Chapter 21 - Corporations

Question 1

Promoter

Answer 1

Someone who organizes a corporation

Question 2

Adopt

Answer 2

Agree to be bound by terms of a contract

Question 3

Novation

Answer 3

A new contract

Question 4

Incorporation Process

Answer 4

Firm can do business in any state even if it does not reside in that state

Question 5

Domestic Corporation

Answer 5

When company establishes in the state in which it was formed

Question 6

Foreign Corporation

Answer 6

When company operates in the state where it is not incorporated

Question 7

Registered Agent

Answer 7

Someone hired by a business to serve as its official presence in the state

Question 8

Incorporator

Answer 8

Person who signs charter and files it to secretary of state

Question 9

Treasury Stock

Answer 9

Stock that a company has sold, but later bought back

Question 10

Minute Book

Answer 10

Book that contains summary of corporation’s official actions

Question 11

Bylaws

Answer 11

Document specifying rules of an organization

Question 12

Quorum

Answer 12

Percentage of stock that must be represented for a meeting to count

Question 13

Winding Up

Answer 13

Officers of corporation pay their debts and distribute remaining property to shareholders

Question 14

Piercing the Corporate Veil

Answer 14

Court holds shareholders personally liable for debts of the corporation

Question 15

Business Judgement Rule

Answer 15

Managers have an affirmative duty to protect the interests of shareholders and the corporation

Question 16

Activist Investor

Answer 16

Shareholder with a large block of stock whose goal is to influence management decisions and strategic direction

Question 17

Right To Information

Answer 17

Shareholders acting in good faith and with proper purpose have right to inspect corporation documents

Question 18

When must a corporation seek a shareholder vote?

Answer 18

Charter amendments, mergers, sale of major assets, dissolution

Question 19

Proxy

Answer 19

Person whom a shareholder appoints to vote for them at a corporation meeting

Question 20

Proxy Statement

Answer 20

Information a company provides to shareholders in preparation for annual meeting

Question 21

Plurality Voting

Answer 21

To be elected, a candidate only needs to receive more votes than his opponent

Question 22

Majority Voting

Answer 22

Directors must resign if more than half the shares that vote withhold their vote from them

Question 23

Zombie Directors

Answer 23

Directors who serve on a board with less than majority support from shareholders

Question 24

Independent Directors

Answer 24

Members of the board of directors who are not employees of the company and do not have close ties with the CEO

Question 25

Inside Directors

Answer 25

Members of board of directors who are also employees of the corporation

Question 26

Net Returns on Invested Capital

Answer 26

Company’s return on capital investment, such as plant and equipment

Question 27

Clawback Policy

Answer 27

Public company must establish to ensure CEO reimburses company any bonuses they received for flawing financials