Final Exams Flashcards
1
Q
- An agency relationship cannot be found in the absence of express or implied authority
A. True
B. False
A
B. False
2
Q
- An agency relationship may be created by
A. Consent of the principal alone
B. Consent of the agent alone
C. By the mutual manifestation of consent of the principal and agent even without an enforceable contract
D. All of the above
E. None of the above
A
C. By the mutual manifestation of consent of the principal and agent even without an enforceable contract
3
Q
- An agent does not owe fiduciary duties to his or her principal unless there is an express contractual provision creating these duties
A. True
B. False
A
B. False
4
Q
- An association of two or more persons who as co-owners carry on a business for profit is a partnership unless some other statutory form of doing business has been complied with
A. True
B. False
A
A. True
5
Q
- A common law general partnership offers which, if any, of the following attributes:
A. Limited liability for its partners
B. Mandated centralized management
C. Owner Control
D. All of the above
E. None of the above
A
C. Owner Control
6
Q
- There is no such thing as a common law limited partnership.
A. True
B. False
A
A. True
7
Q
- Under the common law and the older version of the Uniform Partnership Act, partners:
A. Are agents of the partnership
B. Can dissolve the partnership even if in breach of the partnership agreement
C. May bind the partnership in matters in the ordinary course of business
D. All of the above
E. Only 1 and 3 above
A
D. All of the above
8
Q
- A limited liability company’s (LLC) member’s intrusive active participation in day-to-day management of the company’ business can, without more, result in the loss of the owner’s limited liability.
A. True
B. False
A
B. False
9
Q
- A limited partnership (LP) offers which, if any, of the following advantages:
* A. Limited liability for its limited partners only
* B. Mandated centralized management
* C. Must have at least one general partner
* D. All of the above
* E. None of the above
A
D. All of the above
10
Q
- Limited liability partnerships were not recognized at common law.
A. True
B. False
A
A. True
11
Q
- Under the law of most states, with respect to any corporation, corporate shareholders may amend the bylaws to authorize a new class of stock.
A. True
B. False
A
B. False
12
Q
- As a general rule, courts recognize common law corporations
A. True
B. False
A
B. False
13
Q
Preincorporation promoter transactions are automatically adopted by the corporation when formed
A. True
B. False
A
B. False
14
Q
Once a corporation is formed a preincorporation promoter is automatically released of any liability to third parties.
A. True
B. False
A
B. False
15
Q
The lawyer for the company forgot to file Ebony Inc.’s initial articles of incorporation with the secretary of state. There are now large liability claims being brought against Ebony, Inc. and its two shareholders. These claims involve leases signed at a time when the two shareholders mistakenly thought that the company had been incorporated. The two shareholders did not have knowledge of the failure to file the articles of incorporation. On the basis of the foregoing facts and under the Model Business Corporation Act the two shareholders will:
A. Subject to removal by the board of directors
B. Be liable under common law standards of ultra vires
C. Both 1 & 2
D. Clearly be jointly and severally liable for the acts of the defective corporation
E. None of the above
A
E. None of the above
16
Q
- Directors may issue only those shares that are authorized in the articles of incorporation.
A. True
B. False
A
A. True
17
Q
Corporations do not need express authorization in the articles of incorporation to issue bonds
A. True
B. False
A
A. True
18
Q
- Equitable subordination can impose unlimited personal liability on shareholders who hold corporate notes and/or bonds
A. True
B. False
A
B. False
19
Q
- The Model Business Corporation Act no longer recognizes “ultra vires” in any respect
A. True
B. False
A
B. False
20
Q
Which if any of the following are ultra vires for a corporation under the Model Business Corporation Act?
A. Entering into partnership agreements with other corporations or persons
B. Guaranteeing debts of others
C. Making contributions to charitable entities
D. All of the above are ultra vires
E. None of the above are ultra vires
A
E. None of the above are utlra vires
21
Q
.Corporations’ only social responsibility is to make money for its shareholders
A. True
B. False
A
B. False
22
Q
Courts may make gifts to non-charitable private parties who do not work for the corporation.
