Question

1. Directors and officers are not prohibited from entering into transactions with the corporation.

		true
		false

2.A basic principle of corporation law is that:

here is an established market for the stock.

3.Vacancies on the board can be filled:

		a.by appointment by the chief executive officer of a corporation
b.		only by a vote of the shareholders
		c.by appointment by the chairperson of the board
d.		only by a vote of the corporation's employees

4.A corporation is liable for all torts committed by its employees while acting in the course of and within the scope of their employment.

		true
		false

5. Which of the following types of corporations sells shares to people who often have little interest in it except as investors?

		a.nonprofit corporations
b.		close corporations
c.		municipal corporations
d.		publicly held corporations

6.The traditional judicial rule is that the court will pierce the corporate veil when the corporation has been dominated by one or more of its shareholders and the domination has resulted in an improper purpose.

		true
		false

7.Scott was a member of the board of directors of Buffalo Corporation. Officers of Buffalo were considering the purchase of new equipment to produce a new product. The board of directors had not been consulted about the new venture, but Scott found out about the plan and objected to its implementation. He sought to inspect the corporate books and records to gain factual information supportive of his position. The officers refused his inspection request, asserting that Scott had no management function or power. Under these circumstances, Scott:

a.

is barred from examination of the books and records of the corporation under the business judgment rule.

b.

has the right to inspect corporate books and records, as information regarding the corporation and its affairs is essential to perform his duties.

c.

is barred from examination of the books and records of the corporation under the doctrine of respondeat superior.

d. has the right to inspect corporate books only if he is also a majority shareholder

8.As a general rule, corporations are required to compensate promoters for the services they render during the preincorporation process.

		true
		false

9.Which of the following states has traditionally been considered attractive for incorporation?

		Idaho
		New York
		California
		Delaware

10.

Who are the owners of the corporation?

Board of directors

Employees

CEO & CFO

Shareholders

11.

What is generally required for fundamental changes in the corporation?

Novation

Estoppel

Board Initiative

Referendum

12.

Close corporation shares are seldom intended to be sold to the public at large.

true

false

13.

When a corporate manager makes an honest error in judgment, the business judgment rule directs that the manager will:

be liable for corporate losses.

not be liable and a court will step in to correct the manager's mistake.

not be liable if he acted with care and in good faith.

be liable for losses that can be directly tied to the manager's mistake.

14.

According to the Model Business Corporation Act (MBCA), which of the following is an optional content that could be included in the articles of incorporation?

Name of the corporation

Name and address of each incorporator

The number of shares of capital stock that the corporation shall have authority to issue

The purpose of the corporation

15.

Most incorporated businesses are close corporations.

true

false

16.

As a general rule, promoters are not liable for contracts they make on behalf of corporations that are not yet formed.

		true
		false

Answer 1

1) True

The law does not prohibit directors and officers from entering into transaction with the corporation. However, if the transaction is unfair to the corporation, then also it may be permitted, provided that a full disclosure of such personal interest is made and the disinterested members of the board or shareholders approve such transaction.

2) here is an established for the stock

3) b. Only by a vote of shareholders

4) True

Under respondeat superior, the employer is liable for all acts or omissions of an employee as long as the employee acts within the course and scope of employment.

5) d. publicly held corporations