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ch 33 34

Which of the following statements is correct?
Bonds Debentures and Notes, All of the above
Under most state statutes, a corporation may:
include in its charter a provision indemnifying directors unless they have engaged in intentional misconduct or bad faith.
It is illegal for shareholders to transfer their stock to a trust and give the trustee the power to vote the shares.
f
incorporation protects
shareholders against personal liability for the debts of the company.
A corporation must have a registered agent within the state of incorporation only if the corporation maintains an office in that state.
false
Fashions, Inc. has 12 shareholders. There is no shareholder agreement concerning the board of directors. The company is subject to the Model Act. How many directors is Fashions, Inc. required to have?
none
Terminating a corporation is a three-step process: dissolution, winding up, and termination.
false
The directors of MegaCorp learn that an outsider is planning on buying enough voting stock to get herself elected to the board of directors. MegaCorp, which has cumulative voting, quickly puts together a vote of shareholders to eliminate the company”s cumulative voting procedure. The shareholders vote to do away with cumulative voting. The outsider, Dawn, who wanted to get herself elected to MegaCorp”s board, claims that the company has committed an illegal act. Is she right?
No. Under the Model Act, regardless of MegaCorp”s motives, it had the right to act as it did.
Sara decided to incorporate her business under the name Gomo, Inc. Before Gomo was incorporated, Sara signed a contract in the name of Gomo, Inc. to lease a store front. Sara did not tell the other party that Gomo was not yet formed. Sara is personally liable on the lease.
true
For the business judgment rule to apply:
All WRONG
Which of the following is NOT a method to acquire control of a company?
Make an initial public offering.
The Model Business Corporation Act states: ‘All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed by or under the direction of its:
board of directors
In the Unocal Corp. v. Mesa Petroleum Co. case, the court:
found the issuance of a preliminary injunction against Unocal”s offer was proper. WRONG
A finding by a court that a manager”s decision had a rational business purpose does not necessarily protect the manager from a finding that he breached a duty of care.
f
Jenny is an officer of a corporation. She made a difficult business decision. When challenged about her decision, the court ruled she had acted in good faith and that the business judgment rule applied. As such:
Jenny will not be held personally liable for a decision that results in money losses to the company.
A speculator plans to acquire control of Kelp Corporation and then resell it at a profit. A speculator is sometimes known as a corporate raider.
TRUE
Anti-takeover tactics include all EXCEPT:
negative tender offers.
Corporate responses to takeover attempts are largely governed by federal law.
False
Which of the following describes the duty of loyalty?
It prohibits making a decision that benefits the decision-maker at the expense of the corporation.
A director violates the corporate opportunity doctrine if he or she competes with the corporation, unless the disinterested directors approve of the director”s actions.
true
Alex is a director of ABC, Inc. Alex wants to personally make a major purchase from Bravo Co. If it knew of the opportunity, ABC might be also interested in making that same purchase. Alex must:
advise the boards of both corporations of his conflict of interest. WRONG
Amy is on the board of directors of Computers Plus. Computers Plus is looking for a warehouse to purchase. Amy owns a warehouse. In order for Amy to sell her warehouse to Computers Plus:
the transaction must be fair to both Amy and Computers Plus. WRONG
A board of directors is considering whether to invest a great deal of money into research and development. Such a decision could have a long-term beneficial effect for the company”s future. As an alternative, the board could forego the expenditure into research and development and buy back its own shares in order to immediately increase the company”s reserves. Which of the below groups would most likely favor the option to increase the company”s reserves and not invest in more research and development?
shareholders
Which of the following statements is correct with respect to state efforts to offer protection to companies targeted for hostile takeovers?
Both statutory law and the state courts have provided some degree of protection for companies.
Courts are sympathetic to managers acting in the best interests of the corporation, even when the acts are illegal.
f
A corporate board”s refusal to remove a ‘poison pill’ was held reasonable in:
Unocal Corp. v. Mesa Petroleum Co. WRONG
Tender offers are regulated on the federal level by the National Labor Relations Act.
false
The Williams Act regulates the conduct of the target company in a takeover situation.
false
Which of the following is the most appropriate term to use when describing management”s duty to its shareholders?
Fiduciary duty.
In the Unocal Corp. v. Mesa Petroleum Co. case, the court said the board of directors could act with the primary goal of keeping themselves in office.
false
The Williams Act:
is designed to regulate the conduct of those attempting to take over a company.
On the day a tender offer begins:
a bidder must file a disclosure statement with the SEC.
Which of the following must be approved by the shareholders if a company is attempting to avoid a hostile takeover bid?
all
Directors have the authority to manage the corporate business.
t
Corporate managers serve only one master, which is the best interest of the shareholders.
f
Management”s duty to have a rational business purpose, avoid illegal behavior, and make informed decisions refers to its:
duty of care.
Generally, managers that make informed decisions will not be liable even if their decision turned out badly.
true
The ‘business judgment rule’ has been replaced by ‘good faith statutes’ in most states.
f
In the late 1960s a shareholder of the company that owned the Chicago baseball team sued the company because the directors refused to install lights in Wrigley Field. The court decided that the directors:
had a rational purpose for not installing lights and were not liable for doing anything improper.

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