A. True
B. False
A
B. False
23
Q
As a general proposition, a corporation’s Chief Executive Officer ordinarily has the implied authority to bind his or her corporation to a merger.
A. True
B. False
A
B. False
24
Q
A corporation’s board of directors ordinarily has the implied authority to bind his or her corporation to a merger.
A. True
B. False
A
B. False
25
Under the law of most states, a vote of at least a majority of a quorum of a board of directors is required for approval of ordinary matters that come before the board, unless the bylaws or articles (or certificate) of incorporation provide that a higher vote is required.
A. True
B. False
A. True
26
Duke, Inc.’s articles of incorporation and bylaws call for a 10-member board of directors. Three directors resigned. A board meeting was duly called and noticed, at which 5 of the 7 remaining directors appeared. Each of the 5 directors present at the board meeting voted in favor of declaring a dividend to be paid to all common shareholders. Was this action validly taken under the law of most states?
A. Yes
B. No
B. No
27
Individual, specific, and detailed written notice is generally required for each regular board of directors meeting
A. True
B. False
B. False
28
The Blue Devil, Inc. board of directors held an emergency meeting to reduce the dividends as compared to the previous quarter. No written notice of the meeting was given to the directors. All of the directors voted on the matters presented to the meeting. Based solely on these facts, without any additional facts, a shareholder does not have a clear case for challenging the actions taken.
A. True
B. False
A. True
29
It is a good idea to have the same person serve as secretary and president.
A. True
B. False
B. False
30
The title of president by itself is likely to create apparent and implied authority
A. True
B. False
A. True
31
The title of vice president by itself is likely to create apparent and implied authority
A. True
B. False
B. False
32
Failure to inform oneself may deny a director of his/her/their ability to invoke the business judgment rule.
A. True
B. False
A. True
33
A Delaware or Model Act corporation may adopt a provision in its certificate (or articles) of incorporation to limit or eliminate damages for breaches of the duty of care on the part of the company's directors.
A. True
B. False
A. True
34
A Delaware or Model Act corporation may adopt a provision in its certificate (or articles) of incorporation to limit or eliminate damages for breaches of the duty of loyalty on the part of the company's directors.
A. True
B. False
B. False
35
Under the law in most states, transactions by interested directors are not voidable solely because of the interest if, after full disclosure has been given, statutorily specified cleansing votes have been approved by a majority of independent directors or shareholders.
A. True
B. False
A. True
36
A self-interested director may legitimately remain silent at a directors’ meeting even when he/she/they knows a contract is unfair to the corporation, so long as he/she/they do not vote on the contract.
A. True
B. False
B. False
37
The person challenging a self-dealing transaction has the burden of proving unfairness
A. True
B. False
B. False
38
An exculpatory clause in the articles cannot effectively absolve an officer of liability for improperly taking a corporate opportunity
A. True
B. False
A. True
39
1. Staggered elections for the board of directors:
A. Are not permitted under the law of most states
B. Can facilitate continuity on the board
C. May diminish the impact of cumulative voting right
D. Both (2) and (3) are correct.
E. None of the above
D. Both (2) and (3) are correct
40
As a general rule, a corporation may refuse to reimburse incumbent management’s reasonable proxy expenses when management is ousted because of a challenger who successfully wins the overwhelming majority in a shareholder vote.
A. True
B. False
B. False
41
With respect to a controlling shareholder in a closely held corporation, many court decisions impose fiduciary duties that are more stringent than those found in publicly held corporations.
A. True
B. False
A. True
42
Shareholder pooling or other voting agreements are permitted by most states without complying with the applicable voting trust statute.
A. True
B. False
A. True
43
A proxy that is coupled with an interest
A. Fraudulent if not publicly disclosed
B. Illegal in most states
C. In conflict with most voting trust statutes.
D. The only proxy permissible for directors at directors’ meetings.
E. None of the above
E. None of the above
44
In most states, including in North Carolina, the reasonable expectations of a minority shareholder in a close corporation must be stated explicitly in writing in order to be enforced
A. True
B. False
B. False
45
A court will order involuntary dissolution of a corporation only if the majority shareholders have breached a contractual or fiduciary duty to the minority shareholders.
