Question 1

Which of the following is NOT true of shareholder liability?

Accepted Answer

A)  Shareholders are liable for watered stock
B)  Shareholders are personally liable for receiving illegal dividends.
C)  Shareholders are liable for a breach of contract if a stock subscription agreement was signed and no stock was purchased
D)  Shareholders are liable for violations of the business judgment rule
E)  Shareholders are liable for the debts of a corporation to the extent of their investmentF) B) and C)
G) B) and E)

Question 2

If a shareholder receives watered stock,they cannot be held personally liable.

Accepted Answer

A) True 
 B)False

Question 3

There are two types of self-dealing in which officers and directors might engage.List and describe both types,as well as the penalty for doing so.

Accepted Answer

The first,business self-dealing,occurs w...

Question 4

When shareholders holding more than ________ percent of the outstanding shares are present,a quorum of shareholders exists.

Accepted Answer

A)  80
B)  50
C)  25
D)  60
E)  70F) A) and C)
G) A) and D)

Question 5

The Securities and Exchange Commission has established that any shareholder who owns more than ________ worth of stock in the corporation can submit proposals to be included in proxy materials.

Accepted Answer

A)  $4,000
B)  $5,000
C)  $2,000
D)  $1,000
E)  $3,000F) A) and E)
G) A) and B)

Question 6

Which of the following rights does not apply to corporate directors?

Accepted Answer

A)  The right of compensation
B)  The right of indemnification
C)  The right of obedience
D)  The right of participation
E)  The right of inspectionF) All of the above
G) C) and D)

Question 7

How many votes will the minority shareholders have in the election?

Accepted Answer

A)  10,000
B)  20,000
C)  4,000
D)  2,000
E)  6,000F) A) and B)
G) B) and E)

Question 8

What are the requirements for being a director?

Accepted Answer

Almost anyone can become a director.The ...

Question 9

Which of the following is false regarding officers of a corporation?

Accepted Answer

A)  Qualifications required of officers are set forth in the corporate articles and bylaws.
B)  Officers are executive managers.
C)  Officers run the day-to-day business of the corporation.
D)  The rules of agency do not apply to the work of officers.
E)  In most cases an individual may serve as both a director and an officer.F) A) and B)
G) All of the above

Question 10

Ursula is an executive at a corporation.She becomes angry at her co-owners and begins making bad investments,buying up companies she thinks will soon go bankrupt.When she is sued for a breach of fiduciary duty,can the business judgment rule protect her?

Accepted Answer

A)  Yes,because she was acting within the scope of her authority.
B)  No,because the business judgment rule does not apply to executives.
C)  Yes,because the business judgment rule protects directors and officers from being held accountable for bad decisions.
D)  No,because she did not act in good faith.
E)  No,because the business judgment rule is an exception to the fiduciary duty of board members.F) None of the above
G) C) and D)

Question 11

Shares that have a fixed face value noted on the stock certificate are referred to as Which of the following?

Accepted Answer

A)  Valued stock
B)  Par-value shares
C)  Watered stock
D)  No par-value shares
E)  No-valued stockF) D) and E)
G) A) and D)

Question 12

Under what circumstances are dividends illegal?

Accepted Answer

A)  If the dividends are paid when the company is insolvent.
B)  If they are paid over the objections of minority shareholders
C)  If they are paid to majority shareholders only
D)  If the payment violates the business judgment rule
E)  NeverF) B) and E)
G) B) and D)

Question 13

A director uses inside information to trade the corporation's stock for personal profit.Which of the following is true of the director's liability?

Accepted Answer

A)  He can be held responsible for violating the business judgment rule.
B)  He cannot be held responsible because the corporation provides immunity.
C)  He cannot be held responsible unless the board of directors prohibited his trades.
D)  He can be held responsible for breaching his fiduciary duty to the shareholders from whom the stock was purchased.
E)  He cannot be held responsible unless his trades hurt the company's value.F) A) and B)
G) B) and E)

Question 14

Which of the following may be issued to shareholders as proof of ownership in the corporation?

Accepted Answer

A)  Paper documentation
B)  Stock certificates
C)  Acknowledgement documents
D)  Stock acknowledgements
E)  Stock subscriptionsF) B) and D)
G) C) and E)

Question 15

A board of directors may take no action that benefits a director in his or her personal capacity.

