately.
B)forfeited within ten days of a third party's claim to ownership.
C)forfeited within thirty days if she cannot find the certificate.
D)not affected.

Question 30

Heidi and Ian are directors and shareholders of Globe Software,Inc.Heidi's written authorization to Ian to vote Heidi's shares at a Globe shareholders' meeting is

A)a violation of the duty of loyalty.
B)a preemptive right.
C)a proxy.
D)a quorum.

Question 31

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

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

Question 32

In all states,Exercise & Fitness Club Company and other corporations can pay dividends from

A)gross profits.
B)net profits.
C)retained earnings.
D)surplus.

Question 33

Luke is a director of Motor Parts Corporation.Luke makes decisions with respect to Motor Parts in good faith,in what Luke believes is the firm's best interest,and without violating any duties owed to it.If,despite these circumstances,Luke exercises poor business judgment,under the business judgment rule Luke is

A)immune from liability.
B)liable only to the extent that Luke gains as a result.
C)liable only to the extent that Motor Parts suffers as a result.
D)wholly liable.

Question 34

Clark is a shareholder of Bedrest Mattress Company.Clark will be deemed to have a fiduci?ary duty to Bedrest and its minority share?hold?ers if he has

A)preferred stock.
B)a right of first refusal.
C)a sufficient number of shares to exercise de facto control.
D)watered stock.

Question 35

Melba and Leon are directors of Fresh Foods,Inc.The right of Melba and Leon to be notified of special meetings of the board is the right to

A)compensation.
B)indemnification.
C)participation.
D)self-dealing.

Question 36

Lon and Merry act as the incorporators for NuGame Corporation.After the first board of directors is chosen,subsequent directors are elected by a majority vote of NuGame's

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

Question 37

Gladys is a shareholder of Frozen Yogurt,Inc.As a shareholder,Gladys must approve

A)amending the bylaws.
B)declaring a corporate dividend.
C)hiring a chief executive officer.
D)issuing additional shares.

Question 38

VeriVisual Company makes HD 3D film and video equipment.VeriVisual is like most cor?porations in that its officers are hired by the firm's

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

Question 39

Reba is a director of Quantum Mechanix Corporation.Reba's rights,as a di?rector,do not include a right to

A)indemnification.
B)inspection.
C)participation.
D)self-dealing.

Question 40

Bev is a shareholder of All-Terrain Vehicle Company.As a share?holder,Bev does not have

A)a right to compensation.
B)dividend rights.
C)inspection rights.
D)preemptive rights.

Question 41

Tank is a director and the majority shareholder of Unique New Investment Corporation (UNIC).Tank buys,for $1,500,an option to pur?chase a tract of real estate for $50,000.Tank forms Vista Property,Inc. ,to hold the option.As the majority shareholder,and thus controlling di?rector,of UNIC,Tank orders the firm to authorize the pur?chase of the land from Vista Property for $500,000.Tank then has Vista Property buy the land,sell it to UNIC,and loan the money to UNIC for the purchase at a 10 percent interest rate.Wim,a minority shareholder in UNIC,com?plains to UNIC's board,which takes no action.Wim files a suit against Tank on UNIC's behalf.Will Wim prevail? Explain.

Question 42

Dimitri is a director and shareholder of Equitable Corporation and of Four Square Products,Inc.A resolution comes before the Equitable board to compete with Four Square.What is Dimitri's responsibility?