A. True
B. False
B. False
46
The SEC's proxy rules require companies with publicly held securities to include any shareholder proposal in management’s proxy statement whenever at least ten percent of the shareholders indicate their support for the proposal in advance.
A. True
B. False
B. False
47
Under SEC Rule 14a-8(i)(5), a shareholder proposal may be automatically excluded by management from its proxy statement if the subject of the proposal does not meet the minimum quantitative standards such as relating to 5 percent of net earnings and 5 percent of gross sales
A. True
B. False
B. False
48
Rule 14a-9 of the 1934 Securities Exchange Act is not limited to publicly held companies registered under section 12 and applies its prohibitions to all securities traded in interstate commerce or utilizing interstate facilities.
A. True
B. False
B. False
49
Rule 10b-5 of the 1934 Securities Exchange Act is not limited to publicly held companies registered under section 12 and applies its prohibitions to all securities traded in interstate commerce or utilizing interstate facilities.
A. True
B. False
A. True
50
Notwithstanding the early cases to the contrary, in decisions after 1975, the federal courts have made it clear that private plaintiffs may no longer bring a private right of action for violation of SEC proxy antifraud Rule 14a-9.
A. True
B. False
B. False
51
Which of the following is not an essential element of a Rule 10b-5 private plaintiff’s civil damage action for securities fraud brought by an injured investor?
A. Misrepresentation or omission of a material fact
B. Scienter
C. Plaintiff as a purchaser or seller
D. Defendant as a purchaser or seller
E. All of the above
C. Plaintiff as purchaser or seller
52
Scienter under Rule 10b-5 requires:
A. Negligence
B. Knowing Misconduct
C. Severely Reckless Misconduct
D. Any one of the above
E. Either B or C, but not A
E. Either B or C, but not A
53
The parent company, Blue Devil Industries, Inc., merges a 70 percent owned subsidiary into the parent corporation. Both Blue Devil Industries and its subsidiary are incorporated under the Model Business Corporation Act. The merger terms are blatantly unfair, and there is no business purpose for the merger other than to squeeze out Elliott, the minority shareholder of the subsidiary. Full disclosure of all relevant information is sent to Elliott prior to the merger. The merger
A. Violates Rule 10b-5's antifraud provisions
B. Violates both Rule 10b-5 and Rule 14a-9's proxy rule
C. Violates Rule 10-5, 14a-9, and state corporation law.
D. Violates neither Rule 10b-5 nor Rule 14a-9 but may violate state law
E. All of the above
F. None of the above
D. Violates neither Rule 10b-5 nor Rule 14a-9 but may violate state law
54
A violation of SEC Rule 10b-5 can be based solely on equitable fraud (such as gross unfairness that shocks the conscience).
A. True
B. False
B. False
55
Forward looking statements are inherently misleading and thus are presumptively violations of Rule 10b-5.
A. True
B. False
B. False
56
Reliance is never presumed even in the case of intentional material misstatements.
A. True
B. False
B. False
57
Statements of opinion will never be actionable in a Rule 10b-5 action.
A. True
B. False
B. False
58
As a result of the Private Securities Litigation Reform Act all federal securities class actions must be brought as derivative actions.
A. True
B. False
B. False
59
The bespeaks caution doctrine applies only to forward looking statements and cannot be used to protect materially misleading statements of fact.
A. True
B. False
A. True
60
Insider trading on the basis of material nonpublic information is a breach of fiduciary duty under Delaware law.
A. True
B. False
A. True
61
Section 16(b) of the 1934 Securities Exchange Act is limited to publicly held companies registered under section 12 and does not apply its insider short-swing trading prohibitions to all securities traded in interstate commerce or utilizing interstate facilities.
A. True
B. False
A. True
62
Rule 10b-5 of the 1934 Securities Exchange Act is limited to publicly held companies registered under section 12 and does not apply its insider short-swing trading prohibitions to all securities traded in interstate commerce or utilizing interstate facilities.
