study guide exam 4

Question 1

What is agency?

Answer 1

consensual relationship authorizing one party (agent) to act on behalf of the other party (principal)
“relationship between agent and principal”

Question 2

What is power of attorney?

Answer 2

document that allows you to appoint a person or organization to manage things if you become unable to

Question 3

What is durable power of attorney?

Answer 3

to appoint an agent, such as a trusted friend or relative, to handle specific health, legal, financial responsibilities
(voidable)

Question 4

Name four possible legal statuses of a person involved with a partnership

Answer 4

Employee, Investor, Partner, and Independent Contractor

Question 5

Employee vs Independent contractor

Answer 5

employees- agents, vacation time, benefits, control means, manner of job
Independent- pay own taxes, no benefits, do things on own time, do not have control means or manner in job

Question 6

employee vs partnership

Answer 6

to be partnership- have to share profit AND control

Question 7

black letter law

Answer 7

elements of the law are free from dispute/doubt- accepted by judge

Question 8

conflict of interest

Answer 8

have to put principals interest ahead of agents own (fiduciary duty) (within scope)
self dealing
conflict of interest on steroids
When seller/buyer is on both sides

Question 9

How does agency terminate?

Answer 9

lapse of time, death

Question 10

What is the most common form of business association in the US?

Answer 10

sole proprietorship

Question 11

Which form of business association is responsible for most of the wealth creation in the country?

Answer 11

corporations

Question 12

Name three factors to be considered in choosing a business association form

Answer 12

1) ease of formation
2) federal/state income tax laws
3) management and control

Question 13

Are shareholders personally responsible for the debts and obligations of the corporations? Why?

Answer 13

shareholder liability is limited to the amount invested in the business enterprise

Question 14

What is the difference between a for- profit and a not for profit corporation?

Answer 14

for profit- created for purpose of operating business
non profit- ones whose profits must be exclusively for the charitable, educational, or scientific purpose for when it was formed

Question 15

What risk do the shareholders of a closely held corporation take when they ignore corporate formalities?

Answer 15

forfeiting their limited liability (lose)

Question 16

quorum

Answer 16

minimal number necessary to be present at a meeting to transact business

Question 17

when are directors elected

Answer 17

at the annual meeting of corporation

Question 18

proxy

Answer 18

authorization to vote another’s shares out a shareholder meeting

Question 19

what is right to inspect books and records

Answer 19

if the demand is made in good faith and for a proper purpose

Question 20

what is direct suit

Answer 20

brought by a shareholder or a class of shareholders against the corporation based on owner of shares

Question 21

derivative suit

Answer 21

corporation takes money brought on behalf of corporation

When they win $ goes to corporation

Question 22

What should one do before agreeing to serve on a corporate board?

Answer 22

make sure they are ready for time and effort bc of liability, you can be sued individually

Question 23

inside directors

Answer 23

directors are also officers or employees of the corporation

Question 24

outside directors

Answer 24

directors who are not officers or employees

Question 25

unaffiliated directors

Answer 25

outside directors who have no business contracts with corporation

Question 26

business judgment rule

Answer 26

directors and officers can’t be liable for honest mistakes in judgment if they act with due care, in good faith, and in interest to better corporation “defense when sued individually”

Question 27

John wants to file for bankruptcy. What options does he have? What is the difference between these options?

Answer 27

John is an individual his options are to file
liquidation-do not lose everything bc of exemption
debt- still discharge debt

Question 28

Jane files for bankruptcy. John is owed $50 by Jane. Jane tells John that she has filed for bankruptcy two days ago but John insists that he gets his $50 back. Is John’s behavior in violation of the law? Why?

Answer 28

Yes because once you file for petition is filled out then there is automatic stays which means that an ordered is issued by judge so that creditors can’t collect

Question 29

Laura files for bankruptcy. After the petition is filed when will Laura’s creditors have a chance to see her examination of her financial situation? Who will ask Laura about her financial situation? What happens if Laura does not answer truthfully the questions asked by the trustee?

