Chapter 35. Management Structure
1. Directors have the power to bind the corporation when acting individually rather than as a board.
a. True
b. False
2. By law, a shareholder is always entitled to one vote for each share of stock that he owns.
a. True
b. False
3. In some states and under the RMBCA, cumulative voting is permissive, not mandatory.
a. True
b. False
4. Notice of a shareholders’ meeting may be waived in writing.
a. True
b. False
5. A quorum will consist of a majority of shares entitled to vote if there are no provisions for any other number in the
articles of incorporation.
a. True
b. False
6. Directors ordinarily serve until someone who wants the position calls for an election.
a. True
b. False
7. Directors are elected at the annual meeting of shareholders.
a. True
b. False
8. Under the RMBCA, if a quorum exists, a shareholder action such as the election of directors is approved if the votes
cast for the action exceed the votes cast against it.
a. True
b. False
9. Cumulative voting is permitted so the majority of shareholders can keep control of the board of directors.
a. True
b. False
10. Only the board of directors may approve fundamental changes in the corporation.
a. True
b. False
11. A shareholder may not vote without being at the shareholder meeting.
a. True
b. False
12. A proxy is effective until the shareholder revokes it.
a. True
b. False
13. A proxy is revocable to the same extent as an agency.
a. True
b. False
14. A voting trust does not permit a concentration of corporate control in one person.
a. True
b. False
15. Voting trusts generally are effective for only one year.
a. True
b. False
16. The officers determine the capital structure and financial policy of the corporation.
a. True
b. False
17. The members of the board of directors are essentially trustees of the corporation.
a. True
b. False
18. Closely held corporations sometimes impose supermajority or unanimous quorum requirements even though this
creates the possibility of deadlock at the director level.
a. True
b. False
19. The board of directors generally manages the day-to–day affairs of the company.
a. True
b. False
20. Members of the board of directors may not determine their own compensation.
a. True
b. False
21. The shareholders elect the key corporate officers.
a. True
b. False
22. In closely held corporations, stock transfer restrictions are used to achieve the corporate equivalent of delectus
personae.
a. True
b. False
23. Currently, Julia is vice president of Speller Corporation. Under the Revised Act, Julia will not be permitted to also
hold the office of treasurer.
a. True
b. False
24. Under the Statutory Close Corporation Supplement to the MBCA, a close corporation may operate without a board
of directors.
a. True
b. False
25. Directors usually may vote by proxy when they are not able to be present for a meeting.
a. True
b. False
26. Ace Corporation requires a quorum of five directors. Under the RMBCA if Pam, a director, shows up at the
meeting for a vote on her favorite topic, dividends, and withdraws thereafter leaving only four directors, they may not
act on any further business.
a. True
b. False
27. Under the statutes in most states, if Marilyn and George form a corporation with Marilyn as president and George as
treasurer, Marilyn cannot also be corporate secretary.
a. True
b. False
28. An officer cannot be removed without the shareholders voting to do so.
a. True
b. False
29. The board of directors appoints the officers of the corporation, who are agents of the corporation.
a. True
b. False
30. The Sarbanes-Oxley Act was passed in 2002 to seek to prevent corporate scandals by increasing corporate
responsibility, creating new financial disclosure requirements, creating new criminal offenses, and creating an
Accounting Oversight Board.
a. True
b. False
31. Under the Sarbanes-Oxley Act, the audit committee of every publicly held corporation has direct responsibility for
the appointment, compensation, and oversight of the work of the public accounting firm employed by the corporation
to perform audit services.
a. True
b. False
32. Jack has been on the board of his brother’s company for three years but has never attended a board meeting. He
may be liable for failing to act.
a. True
b. False
33. The officers and the directors are fiduciaries of the corporation, but the business judgment rule will not preclude
liability on officers and directors for honest mistakes of judgment.
a. True
b. False
34. Management can be offered shares of the corporation at favorable prices if other shareholders are excluded from
that offer.
