Chapter 47

Question 1

Minimum number of persons, shares represented, or directors who must be present at a meeting in order to lawfully transact business. This is a?

Answer 1

Quorum

Question 2

Rule that allows management immunity from liability for corporate acts where there is a reasonable indication that the acts were made in good faith with due care.

Answer 2

Business Judgement Rule (BJR)

Question 3

As owners, stockholders have the right to?

Answer 3

Control the corporation

Question 4

Stockholders right to control the corporation is limited to?

Answer 4

Voting at meetings to elect directors

Question 5

Meetings of shareholders (three types)

Answer 5

Regular Meetings
Special Meetings
Quorum

Question 6

Type of meetings held by shareholders, usually prescribed by the articles of incorporation or the bylaws

Answer 6

Regular Meetings

Question 7

Type of meetings held by shareholders, must be called and notice must be given that explains the purpose

Answer 7

Special Meetings

Question 8

A valid meeting, held by shareholders, that requires a minimum number of shareholders or people authorized to vote

Answer 8

Quorum

Question 9

Action without meeting (shareholders)

Answer 9

A number of statutes provide for corporate action without holding a meeting.

Action must be evidenced by a written consent describing the action taken, signed by shareholders entitled to vote and delivered to the corporation.

Question 10

Qualifications for the Board of Directors

Answer 10

Absent a contrary position, any person is eligible for membership.

Question 11

Bylaws may require that directors?

Answer 11

Own stock (not ordinarily imposed)

Question 12

Courts will not interfere with the board’s judgement in the absence of?

Answer 12

Illegale conduct or fraud

Question 13

A director is disqualified from taking part in corporate action when the director has?

Answer 13

An undisclosed conflict of interest

Question 14

SOX prevents

Answer 14

Virtually all loans to directors

Question 15

Meetings of Directors

Answer 15

Most states permit action without actual meeting

Question 16

Immunity from liability for corporate acts made in good faith with due care

Answer 16

Business Judgement Rule (BJR)

Question 17

Traditional rule (BJR)

Answer 17

Courts presume directors were informed, acted in good faith, and in the belief it was best for the corporation (in terms of liability)

Question 18

Application in Corporate Control Transactions (BJR)

Answer 18

Courts recognize potential for self-interest

Question 19

Protection of Directors (BJR)

Answer 19

States passed laws to reduce the risk of personal liability for directors who act in good faith.

Question 20

Actions against Directors:

Answer 20

Actions should be brought by corporation. If not, then by shareholders.

Question 21

Removal of Director

Answer 21

Ordinarily done by vote of shareholders. RMBCA provides for removal ‘with or without cause’.

Question 22

Officers are the ________ of a corporation.

Answer 22

Agents

Question 23

Officer’s powers are controlled by?

Answer 23

The laws of agency

Question 24

Their responsibilities are often based on whether or not there is also a CEO.

Answer 24

The President

Question 25

Other Officers and Employees of Corporations

Answer 25

Authority of employees and other officers is limited to the duties of their office.

Question 26

Corporate Opportunities (relating to fiduciary duties)

Answer 26

If officer diverts an opportunity, the corporation may recover the lost profits

Question 27

Secret Profits (relating to fiduciary duties)

Answer 27

Officers liable to the corporation for secret profits made in connection with the corporate business

Question 28

Duty of Loyalty (relating to fiduciary duties)

Answer 28

Breach of loyalty to recruit management to a competing company while still employed

Question 29

Agents and Employees

Answer 29

Same rules as when the principal or employer is a natural person. Governed by general agency principles.

Question 30

Executive Compensation Under Dodd-Frank

Answer 30

Section 951-Say on Pay Section 952-Compensation Committee Section 953-Pay for Performance Section 954-Recovery of Erroneously Awarded Compensation

Question 31

Section 951-Say on Pay

Answer 31

Shareholders must approve or disapprove executive compensation

Question 32

Section 952-Compensation Committee

Answer 32

Companies listed on national exchanges must have independent committees

Question 33

Section 953-Pay for Performance

Answer 33

Executive Compensation Disclosures

Question 34

Section 954-Recovery for Erroneously Awarded Compensation

Answer 34

Proposed, would require claw-back provisions

Question 35

Corporate management is not liable for economic consequences if?

Answer 35

Decision made in good faith

Question 36

Corporate management is generally not liable for loss caused by the negligent performance of their duties but...

Answer 36

A derivative suit may be filed by shareholders

Question 37

(In regard to corporate management) Personal responsibility will attach when?

Answer 37

An officer personally participates in a tort

Question 38

Active participation in criminal acts (corp. officers)

Answer 38

Personally responsible even when they act on behalf of the corporation

Question 39

Responsible Corporate Officer Doctrine

Answer 39

Says an officer may be criminally liable under a number of statutes for failure to prevent a crime

Question 40

Criminal liability of the corporation itself

Answer 40

Corporation may be convicted of a crime if its agent acted within the scope of authority

Question 41

Punishment of Corporation (criminal liability)

Answer 41

Fines

Question 42

Indemnification of Officers, Directors, Employees and Agents (criminal liability)

Answer 42

As long as they act in good faith

Question 43

Liability for Corporate Debts

Answer 43

Not liable even if their actions caused the debts

Question 44

Protection of Shareholders

Answer 44

Against misconduct by management

Question 45

Civil Liability of the Corporation

Answer 45

Liable to a third party if an agent causes injury