Answer 29

examined after a reasonable time and they will be looked at by meeting creditors where trustees will ask questions. if she lies she will be denied

Question 30

Which obligations have top priority in being satisfied from the estate of the debtor?

Answer 30

domestic support obligations- debts owed to a spouse, former spouse or child
expenses of administration-debtors estate

Question 31

Does a debtor who files for chapter 7 lose all their personal and real property? Why?

Answer 31

no they do not because there are exemptions for certain things

Question 32

Becky filed for chapter 7. One of her creditors offers to let her keep her credit card with low interest if she agrees not to discharge the debt. Can Becky agree to that? What does she have to do for the debt not to be discharged?

Answer 32

yes she can do that if she agrees to pay debt

Question 33

Are student loans dischargeable?

Answer 33

no you have to pay them

Question 34

Paul owes a debt of $250,000 arising from a judgment resulting from a drunken driving accident that disabled a mother of four. Is this debt dischargeable in bankruptcy? Why?

Answer 34

yes because he had limited liability for willful and malicious injury

Question 35

A wants to file for bankruptcy. He owns a house in the Hamptons worth $400,000. To make sure the creditors don’t take it, a year before filing he put the house in his mother’s name. What kind of transfer is this? What is the actual intent of this transfer? What can the trustee do?

Answer 35

fraudulent transfer, trustee can sue to get property, you can avoid transfer if it is voidable by state law

Question 36

What is the principle purpose of the Bankruptcy Code? What kind debtor is the Code intended to help?

Answer 36

provide honest debtor with fresh start

addicts because they can be considered sick

Question 37

In a bankruptcy, which creditors are in the best position to recover from the distribution of the estate?

Answer 37

secured debtors-creditor with benefit of security interest over same or all assets of debtor

Question 38

What is the means test? Why is it important?

Answer 38

deciding if you qualify for chapter 7 or not because most people want it

Question 39

what can a business that is facing financial trouble file for?

Answer 39

can file for chapter 11-reorganization

Question 40

What is reorganization? What is the main objective of the reorganization proceeding?

Answer 40

a plan to get the business to succeed and survive

Question 41

Do customers of a company in Chapter 11 get affected by the filing of bankruptcy?

Answer 41

no customers do not know company is reorganizing

Question 42

What are the requirements for the bankruptcy court to confirm the reorganization plan?

Answer 42

judge has to approve that there is good faith

conflict of interest because lawyer and people want corp to get $$

Question 43

Which bankruptcy filing allows individuals to adjust their debts? What happens if the debtor fails to make the payments under the repayment plan?

Answer 43

Chapter 13- then it will be converted to chapter 7 or dismissed

Question 44

what is the primary purpose of federal securities regulation?

Answer 44

prevent fraud in sale of securities and ensure public

Question 45

SEC and its mandate

Answer 45

Securities Exchange Commission-independent quasi judicial agency consisting of 5 commissioners
protect investors, fair orderly markets

Question 46

Security

Answer 46

includes any note, stock , bond, reorganization prescription, and investment contract

Question 47

How does federal law treat intrastate issues of securities?

Answer 47

nothing to do with it, its a state issue

Question 48

FCPA

Answer 48

Foreign Corrupt Practices Act-internal control on companies with securities registered under 1934 act

Question 49

FCPA prohbits

Answer 49

all domestic concerns for bribing foreign government or political officials

Question 50

insider trading

Answer 50

rule lob 5 applies to sales or purchase cases of securities made by an “insider”who possesses material info that is not available to general public

Question 51

Insider

Answer 51

directors, officers, employees, and agents of the issuer

Question 52

Tippee

Answer 52

recipient of the tip

Question 53

grease payment

Answer 53

pay small amount of $ to move things along and is legal. it is not a bribe