a. True
b. False
35. Officers who trade on inside information must return their profits to the corporation.
a. True
b. False
36. Determining the names of other shareholders in order to communicate with them about corporate affairs is a “proper
purpose” for a shareholder to inspect the books and records of a corporation.
a. True
b. False
37. George is a shareholder in the Muncy Kempf Corporation. He learns of insider trading by one of the directors and
wants to sue the corporation on behalf of the corporation and its shareholders. A shareholder cannot sue the
corporation to enforce a right belonging to the corporation.
a. True
b. False
38. Federal statutes prohibit officers and directors from purchasing or selling shares of their corporation’s stock without
adequately disclosing all material facts in their possession that may affect the stock’s actual or potential value.
a. True
b. False
39. Directors, but not officers, may compete with the corporation in their own private business dealings.
a. True
b. False
40. In most states, a corporation may, with shareholder approval, limit the liability of directors for some breaches of the
duties which they owe to the corporation.
a. True
b. False
41. An extension of a voting trust for an additional term binds only those shareholders that consent to the extension.
a. True
b. False
42. The Revised Act requires that demand be made upon the board of directors to enforce the corporate right at issue in
all cases as a prerequisite to bringing a derivative suit.
a. True
b. False
43. A shareholder may bring a derivative suit on behalf of the corporation and any recovery usually goes to the
corporation’s treasury, or a shareholder may bring a direct suit to enforce a claim he has against the corporation
based on his ownership of shares and any recovery goes to the shareholder plaintiff.
a. True
b. False
44. During the past twenty years or so, inside directors’ number and influence in most large corporations have increased
dramatically.
a. True
b. False
45. The CFPA of 2010 requires that publicly held companies annually include a provision in their proxy statements for a
binding shareholder vote on executive compensation.
a. True
b. False
46. The Statutory Close Corporation Supplement to the MBCA and RMBCA and special legislation in about twenty
states accommodate the needs of closely held corporations by all but which of the following?
a. Permitting operation without a board of directors
b. Authorizing the use of shareholder agreements in place of bylaws
c. Requiring cumulative voting
d. Making annual meetings optional
47. Assuming no special provision in the articles of incorporation, special shareholder meetings may be called by:
a. the president of the company.
b. any individual director.
c. any individual shareholder.
d. holders of at least 10% of shares.
48. Under the Model Act and in a majority of the states, a quorum of shareholders at an annual meeting may be not less
than percent of the shares entitled to vote.
a. 10
b. 33 1/3
c. 66 2/3
d. 50
49. All of the following would constitute a “fundamental change” to the corporation EXCEPT:
a. an amendment to the articles of incorporation.
b. a merger.
c. a stock dividend.
d. selling off 60% of the business assets not in the regular course of business.
50. A significant change to U.S. financial regulation occurred with the 2010 Congressional enactment, the:
a. Sarbanes-Oxley Act.
b. Wall Street Reform and Consumer Protection Act.
c. RMBCA.
d. Statutory Close Corporation Supplement.
51. The Revised Act and the majority of states hold that the officers’ and directors’ test of the duty of diligence requires
a director or officer to discharge her duties:
a. in good faith.
b. with the care an ordinarily prudent person in a like position would exercise under similar circumstances.
c. in a manner she reasonably believes to be in the best interests of the corporation.
d. All of these.
52. The Revised Act states that “all corporate powers shall be exercised by or under the authority of, and the business
and affairs of the corporation managed under the direction of ”:
a. the shareholders of the corporation.
b. the chief executive officer of the corporation.
c. the officers of the corporation.
d. the board of directors of the corporation.
53. Assuming there are no provisions in the corporation‘s articles of incorporation or bylaws regarding quorum
requirements, if there are 13 total directors of General Gonzo Corporation and the minimum number of directors are
present to transact business, how many votes normally would be necessary for those present to act as a board?
a. 7
b. 4
c. 6
d. 11
54. If the board delegates to a committee its duty to select a new company president:
a. the members of that committee may be responsible individuals other than board members.
b. the committee must be approved by the shareholders.
c. the non-committee directors are relieved of liability for acts of the committee.
d. the committee must consist of board members.