A. True
B. False
B. False
63
SEC Rule 10b-5’s insider trading prohibitions are violated whenever someone purchasing or selling stock takes unfair advantage of unequal access to material non-public information that is not specifically disclosed in SEC filings.
A. True
B. False
B. False
64
The "misappropriation" theory for insider trading liability under SEC Rule 10b-5 was adopted by the United States Supreme Court in the O’Hagan case.
A. True
B. False
A. True
65
A corporate insider having material nonpublic proprietary information about his or her company may pass on the information to a third party so the third party may trade on the information so long as the insider does not trade on the information.
A. True
B. False
B. False
66
Section 16(b) of the 1934 Securities Exchange Act is limited to publicly held companies registered under section 12 and does not apply its insider short-swing trading prohibitions to all securities traded in interstate commerce or utilizing interstate facilities.
A. True
B. False
A. True
67
Which of the following is true regarding SEC Rule 14e-3's prohibition against trading on the basis of advanced information about a yet to be announced tender offer:
A. Rule 14e-3 applies only to officers, directors, and 10% beneficial owners
B. Rule 14e-3 has been held to be violated even without a showing that the defendant breached a duty.
C. Rule 14e-3 preempts state law
D. Both A and B are correct
B. Rule 14e-3 has been held to be violated even without a showing that the defendant breached a duty.
68
Tipper-tippee liability for insider trading requires a showing that the tipper have received a personal benefit which must be pecuniary in nature.
A. True
B. False
B. False
69
7. Tipper-tippee liability for insider trading requires a personal benefit which may be based on friendship even without a pecuniary benefit.
A. True
B. False
A. True
70
7. Tipper-tippee liability for insider trading requires a personal benefit which may be based on friendship even without a pecuniary benefit.
A. True
B. False
B. False
71
Most current corporate statutes require that in order to be effective, extraordinary matters (such as mergers and amendments to the articles of incorporation) require approval of at least two-thirds of the shares entitled to vote.
A. True
B. False
B. False
72
Most current corporate statutes require that in order to be effective, extraordinary matters (such as mergers and amendments to the articles of incorporation) require approval of a plurality of shares provided there is a quorum present.
A. True
B. False
B. False
73
A “long-form” merger may be successful without action by the target company’s board of directors.
A. True
B. False
B. False
74
Ordinarily, there are no shareholder votes required for either corporation in a "short form" merger under the Model Business Corporation Act or the law of Delaware.
A. True
B. False
A. True
75
Ordinarily, there are no statutory appraisal rights which attach to any corporation in a "short form" merger under the Model Business Corporation Act or the law of Delaware.
A. True
B. False
B. False
76
As a general proposition, a corporation’s Chief Executive Officer ordinarily has the implied authority to bind his or her corporation to a merger.
A. True
B. False
B. False
77
Which of the following statements are accurate with respect to the statutory right of appraisal?
A. The Delaware "block method" for determining fairness in an appraisal proceeding is the exclusive fairness test allowed in Delaware.
B. Appraisers in Delaware and under the Model Act should not consider a minority discount or a marketability discount.
C. The statutory appraisal remedy in most Delaware and the Model Act is exclusive in the absence of fraud or wrongdoing.
D. All of the above are correct
E. Only B and C are correct
E. Only B and C are correct
78
8. Which of the following are correct?
A. A sale of substantially all of a corporation's assets can always be accomplished by the board of directors without shareholder approval
B. In determining whether a sale of assets constitutes a sale of substantially all of the corporation's assets, the Delaware courts use both a quantitative and qualitative analysis.
C. A sale of substantially all of the assets not in the regular course of business triggers statutory appraisal rights in Delaware.
D. A sale of substantially all of the assets not in the regular course of business triggers statutory appraisal rights Under the Model Business Corporation Act
E. All of the above.
F. Only B and D are correct.
F. Only B and D are correct.
79
There is a statutory procedure for a sale of substantially all of the assets not in the regular course of business but there is no prescribed statutory procedure for purchasers of corporate assets not in the regular course of business.
A. True
B. False
A. True
