STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ27—1ȱQUIZȱ
LegalȱConceptsȱ
Directions:ȱFillȱinȱtheȱblank(s)ȱwithȱtheȱmostȱappropriateȱtermȱorȱphraseȱtoȱcompleteȱ
theȱsentence.ȱ
ȱAnswersȱ
ȱ
ȱȱ1.ȱOneȱmajorȱadvantageȱofȱcorporationsȱisȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱ,ȱȱȱ
whichȱmeansȱtheȱcorporationȱcanȱcontinueȱindefiȬ
nitelyȱwithȱnewȱowners.ȱ
ȱȱ1.ȱ__________________ȱ
ȱ2.ȱIfȱaȱcorporationȱisȱcharteredȱinȱaȱparticularȱstate,ȱitȱisȱ
a(n)ȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱȱcorporationȱinȱthatȱstate.ȱ
ȱȱ2.ȱ__________________ȱ
ȱ3.ȱA(n)ȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱȱcorporationȱisȱorganizedȱbyȱindividuȬ
alsȱȱforȱbusinessȱorȱcharitableȱreasons.ȱ
ȱȱ3.ȱ__________________ȱ
ȱ4.ȱArticlesȱofȱincorporationȱareȱsignedȱbyȱpersonsȱ
knownȱasȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱ.ȱ
ȱȱ4.ȱ__________________ȱ
ȱ5.ȱA(n)ȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱȱcorporationȱisȱorganizedȱforȱaȱȱ ȱȱ
social,ȱcharitable,ȱorȱeducationalȱpurposeȱandȱdoesȱ
notȱpayȱearningsȱtoȱitsȱowners.ȱ
ȱȱ5.ȱ__________________ȱ
ȱ6.ȱA(n)ȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱȱcorporationȱisȱaȱcorporationȱthatȱisȱ
charteredȱinȱaȱstateȱotherȱthanȱtheȱoneȱinȱwhichȱitȱ
doesȱbusiness.ȱ
ȱȱ6.ȱ__________________ȱ
ȱ7.ȱA(n)ȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱȱcorporationȱisȱestablishedȱforȱaȱȱ ȱȱ
governmentalȱpurpose.ȱ
ȱȱ7.ȱ__________________ȱ
ȱ8.ȱWhenȱcourtsȱdisregardȱlimitedȱliabilityȱprotectionȱ
andȱholdȱindividualȱshareholdersȱpersonallyȱresponȬ
sibleȱforȱcorporateȱdebtȱitȱisȱȱcalledȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱ.ȱ
ȱȱ8.ȱ__________________ȱ
ȱ9.ȱTheȱapplicationȱtoȱaȱstateȱforȱaȱcharterȱforȱaȱcorporaȬ
tionȱisȱtypicallyȱknownȱasȱtheȱ__________________.ȱ
ȱȱ9.ȱ__________________ȱ
10.ȱAȱcorporationȱcharteredȱinȱanotherȱnationȱdoȬȱȱȱ
ingȱbusinessȱinȱaȱstateȱwithinȱtheȱUnitedȱStatesȱisȱ
knownȱasȱa(n)ȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱȱcorporation.ȱ
10.ȱ__________________ȱ
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
