Corporations

Question 1

The be validly filed, a corporation must file (i) ______ of ______ that include the (ii) _______ of the corporation, (iii) ______ of authorized shares; (iv) names and addresses of ___________ and of the registered agent, and (v) may limit the corporations _____.

Answer 1

(i) articles of incorporation; (ii) name; (iii) number; (iv) incorporators; (v) purposes

Question 2

If a person acts on behalf of a corporation, knowing there is no valid corporation, that person is personally (i) ______. If however, there is (ii) ________ compliance with the incorporation statute and an exercise of (iii) corporate ________, there may be no liability.

Answer 2

(i) liability; (ii) colorable; (iii) privileges

Question 3

If a third party treats an entity as a corporation, it is (i) __________ from from claiming personal liability against an agent, if there is no valid corporation

Answer 3

(i) estopped

Question 4

A court may allow a plaintiff to pierce the corporate veil if the owners do not treat the corporation as a separate entity (i) (______ ___ doctrine), if the corporation was (ii) _______ capitalized at the outset, or if the use of the corporate form is meant to perpetrate a (iii) fraud.

Answer 4

(i) alter ego; (ii) inadequately; (iii) fraud

Question 5

Shareholders of record date can vote at the (i) ______ meeting, and (ii) regarding any __________ corporate changes.

Answer 5

(i) annual; (ii) fundamental

Question 6

A written proxy can be valid for at most (i) ______ months; it is generally revocable unless expressly provided otherwise and coupled with an (ii) ______ / __________; it may be implicitly revoked by (iii) _______ at a vote.

Answer 6

(i) eleven; (ii) security / consideration; (iii) attendance

Question 7

Shareholder (i) ____ trusts are valid in most states for up to (ii) ___ years, but are not renewable.

Answer 7

(i) voting; (ii) ten

Question 8

A prkemitpve stock right tis the right to (i) _____ shares to maintain proportionate ownership. it does not apply to shares issued as compensation, for other non-cash consideration, within six months of incorporation, or nonvoting shares with a distribution preference.

Answer 8

(i) preemptive

Question 9

A (i) _______ suit is to enforce the right of the shareholder. A (ii) _____ suit is to enforce the right of the corporation.

Answer 9

(i) direct; (ii) derivative

Question 10

To bring a derivative suit, the shareholder must have owned shares at the time of the alleged wrong, maintain ownership throughout the suit, and (i) _______ the board to bring suit. If a majority of independent directors determine in (ii) _______ _______ that the suit is not in the interest of the corporation, it can elect not to pursue it.

Answer 10

(i) demand; (ii) good faith

Question 11

There is no right to receive a (i) __________ from the corporation. If the board declares a dividend, the corporation must be (ii) _________, it must pay dividends in order of (iii) __________.

Answer 11

(i) dividend; (ii) solvent; (iii) preference

Question 12

The (i) _____ ________ rule generally protects directors from personal liability, so long a they act in (ii) _____ ______, with the (iii) _______ that an ordinarily prudent person in their position would use, and in a manner (iv) _______ believed to be in the interest of the corporation. Directors may defend with reasonable __________ on opinions, reports, etc., prepared by experts/employees.

Answer 12

(i) business judgment; (ii) good faith; (iii) care; (iv) reasonably; (v) reliance

Question 13

Articles may limit director personal liability, except: (i) breach of __________ (improper personal benefit), (ii) unlawful ___________, and intentional (iii) _______ or (iv) _______ acts.

Answer 13

(i) loyalty; (ii) distributions; (iii) torts; (iv) criminal

Question 14

If a Director has an interest in a transaction with the corporation, to be valid, the Director must (i) ______ all ________ facts, and the transaction must be (ii) ______ by a majority of ________ directors; OR if the deal was (iii) ______ to the corporation.

Answer 14

(i) disclose all material; (ii) uninterested; (iii) fair

Question 15

A director may not divert to himself a business (i) ________ within the corporation’s line of business without first giving the corporation the opportunity to act. If the director does (ii) ________ corporation opportunity, the remedy is to recover the Director’s (iii) ___________, or convey the opportunity to the corporation.

Answer 15

(i) opportunity; (ii) usurp; (iii) profits

Question 16

Generally, a fundamental corporate change (amendment to the articles, mergers, share exchanges, or disposition of substantially all assets) requires a (i) _______ resolution, (ii) ________ to shareholders, (iii) shareholder __________, and (iv) Articles of Change filed with the State Secretary of State.

