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Exam 22: Corporations: Formation and Organization

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Question 31

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Corporate directors typically serve lifetime appointments.

A) True
B) False

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Question 32

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Corporations commit ultra vires acts most frequently when they create contracts outside the scope of their powers.

A) True
B) False

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Question 33

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Closely held corporations generally offer stock for sale to the general public.

Which of the following is a corporation created by the government to help administer law?

Because a stock certificate is a negotiable instrument similar to currency,if a stock certificate is destroyed (for example,by fire),the shareholder's ownership in the corporation terminates.

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

Death of a corporation occurs through which of the following phases?

Owners of ________ stock enjoy preferences with respect to assets and dividends.

An S corporation has the tax status of a partnership.

________ directors are outside directors who do not have business contacts with the corporation.

Set forth the ways discussed in the textbook in which the directors and officers of Enron failed in their duty of care.

Kite Sales.Wendy is president of ABC Kites,a business that manufactures kites.Her company's kites are sold to large toy stores.After Wendy learned a great deal about kites,she started to make kites at home and to promote them to large toy stores.She also started selling kites to friends.Some of the directors learned about her kite sales and accused her of wrongdoing.Wendy denied any wrongdoing.What remedy,if any,will be imposed on Wendy for her home kite sales?

A de facto corporation has not substantially met the requirements of the state incorporation statute,and as a result,courts do not recognize it as a corporation for most purposes.

ABC Corporation suffered damages when a supplier failed to deliver as agreed.The president of ABC did not institute suit as Garrett,a major shareholder,believed was proper.Garrett complained to the board of directors,but they refused to do anything.Which of the following is an option to Garrett with regard to a lawsuit against the supplier?

Directors and officers are self-dealing when they make decisions that violate their corporate duty of loyalty.

Which of the following rights give preference to shareholders to purchase shares of a new issue of stock?

Shaky Bicycles.Rhonda,an incorporator who filed the articles of incorporation for ABC Corporation,a corporation set up to sell bicycles,listed the correct town and street but incorrectly put the wrong street number in the document.Helen,a manufacturer of bicycle parts,had sold a number of parts to ABC Corporation.Unfortunately,the corporation was not making any profit,and Helen was not paid in a timely manner.Rhonda told her that the corporation was not liable because it was not validly formed due to the address mistake.Bernice,another creditor of ABC Corporation,also claimed that a shareholder of Shaky Bicycles,Slick,was personally liable to her.Bernice alleged that Slick committed fraud against her when he told her that ABC Corporation was making large amounts of money,that if she would only lend $50,000 to the corporation he would marry her,and that the corporation would make so much money that she would be wealthy in six months.She made the loan,but the corporation has been unable to repay her.Slick told her that he is sorry,but that her only avenue of recovery is through the corporation.Assuming ABC's corporate status is in place,which of the following is Bernice's best theory in order to hold Slick personally liable to her?

A court may find a corporate officer criminally liable regardless of the extent to which the officer took part in the criminal activity.

A corporation must be incorporated in the state in which it has its principal place of business.

As a general rule,shareholders of a corporation can freely transfer their corporate shares.