LegalȱApplicationȱ
ȱ11.ȱBryantȱPetersonȱisȱaȱshareholderȱinȱKwikCast,ȱInc.ȱKwikCastȱearnedȱ$700,000ȱinȱ
itsȱfirstȱyearȱofȱincorporation.ȱEachȱshareholderȱreceivedȱdividendsȱofȱ$15,000ȱafȬ
terȱtheȱcorporateȱtaxesȱwereȱpaid.ȱBryantȱbelievesȱhisȱdividendsȱshouldȱbeȱnonȬ
taxableȱsinceȱtheȱcorporationȱalreadyȱpaidȱtaxesȱonȱitsȱearnings.ȱIsȱheȱcorrect?ȱ
Explainȱyourȱanswer.ȱ
6-22 Chapter 27 The Law of Corporations
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ27—1ȱPRACTICEȱACTIVITYȱ
Readȱtheȱfollowingȱcasesȱandȱanswerȱtheȱquestionsȱaboutȱthem.ȱAttachȱaȱpageȱifȱadditionalȱ
spaceȱisȱneededȱforȱanswers.ȱ
ȱ
1.ȱInȱApril,ȱJaleelȱmetȱwithȱseveralȱothersȱandȱanȱattorneyȱforȱtheȱpurposeȱofȱdisȬ
cussingȱaȱnewȱbusinessȱcorporation.ȱAfterȱtheseȱdiscussions,ȱJaleelȱagreedȱtoȱ
purchaseȱstockȱandȱbecomeȱanȱofficerȱandȱdirectorȱofȱtheȱcorporation.ȱAfterȱtheȱ
$4,333.40.ȱIBMȱsuedȱJaleelȱforȱtheȱmoney,ȱsayingȱthatȱtheȱfailureȱofȱtheȱbusinessȱ
toȱfileȱitsȱcertificateȱofȱincorporationȱstrippedȱtheȱcorporationȱofȱallȱcorporateȱexȬ
istence.ȱWillȱtheȱcourtȱagreeȱorȱdisagreeȱwithȱIBM?ȱExplain.ȱ[Cranstonȱv.ȱInternaȬ
ȱ
ȱ
ȱ
ȱ
ȱ
2.ȱBretherenȱVillageȱisȱaȱcottageȱprogramȱforȱtheȱelderly.ȱOrdinarily,ȱresidentsȱpayȱ
anȱadmissionȱfeeȱandȱforȱtheȱcostȱofȱlivingȱinȱtheȱcottage.ȱIfȱaȱresidentȱcanȱnoȱ
evenȱthoughȱitȱchargesȱresidents,ȱitȱallowsȱthemȱtoȱcontinueȱtoȱliveȱthereȱevenȱifȱ
theyȱcannotȱpay.ȱCanȱBretherenȱVillageȱbeȱexemptedȱfromȱtaxesȱasȱaȱnonprofit,ȱ
evenȱifȱitȱmayȱmakeȱaȱprofitȱifȱallȱtheȱresidentsȱcanȱpay?ȱExplain.ȱ[BretherenȱVilȬ
1979)]ȱ
Chapter 27 The Law of Corporations
6-23
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ27—1ȱRETEACHȱ
ȱ
Directions:ȱFindȱandȱshadeȱinȱtheȱanswerȱtoȱeachȱquestionȱinȱtheȱtableȱbelowȱandȱ
thenȱwriteȱeachȱanswerȱinȱtheȱanswerȱcolumn.ȱWriteȱtheȱremainingȱunshadedȱlettersȱ
inȱorderȱfromȱleftȱtoȱrightȱtoȱrevealȱaȱstatementȱaboutȱshareholders.ȱ
ȱȱ Answersȱ
ȱȱ1.ȱWhatȱkindȱofȱcorporationȱisȱorganizedȱbyȱindividualsȱforȱ
businessȱorȱcharitableȱreasons?ȱ
1._______________________ȱ
ȱȱ2.ȱWhatȱkindȱofȱcorporationȱisȱorganizedȱforȱsocialȱorȱeducaȬ
