Business Structure - Rights, Duties, Legal Obligations Authority of Owners and Management

Question 1

The Revised Model Business Corporation Act gives stockholders

Answer 1

the right to inspect the books and records with five days’ written notice

Question 2

a derivative lawsuit

Answer 2

is when the shareholders have the right to sue on behalf of the corporation if the corporation fails to sue after being harmed

Question 3

A partnership’s interest

Answer 3

is not assignable to creditors

Question 4

The business judgment rule protects the directors from shareholder lawsuits alleging a lack of due care on the part of the directors in carrying out the corporation’s business. This rule applies

Answer 4

1) when the board makes an informed decision,
2) when there is no conflict of interest, and
3) when there is a rational basis for the board’s decision.

Question 5

Cumulative voting

Answer 5

allows a particular shareholder to cast all of his/her votes held for a single individual; thus, minority shareholders are provided a greater voice in electing directors who will represent their interests

Question 6

Respondeat superior

Answer 6

is a legal doctrine that considers the employer to be responsible for the actions of employees performed within the course of their employment (Master-servant rule)