CORPORATE 04

Question 1

Annual Shareholders’ Meeting

Answer 1

A meeting of the shareholders of a corporation that msut be ehld by the corporation to elect directors and to vote on other matters.

Question 2

Special Shareholders’ Meetings

Answer 2

Meetings of shareholders that may be called to consider and vote on important or emergency issues, such as a proposed merger or amending the articles of incorporation.

Question 3

Proxy

Answer 3

A written document that sharholder signs, authorizing another person to vote on his or her shares at the shareholders’ meeting in the event of the shareholder’s absence.

Question 4

Record Date

Answer 4

A date specified in corporate bylaws that determines whether a shareholder may vote at a shareholders’ meeting.

Question 5

Quorum

Answer 5

The required number of shares that must be represented in person or by proxy to hold a shareholders’ meeting. The RMBCA establishes a majority of outstanding shares as a quorum.

Question 6

Straight Voting

Answer 6

A system in which each shareholder votes the number of shares she owns on candidates for each of the positions open.

Question 7

Cumulative Voting.

Answer 7

A system in which a shareholder can accumulate all of her votes and vote them all for one candidate or split them amont several candidates.

Question 8

Supramajority voting requirement.

Answer 8

A requirement that a greater than majority of shares constitutes a quoum of the vote of the shareholders.

Question 9

Voting Trust

Answer 9

An arrangement in whihc the shareholders transfer their stock certificate to a trusteewho is empowered to vote the shares.

Question 10

Shareholder Voting Agreement

Answer 10

An agreement between two or more shareholders that stipulates how they will vote their shares.

Question 11

Right of First Refusal

Answer 11

An agreement that requires a selling shareholder ot offer her shares for sale to the other parties to the agreement before selling them to anyone else.

Question 12

Buy-and-Sell Agreement

Answer 12

An agreement that requires selling shareholders to sell their shares to the other shareholders or to the corporation at the price specified in the agreement.

Question 13

Preemptive Rights

Answer 13

Rights that give existing shareholders the option of subscribing to new shares being issued in proportion to their current ownership interests.

Question 14

Annual Report

Answer 14

A report provided by shareholders that contains a balance sheet, an income statement, and a statement of changes in shareholder equity.

Question 15

Dividend

Answer 15

A distribution of profits of the corporation to shareholders.

Question 16

Stock Dividend

Answer 16

Additional Shares of stock distributed as a dividend.

Question 17

Derivative Lawsuit

Answer 17

A lawsuit a shareholder brings agains an offending party on behalf of a corporation when the corporation fails to bring the lawsuit.

Question 18

Piercing the Corporate Veil

Answer 18

A doctrine that states that if a shareholder dominates a corporation and uses it for improper purposed, a court of equity can disregard the corporate entity and hold the shareholder personally liable for the corporation’s debts and obligations.

Question 19

Board of Directors

Answer 19

A panel of decision makers who are elected by the shareholders

Question 20

Inside Director

Answer 20

A member of the board of directors who is also an officer of the corporation.

Question 21

Outside Director

Answer 21

A memeber of a board of directors who is not an officer of the corporation.

Question 22

Quorum

Answer 22

The number of directors necessary to hold a board meeting or transact business of the board.

Question 23

Officers

Answer 23

Employees of a corporation who are appointed by the board of directors to manage the day-to-day operations of the corporation.

Question 24

Duty of Obedience

Answer 24

A duty that directors and officers of a corporation have to act within the authority conferred upon them by state corporation codes, the articles of incorporation, the corporate bylaws, and the resolutions adopted by the board of directors.

Question 25

Fiduciary Duties

Answer 25

The duties of obedience, care and loyalty owed by directors and officers to their corporation and its shareholders.

Question 26

Dury of Care

Answer 26

A duty of corporate directors and officers to use care and diligence when acting on behalf of the corporation.

Question 27

Negligence

Answer 27

Failure of a corpoate director or officer to exercise the duty of care while condcting the corpoation’s business.

Question 28

Business Judgement Rule

Answer 28

A rule that says directors and officers are not liable to the corporation or its shareholders for honest mistakes of judgment.

Question 29

Duty of Loyalty

Answer 29

A duty that directors and officers have not to act adversly to the interests of the corporation and to subordinate their personal interests to those of the corporation and its shareholders.