Question 1:

Able, Baker, and Charlie each own one third of a corporation that generates large profits each year. Each of them is a member of the board of directors. Able and Baker work for the corporation and receive salaries and bonuses consistent with amounts paid to executives in similar companies with similar profits. Charlie has no day-to-day involvement and receives no salary or bonus. The corporation pays no dividends.

What will be the likely result if Charlie sues to force the corporation to pay dividends?

Group of answer choices

Charlie will win because Able and Baker have a fiduciary duty to treat Charlie equally.

Charlie will lose because he only has one of the three positions on the board of directors.

Charlie will lose because there is no evidence that any portion of Able's and Baker's salary and bonus is a disguised dividend.

Charlie will win because of the presumption that profitable companies should pay dividends.

Question 2:

Assume Corporation One is incorporated in a state that requires cumulative voting. Corporation One has five directors, each elected to one year terms. Shareholder A owns 33 of the 100 outstanding shares.

If the other shareholders vote as a block, how many directors may Shareholder A elect?

Group of answer choices

One

Three

Zero

Two

Question 3:

Assume Corporation One is incorporated in a state that requires cumulative voting. Corporation One has three directors, each elected to one year terms. Shareholder A owns 33 of the 100 outstanding shares.

If the other shareholders vote as a block, how many directors may Shareholder A elect?

Group of answer choices

Three

One

Two

Zero

Question 4:

Cumulative voting allows minority shareholders with a material block of shares to elect one-half of the board of directors.

Group of answer choices

True

False

Question 5:

Gary Green is a two percent shareholder in X Corporation, a publicly traded corporation subject to the 1934 Securities Exchange Act. X Corporation manufactures gasoline powered golf carts. Gary was also employed by X Corporation until last month, when he was terminated as part of an overall reduction in employees to offset declining sales.

Which of the following proposals submitted by Gary to the company may be excluded from its proxy materials?

Group of answer choices

A proposal that the company ignore current federal law that prohibits the hiring of employees unless they have a Social Security Number (Gary believes this law is unconstitutional).

A proposal to rehire Gary because he was unfairly treated in the decision to reduce the number of employees.

A proposal to begin manufacturing a line of electric golf carts.

All three proposals may be excluded from the proxy materials.

Question 6:

Shareholders not active in a business typically want to retain power over who is on the board of directors and whether the business should continue.

Group of answer choices

True

False

Question 7:

Voting trusts are structured to separate beneficial interests from voting interests.

Group of answer choices

True

False

Question 8:

Which of the following statements is correct?

Group of answer choices

Shareholders have the ability to address the liquidation of their shares by contract.

All answers are correct.

Shareholders have no legal right to liquidate their shares under standard corporate law statutes.

Shareholders may require by contract that the shares of a deceased shareholder will be purchased by the corporation.

Question 9:

Which of the following statements is incorrect as it relates to statutory close corporations?

Group of answer choices

Shareholders making decisions normally reserved for directors assume the fiduciary duties that directors would otherwise have.

Close corporation statutes typically allow shareholders, by agreement of shareholders owning a majority of the stock, to agree on their roles once they become directors.

Close corporation statutes typically allow shareholders to agree among themselves about how they will vote their shares and conduct corporate business.

All answers are incorrect.

Question 10:

Which of the following statements most accurately reflects the view of courts with respect to relative roles and responsibilities of shareholders and directors?

Group of answer choices

Whether courts will enforce agreements among shareholders will often be based on the risk to the interests of minority shareholders who were not part of the agreement.

Courts are reluctant to enforce agreements among shareholders about how they will vote their shares.

Courts will always enforce agreements among shareholders to (i) elect each other as directors, and (ii) agree upon what actions they will take as directors.

Courts will usually enforce agreements among shareholders if more than two thirds of the shareholders are signatories to the agreement.