tionalȱpurposesȱandȱdoesȱnotȱpayȱearningsȱtoȱitȱownersȱ?ȱ
2._______________________ȱ
ȱȱ3.ȱWhatȱkindȱofȱcorporationȱisȱestablishedȱforȱaȱgovernmentalȱ
purpose?ȱ
3._______________________ȱ
ȱȱ4.ȱWhatȱkindȱofȱcorporationȱisȱcharteredȱinȱaȱstateȱotherȱthanȱ
theȱoneȱinȱwhichȱitȱisȱdoingȱbusiness?ȱ
4._______________________ȱ
ȱȱ5.ȱWhatȱdocumentȱtypicallyȱservesȱasȱtheȱapplicationȱtoȱaȱ
stateȱforȱaȱcorporateȱcharter?ȱ
5._______________________ȱ
ȱȱ6.ȱȱ WhatȱkindȱofȱcorporationȱisȱcharteredȱinȱanȬotherȱnationȱ
whileȱdoingȱbusinessȱinȱaȱstateȱofȱtheȱUnitedȱStates?ȱ
6._______________________ȱ
ȱȱ7.ȱȱ Whatȱadvantageȱofȱcorporationsȱallowsȱthemȱtoȱcontinueȱ
indefinitely?ȱ
7._______________________ȱ
ȱȱ8.ȱȱWhatȱareȱtheȱpersonsȱwhoȱsignȱtheȱarticlesȱofȱincorporaȬ
tionȱknownȱas?ȱ
8._______________________ȱ
ȱȱ9.ȱWhatȱindividualsȱbringȱtogetherȱinterestedȱpartiesȱandȱ
takeȱpreliminaryȱstepsȱtoȱformȱaȱcorporation?ȱ
9._______________________ȱ
10.ȱWhatȱkindȱofȱcorporationȱisȱcharteredȱandȱdoesȱbusinessȱ
withinȱtheȱsameȱstate?ȱ
10._______________________ȱ
ȱ
CȱOȱIȱNȱCȱOȱRȱPȱOȱRȱAȱTȱOȱ
RȱSȱUȱRȱTȱSȱSȱAȱLȱIȱEȱNȱOȱ
PȱRȱOȱMȱOȱTȱEȱRȱSȱEȱBȱTȱSȱ
6-24 Chapter 27 The Law of Corporations
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ27—1ȱENRICHMENTȱ
Thisȱlessonȱprovidedȱgreaterȱdetailȱonȱcorporations.ȱAlthoughȱcorporationsȱareȱfarȱ
outnumberedȱbyȱsoleȱproprietorshipsȱandȱpartnerships,ȱcorporationsȱdoȱmostȱofȱtheȱ
businessȱinȱtheȱcountry.ȱThisȱisȱbecauseȱcorporationsȱhaveȱattributesȱthatȱareȱessenȬ
tialȱforȱlargeȬscaleȱenterprises.ȱReviewȱtheȱterminologyȱinȱtheȱlessonȱforȱtheȱvariousȱ
typesȱofȱcorporations.ȱThenȱdetermineȱexamplesȱofȱcorporationsȱcharteredȱinȱyourȱ
stateȱthatȱfallȱintoȱeachȱofȱtheȱcategoriesȱlistedȱbelow.ȱInȱtheȱspacesȱprovided,ȱindiȬ
cateȱwhyȱtheȱcorporationȱfitsȱintoȱthatȱspecificȱcategory.ȱAlsoȱindicateȱifȱtheȱcorporaȬ
tionȱisȱaȱmultinationalȱcorporation.ȱȱ
ȱ
1.ȱClassificationȱaccordingȱtoȱplaceȱofȱincorporation:ȱ
a.ȱDomesticȱcorporationȱ
b.ȱForeignȱcorporationȱ
c.ȱAlienȱcorporationȱ
2.ȱClassificationȱaccordingȱtoȱpurposeȱ
a.ȱPublicȱcorporationȱ
