Business Law: Chapter 22

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  1. True or False?

    Federal securities law does not require that target corporations assist aggressors in any way.
  2. ____________ are outside directors who have business contacts with the corporation.
    Affiliated directors
  3. True or False?

    Directors and officers have a fiduciary duty of care.
  4. In a hostile takeover situation, what does the term "going private" reference?
    A leveraged buyout
  5. What is needed in order for a business to qualify as an S corporation?
    • 1. No more than 100 shareholders
    • 2. Only individuals, trusts, and in some circumstances corporations as shareholders.
  6. Death of a corporation occurs in which of the following phases?
    Dissolution and liquidation
  7. 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. What is an option to Garrett in regard to a lawsuit against the supplier?
    A shareholder's derivative suit
  8. What are outside directors who do not have business contacts with the corporation?
    Unaffiliated directors
  9. What is a term for stock issued to individuals below its fair market value?
    Watered stock
  10. A _______________ corporation is a corporation created by the government to help administer law.
  11. When a corporation is incorporated, the secretary of state usually issues a[n] _______________, a document certifying that the corporation is incorporated in the state and is authorized to conduct business.
    Certificate of incorporation
  12. In a merger situation, what is a term for the corporation that does not continue to exist?
    The absorbed corporation
  13. How is the number of corporate directors determined?
    According to the corporate articles or bylaws in compliance with state law.
  14. Reference - Machine Malfunction. Bruno, the president of a corporation operating work out facilities, convinced the board of directors to approve a large purchase of a type of fitness machine called "Perfect Body." Bruno had carefully investigated the machine and did a presentation to the board on its purported benefits. Unfortunately,
    after the purchase, it was announced that "Perfect Body" was actually a very dangerous machine that should not be used. The manufacturer of "Perfect Body" went bankrupt, and the corporation lost $200,000 on the purchase of the machines. The shareholders are furious and want to sue
    Bruno and the directors. The board of directors agrees to allow Frances, the ringleader of the shareholders, to purchase stock of the company at below its fair market value. She purchases a considerable amount of stock on that basis, but says that the shareholders plan to continue with an action against Bruno and the board members. Which of the following is true regarding liability of Frances, if any, for purchasing the stock at below its fair market value?
    She is liable for paying the difference between the price she paid for the shares and the stated corporate value of the shares.
  15. True or False?

    A corporation must be dissolved if over 50% of the shareholders die.
  16. True or False?

    Courts have refused to find that corporations have rights under the U.S. Constitution.
  17. How are directors chosen after incorporation?
    By majority vote of the shareholders.
  18. True or False?

    When directors or officers violate their duty of loyalty, they are self-dealing.
  19. If the incorporator or promoters make an error or omission during the incorporation process, courts may rule that the organization is not a corporation, in which case the organization is a[n] ____________
  20. While ordinary decisions made by directors require a __________ vote, more important decisions sometimes require a  __________ vote.
    Majority; two-thirds
Card Set:
Business Law: Chapter 22
2015-03-09 00:08:16
Business Organizations

Business Organizations
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