Accepted Answer

A) True 
 B)False

Question 16

Prior to an annual meeting,which of the following items,containing proposals made by shareholders,are sent to shareholders?

Accepted Answer

A)  Proxy materials
B)  Meeting proposals
C)  Presidential materials
D)  Meeting agenda
E)  Officer materialsF) A) and D)
G) C) and D)

Question 17

Although some states allow for longer terms under certain circumstances,for how long do directors typically serve?

Accepted Answer

A)  Three years
B)  Five years
C)  Two years
D)  Four years
E)  One yearF) B) and E)
G) A) and B)

Question 18

Which of the following are directors who are not officers or employees of the corporation?

Accepted Answer

A)  Approved directors
B)  Unaffiliated directors
C)  Affiliated directors
D)  Inside directors
E)  Outside directorsF) C) and E)
G) B) and E)

Question 19

Which term describes the owners of a corporation?

Accepted Answer

A)  Officers
B)  The State
C)  Directors
D)  Affiliates
E)  ShareholdersF) All of the above
G) A) and B)

Question 20

Which of the following is false regarding corporate decisions that might personally benefit a particular director or officer?

Accepted Answer

A)  The director to benefit may vote on the issue although a majority of all directors must approve the transaction.
B)  There must be full disclosure of the interest by a director who might personally benefit from a corporate decision.
C)  The duty to disclose an interest that might personally benefit a director is a fiduciary duty.
D)  The duty to disclose an interest that might personally benefit an officer is a fiduciary duty.
E)  There must be full disclosure of the interest by an officer who might personally benefit from a corporate decision.F) C) and D)
G) B) and C)

Exam 39: Corporations: Directors, officers, and Shareholders

There are two types of self-dealing in which officers and directors might engage.List and describe both types,as well as the penalty for doing so.

Correct AnswerverifiedThe first,business self-dealing,occurs w...View AnswerShow Answer

What are the requirements for being a director?

Correct AnswerverifiedAlmost anyone can become a director.The ...View AnswerShow Answer

When shareholders holding more than ________ percent of the outstanding shares are present,a quorum of shareholders exists.

Correct AnswerverifiedShow Answer

Although some states allow for longer terms under certain circumstances,for how long do directors typically serve?

Correct AnswerverifiedShow Answer

A board of directors may take no action that benefits a director in his or her personal capacity.

Correct AnswerverifiedShow Answer

Which of the following are directors who are not officers or employees of the corporation?

Correct AnswerverifiedShow Answer

Which of the following is false regarding officers of a corporation?

Correct AnswerverifiedShow Answer

Which of the following rights does not apply to corporate directors?

Correct AnswerverifiedShow Answer

Prior to an annual meeting,which of the following items,containing proposals made by shareholders,are sent to shareholders?

Correct AnswerverifiedShow Answer

Which term describes the owners of a corporation?

Correct AnswerverifiedShow Answer

The Securities and Exchange Commission has established that any shareholder who owns more than ________ worth of stock in the corporation can submit proposals to be included in proxy materials.

Correct AnswerverifiedShow Answer

Which of the following is NOT true of shareholder liability?

Correct AnswerverifiedShow Answer

Which of the following may be issued to shareholders as proof of ownership in the corporation?

Correct AnswerverifiedShow Answer

How many votes will the minority shareholders have in the election?

Correct AnswerverifiedShow Answer

Ursula is an executive at a corporation.She becomes angry at her co-owners and begins making bad investments,buying up companies she thinks will soon go bankrupt.When she is sued for a breach of fiduciary duty,can the business judgment rule protect her?

Correct AnswerverifiedShow Answer

Shares that have a fixed face value noted on the stock certificate are referred to as Which of the following?

Correct AnswerverifiedShow Answer

A director uses inside information to trade the corporation's stock for personal profit.Which of the following is true of the director's liability?

Correct AnswerverifiedShow Answer

Which of the following is false regarding corporate decisions that might personally benefit a particular director or officer?

Correct AnswerverifiedShow Answer

Under what circumstances are dividends illegal?

Correct AnswerverifiedShow Answer

If a shareholder receives watered stock,they cannot be held personally liable.

Correct AnswerverifiedShow Answer

Correct Answer
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The first,business self-dealing,occurs w...
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Almost anyone can become a director.The ...
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