b.ȱPrivateȱcorporationȱ
ȱȱi.ȱProfitȬmakingȱcorporationȱ
ȱii.ȱNonprofitȱcorporationȱ
iii.ȱPublicȱserviceȱcorporationȱ(publicȱutility)ȱ
Chapter 27 The Law of Corporations
6-25
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ27—2ȱQUIZȱ
LegalȱConceptsȱ
Directions:ȱInȱtheȱAnswersȱcolumn,ȱwriteȱtheȱletterȱfromȱColumnȱ1ȱthatȱrepresentsȱ
heȱwordȱorȱphraseȱthatȱmatchesȱtheȱstatementȱinȱColumnȱ2.ȱt
ȱColumnȱ1ȱȱColumnȱ2ȱAnswersȱ
ȱȱ 1.ȱAȱtypeȱofȱstockȱthatȱgivesȱtheȱshareholderȱȱ 1. _______ ȱ
theȱrightȱtoȱvoteȱinȱcorporateȱelectionsȱ
ȱȱ 2.ȱPersonsȱwhoȱareȱresponsibleȱforȱtheȱoverallȱ
directionȱofȱtheȱcorporationȱ2. _______ ȱ
ȱȱ 3.ȱAȱpersonȱwhoȱownsȱoneȱorȱmoreȱsharesȱ3. _______ ȱ
ofȱstockȱ
3.ȱAȱpartnerȱwhoȱ4.ȱTheȱprocessȱofȱendingȱaȱcorporation’sȱlifeȱ4. _______ ȱ
ȱȱ 5.ȱAȱtypeȱofȱpreferredȱstockȱforȱwhichȱifȱtheȱ
dividendȱisȱnotȱpaidȱinȱaȱgivenȱyearȱitȱreȬ
mainsȱdueȱandȱȱpayableȱinȱtheȱfutureȱ5. _______ ȱ
ȱȱ 6.ȱAȱtypeȱofȱstockȱthatȱentitlesȱitsȱownerȱȱȱ 6. _______ ȱ
toȱaȱstatedȱdividendȱ
ȱȱ 7.ȱAȱprincipleȱthatȱprotectsȱshareholders,ȱȱȱ 7. _______ ȱ
directors,ȱofficers,ȱandȱcorporateȱemployȬ
eesȱfromȱpersonalȱliabilityȱforȱhonestȱmisȬ
takesȱ
ȱȱ 8.ȱAȱunitȱofȱownershipȱinȱaȱcorporationȱȱȱ 8. _______ ȱ
ȱȱ 9.ȱStockȱwhichȱisȱoriginallyȱsoldȱwithoutȱaȱ
parȱvalue.ȱȱ 9. _______ ȱ
ȱȱ 10.ȱSharesȱnotȱrepresentedȱbyȱaȱpieceȱofȱpaperȱȱ10. _______ ȱ
butȱwhoseȱownershipȱisȱregisteredȱonȱ
booksȱȱkeptȱbyȱtheȱissuingȱcorporationȱ
A.ȱshareȱofȱstockȱ
B.ȱshareholderȱ
C.ȱcommonȱstockȱ
D.ȱdividendsȱ
E.ȱpreferredȱstockȱ
F.ȱliquidationȱ
G.ȱbusinessȱȱ
ȱjudgmentȱruleȱ
H.ȱmergerȱ
I.ȱparȱvalueȱ
J.ȱnoȱparȱstockȱ
K.ȱcumulativeȱȱ
L.ȱparticipatingȱ
M.ȱȱ uncertifiedȱ
N.ȱminorityȱȱ
ȱpositionȱ
O.ȱproxyȱ
P.ȱpreemptiveȱȱ
ȱrightȱ
Q.ȱdirectorsȱ
R.ȱinsideȱboardȱ
S.ȱoutsideȱboardȱ
ȱȱ 11.ȱDistributionsȱofȱprofitsȱearnedȱbyȱaȱ11. _______ ȱ
corporationȱ
ȱȱ 12.ȱWhatȱisȱgivenȱbyȱaȱshareholderȱwhoȱdoesȱȱȱ 12. _______ ȱ
notȱwishȱtoȱattendȱmeetingsȱandȱtoȱvoteȱinȱ
ȱȱ ȱpersonȱ
6-26 Chapter 27 The Law of Corporations
LegalȱApplicationȱ
13. SaraȱHawkinsȱisȱoneȱofȱthreeȱdirectorsȱforȱtheȱSunȱElectricȱCorporation.ȱSheȱhadȱ
