Question

1.Which best describes the business judgment rule?

a. A fiduciary duty that requires directors to be experts.

b. A fiduciary duty imposed on shareholders who elect directors.

c. A rule that is applicable only if it is set forth in the corporate bylaws.

d. A rule designed to protect directors from personal liability.

2.Which of the following is true with respect to dividends?

a. There are some restrictions on the board of directors with respect to declaring dividends.

b. Nonprofit corporations are allowed to declare reasonable dividends.

c. Shareholders have an absolute right to dividends.

d. Bondholders receive dividends.

Answer 1

1. Business judgement rule will be protecting the directors from their personal liability because it is protecting them from shareholders who are suing these corporate directors for breach of duty or care.

All the other this statement are false because it does not require director to be expert or it does not required share holder to elect director.

Correct answer is option (d)

2. There are restriction on the board of directors with respect of declaration of the dividend because these board of director cannot completely declared the dividend without looking after the profits which have been made by the company.

Correct answer will be option( A)