Answer 16

(i) board; (ii) notice; (iii) approval

Question 17

A shareholder in a closely held (not public, not traded0 corporation that opposes a fundamental change has the right to seek (i) ________. They must give (ii) _______ to the corporation of their intent to demand appraisal (before fundamental change vote); (iii) not vote in _____ of the change, and (iv) demand ___________ after the change is approved.

Answer 17

(i) appraisal; (ii) notice; (iii) favor; (iv) payment

Question 18

If a corporation winds down and distributes assets to shareholders, subsequent claims can be assessed against shareholders for their (i) ____ _____ ownership; generally, as long as dissolution is published, claims are limited to (ii) ______ years following wind-up.

Answer 18

(i) pro rata; (ii) five

Question 19

A corporation may exist (i) _______ (forever). A “C” corporation is taxed (ii) ______ from owners. An “S” corporation allows for (iii) ____-through taxation (like Partnerships). An S Corp is limited to (iv) _______ shareholders.

Answer 19

(i) perpetually; (ii) separately; (iii) pass; (iv)

Question 20

If a corporation’s annual meeting is not held within the earlier of (i) ____ months after the end of the corporation’s fiscal year or (ii) ______ months since its last annual meeting, a (iii) ______ may order the meeting to be held.

Answer 20

(i) six; (ii) fifteen; (iii) court

Question 21

Note of a shareholder’s meeting must be given to shareholders with no fewer than (i) _______ days and moo more than (ii) ____ days.

Answer 21

(i) ten; (ii) sixty

Question 22

Restrictions on the sale of stock must be (i) _______-. A 3d-party purchase is bound by the provisions if the restriction is (ii) _____ ______ (on the certificate), or if the purchaser had (iii) _______ of the restriction at the time of purchase.

Answer 22

(i) reasonable; (ii) conspicuously noted; (iii) knowledge

Question 23

Under the MCBA, a shareholder may insect the corporations books, papers, accounting, etc., with (i) ___ day’s proper written notice.

Answer 23

Five

Question 24

A derivative suit settlement requires (i) _______ approval.

Answer 24

(i) court

Question 25

Upon termination of a derivative action, the court may order the corporation to pay the plaintiff’s (i) ______ ______. If, however, the court finds the suit was improper, it may order the plaintiff to pay the corporation’s (ii) ______ _______.

Answer 25

(i) reasonable expenses; (ii) reasonable expenses

Question 26

(i) ________ dividends/distributions are not subject to the solvency test.

Answer 26

(i) Share

Question 27

After declaration, holders of a dividend distribution have the same priority as (i) _______ of the corporations for claims.

Answer 27

(i) unsecured creditors

Question 28

A director who authorizes an insolvent distribution may be (i) ______ liable, however, he can defend with the defense that he acted in (ii) ____ ______, in (iii) _______ on the financial statements and information of experts.

Answer 28

(i) personally; (ii) good faith; (iii) reliance

Question 29

When the business judgment rule is in effect, the (i) ________ has the burden of showing that the directors did not meet the statutory standard.

Answer 29

(i) plaintiff

Question 30

To overcome a conflicted transaction, a broad member can disclose all (i) ______ ________ and submit the transaction to approval by a majority of uninterested directors (at least two) or (ii) a majority of disinterested _______.

Answer 30

(i) material facts; (ii) shareholders

Question 31

The presence of an interested director at a vote to approve a conflicted transaction is (i) _______.

Answer 31

(i) irrelevant.

Question 32

Lack of corporate financing available is not a defense to (i) _________.

Answer 32

(i) usurpation / duty of loyalty

Question 33

Officers must conduct their duties in (i) ____ _____ with the care of an ordinarily (ii) ______ _______ in their position, in what they (iii) ______ ________ to be in the best interests of the corporation.

Answer 33

(i) good faith, (ii) prudent person; (iii) reasonably believe

Question 34

Unless noted by the articles, a corporation must (i) ____ a director who prevails in defending a proceeding against the officer or director, paying reasonable expenses.

Answer 34

(i) indemnify

Question 35

Appraisal remedies are not available to shareholders of (i) _______-traded corporations, or corporations with at least (ii) _______ shareholders and the class-shares have a value greater than (iii) __________ million.

Answer 35

(i) publicly; (ii) 2,000; $20