askedȱherȱcapableȱfriend,ȱDereka,ȱtoȱrepresentȱherȱatȱtheȱmeeting.ȱHasȱSaraȱactedȱ
legally?ȱExplainȱyourȱanswer.ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
14.ȱTheȱBoardȱofȱDirectorsȱofȱMagnumȱCorporationȱplannedȱtoȱexpandȱitsȱoperaȬ
tionsȱintoȱtheȱoverseasȱmarket.ȱAȱminorityȱofȱtheȱboardȱthoughtȱthatȱwasȱaȱbadȱ
ersȱwantȱtoȱsueȱtheȱcorporationȱforȱitsȱlossesȱfromȱtheȱoverseasȱfiasco.ȱDoȱtheyȱ
haveȱaȱclaimȱagainstȱthoseȱboardȱmembersȱwhoȱvotedȱforȱtheȱexpansion?ȱExȬ
plainȱyourȱanswer.ȱ
Chapter 27 The Law of Corporations
6-27
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ27—2ȱPRACTICEȱACTIVITYȱ
Readȱtheȱfollowingȱcasesȱandȱanswerȱtheȱquestionsȱaboutȱthem.ȱAttachȱaȱpageȱifȱadditionalȱ
spaceȱisȱneededȱforȱanswers.ȱ
ȱ
1.ȱTheȱFederalȱDepositȱInsuranceȱCorporationȱ(FDIC)ȱbroughtȱaȱnegligenceȱsuitȱ
theyȱwereȱactingȱwithinȱtheȱexerciseȱofȱtheirȱdiscretionȱandȱjudgmentȱinȱtheȱdeȬ
velopmentȱofȱtheirȱenterprise.ȱAreȱtheȱdirectorsȱcorrect?ȱExplain.ȱ[FederalȱDepositȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
2.ȱDennisȱandȱhisȱwife,ȱCaroline,ȱwereȱpresidentȱandȱsecretaryȱofȱaȱcorporationȱ
thatȱlostȱitsȱcharterȱthroughȱbankruptcy.ȱAȱlawȱfirmȱwasȱhiredȱtoȱhelpȱthemȱreȬ
gationȱofȱtheȱcorporation,ȱnotȱthemȱpersonally.ȱTheȱlawȱfirmȱnowȱsuesȱDennisȱ
andȱCarolineȱforȱtheȱfees.ȱWillȱDennisȱandȱCarolineȱhaveȱtoȱpay?ȱExplain.ȱ
6-28 Chapter 27 The Law of Corporations
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ27—2ȱRETEACHȱ
Directions:ȱWriteȱtheȱnumbersȱ1–20ȱonȱindexȱcardsȱinȱlargeȱprint.ȱOnȱtheȱotherȱsideȱ
ofȱtheȱcard,ȱwriteȱtheȱdefinitionȱorȱtermȱthatȱisȱshownȱbyȱeachȱnumberȱbelow.ȱTapeȱ
theȱcardsȱtoȱaȱchalkboardȱinȱtheȱpatternȱbelowȱwithȱtheȱnumbersȱfacingȱtheȱstudents.ȱ
Divideȱtheȱstudentsȱintoȱfourȱorȱfiveȱteams.ȱEachȱteamȱshouldȱchooseȱaȱcaptainȱtoȱ
answerȱforȱthem.ȱTheȱteamȱcaptainȱwillȱchooseȱanyȱtwoȱnumbers.ȱReadȱtheȱcontentsȱ
onȱtheȱbackȱofȱtheȱcardsȱoutȱloud.ȱIfȱtheȱtwoȱchosenȱcardsȱformȱaȱcorrectȱmatchȱofȱaȱ
termȱandȱitsȱdefinition,ȱtheyȱareȱremovedȱfromȱtheȱchalkboardȱandȱthatȱteamȱscoresȱ
