REG Chapter 8

Question 1

Exoneration

Answer 1

A suit to compel payment from the principal. Must be BEFORE the surety pays the creditor.

Question 2

Subrogation

Answer 2

Enforcement of creditor’s right against the principal. Is AFTER the surety pays the creditor in full.

Question 3

Reimbursement or Right to Indemnification

Answer 3

A suit against the principal after payment.

Question 4

What are the defenses available to a surety?

Answer 4

CPRS:

• Creditor acts in bad faith
• Payment and tender of payment
• Release of principal debtor
• Surety’s incapacity or bankruptcy

Question 5

Duties of Agent to Principal

Answer 5

Fiduciary:

• Duty of loyalty
• Duty of obedience
• Duty of reasonable care
• Duty to account

Question 6

In what ways can agency power arise?

Answer 6

• A grant of actual authority (power & right)
• Apparent authority or estoppel (power no right)
• Ratification (power no right)

Question 7

Limitations on an S Corp

Answer 7

• No more than 100 persons
• Must be individuals, estates, or certain trusts
• Domestic corporation
• Only one class of stock
• Foreign shareholders prohibited

Question 8

Articles of Incorporation must include the following:

Answer 8

• Name of the corp
• Names and address of “registered agent”
• Names and addresses of each incorporator
• The number of shares authorized to be issued
• Provision for the authorization of voting stock

Question 9

What reasons will cause courts to “pierce the corporate veil”?

Answer 9

• Shareholders commingling person and corporate funds
• Inadequate capitalization at time of formation
• Committing fraud on existing creditors

Question 10

What are the fundamental corporate changes?

Answer 10

DAMS: (require board and shareholder approval, no unanimous)

• Dissolution
• Amendment of the Articles of Incorporation
• Mergers, consolidation, or share exchange
• Sale of substantially all of corps assets