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Exam 48: Management of Corporations

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Question 21

True/False

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A quorum is broken if shareholders leave and those remaining are not sufficient to constitute a quorum.

A) True
B) False

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Question 22

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What is not part of the presumptions of the business judgment rule concerning directors?

A) that the decision they reached was profitable to the corporation
B) that they acted on an informed basis
C) that they acted in good faith
D) that they acted in the honest belief that the action taken was in the best interest of the corporation

E) A) and D)
F) A) and C)

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Question 23

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The duties of officers of a corporation are generally set forth in the articles of incorporation.

A director is disqualified from taking part in corporate action with respect to a matter in which the director has an undisclosed conflicting interest.

Directors are usually allowed to vote by proxy.

State laws that attempt to indemnify corporate directors against personal monetary liability for gross negligence are void as contrary to public policy.

Which of the following is an incorrect statement about directors?

The __________ rule allows management immunity from liability for corporate acts where there is a reasonable indication that the acts were made in good faith and with due care.

All of the directors of the XYZ Corporation were present at a meeting called on a Monday evening at 9 p.m.Meetings normally were held on Friday evenings at 6 p.m.At the Monday meeting,a report was made indicating that an agent of the corporation was having difficulties formalizing a contract in a foreign country.The report indicated that if funds were made available to a local political figure,the contract the company desired would be obtained.The directors unanimously voted to forward the necessary funds for this operation to the agent.An action was later commenced against the directors,alleging illegal activities.In response,the directors argue that: (1)no illegal activity had occurred;(2)if an illegal activity did occur,it was not at a valid meeting of the corporation and was therefore not an official action of the board;and (3)if they had to legally defend themselves,they would seek reimbursement from the corporation.Discuss the directors' contentions.

A president of a corporation does not have the authority to:

Eligibility for membership on a board of directors is determined by all of the following except:

The business judgment rule is applied by the courts as a presumption that must be overcome by the person challenging a director's actions.

The courts have traditionally viewed it as their responsibility to sit in judgment on the wisdom of decisions made by corporate directors.

The means by which stockholders may seek to protect themselves against corporate actions to which they object include all of the following except:

A corporation generally may avoid a transaction because of a director's secret disqualification,such as a conflict of interest.

A corporation may be convicted of a criminal offense if it is shown beyond a reasonable doubt that the offense was committed by its agent acting within the scope of the agent's authority.

Under which of the following scenarios would a third person be able to successfully sue a corporate manager if the manger's advice to the corporation causes loss to the third person?

Officers and directors may be criminally liable for failure to prevent the commission of a crime if they are found to be the "responsible corporate officers."

If an officer diverts a corporate opportunity,the corporation may recover from the officer:

The stockholders of the Apex Corporation attended a special meeting of the stockholders called to discuss matters of extreme urgency to the corporation.A quorum was not present when the meeting opened,nor was a quorum present when the matters to be treated in the meeting were discussed.Management,however,felt that the importance of the issue was significant enough to warrant continuation of the meeting without a quorum,and the stockholders voted on the issues presented during the meeting.During the last fifteen (15)minutes of the meeting,just prior to the cocktail hour regularly attended by many stockholders,enough stockholders had arrived to constitute a quorum.Were the issues of this meeting dealt with in a valid manner?