aȱpoint.ȱIfȱtheȱcardsȱdoȱnotȱmakeȱaȱcorrectȱmatch,ȱtheȱnextȱteamȱmayȱtakeȱaȱturn.ȱ
Note:ȱȱDoȱnotȱallowȱtheȱstudentsȱtoȱhaveȱanythingȱtoȱwriteȱwithȱduringȱtheȱgame.ȱ
Cardȱ1ȱ
shareȱofȱstockȱ
Cardȱ2ȱ
Personsȱwhoȱareȱ
responsibleȱforȱtheȱ
overallȱdirectionȱofȱ
aȱcorporationȱ
Cardȱ3ȱ
shareholderȱ
Cardȱ4ȱ
Aȱboardȱthatȱ
consistsȱofȱinsideȱ
andȱoutsideȱ
membersȱ
Cardȱ5ȱ
Owningȱlessȱthanȱ
50ȱpercentȱofȱtheȱ
votingȱsharesȱ
Cardȱ6ȱ
commonȱstockȱ
Cardȱ7ȱ
dividendsȱ
Cardȱ8ȱ
Somethingȱthatȱ
protectsȱ
shareholdersȱandȱ
directorsȱfromȱ
personalȱliabilityȱ
forȱhonestȱ
mistakesȱ
Cardȱ9ȱ
preferredȱstockȱ
Cardȱ10ȱ
Aȱunitȱofȱ
ownershipȱinȱaȱ
corporationȱ
Cardȱ11ȱ
liquidationȱ
Cardȱ12ȱ
businessȱjudgmentȱ
ruleȱ
Cardȱ13ȱ
Aȱpersonȱwhoȱ
ownsȱoneȱorȱmoreȱ
sharesȱofȱstockȱ
Cardȱ14ȱ
minorityȱpositionȱ
Cardȱ15ȱ
Distributionsȱofȱ
profitsȱearnedȱbyȱaȱ
corporationȱ
Cardȱ16ȱ
Stockȱthatȱentitlesȱ
itsȱownerȱtoȱaȱ
statedȱdividendȱ
Cardȱ17ȱ
mixedȱboardȱ
Cardȱ18ȱ
Stockȱthatȱgivesȱ
theȱshareholderȱ
theȱrightȱtoȱvoteȱinȱ
corporateȱelectionsȱ
Cardȱ19ȱ
directorsȱ
Cardȱ20ȱ
Theȱendingȱofȱaȱ
corporationȱ
Chapter 27 The Law of Corporations
6-29
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ27—2ȱENRICHMENTȱ
Asȱyouȱlearnedȱinȱthisȱlesson,ȱcorporationsȱissueȱunitsȱofȱownershipȱknownȱasȱ
sharesȱofȱstock.ȱAȱpersonȱwhoȱownsȱoneȱorȱmoreȱsharesȱofȱstockȱisȱaȱshareholderȱ(orȱ
stockholder).ȱTheȱcorporationȱusesȱtheȱmoneyȱreceivedȱfromȱtheȱinitialȱsaleȱofȱstockȱ
toȱbuyȱequipment,ȱsupplies,ȱandȱinventory;ȱtoȱhireȱlabor;ȱandȱtoȱpayȱotherȱexpenses.ȱ
Onceȱgoodsȱandȱservicesȱareȱproducedȱandȱsold,ȱearningsȱareȱmadeȱandȱmayȱbeȱreȬ
invested.ȱDividendsȱmayȱalsoȱbeȱpaidȱtoȱshareholders.ȱTheȱpriceȱofȱtheȱstockȱinȬ
creasesȱwhenȱtheȱcorporationȱdoesȱwell.ȱSelectȱaȱlargeȱcorporationȱandȱcheckȱwithȱ
theȱcompany,ȱaȱstockȱbroker,ȱorȱanȱInternetȱsiteȱtoȱfindȱoutȱaboutȱtheȱcompany’sȱ
stock.ȱThenȱanswerȱtheȱfollowingȱquestions.ȱ
ȱ
1.ȱDoesȱtheȱshareholderȱreceiveȱaȱstockȱcertificateȱasȱwrittenȱevidenceȱofȱownershipȱ
andȱrightsȱinȱtheȱbusinessȱorȱareȱtheȱsharesȱregisteredȱonȱbooksȱkeptȱbyȱorȱforȱ
theȱissuingȱcompany?ȱ
ȱ
ȱ
ȱ
2.ȱWhatȱisȱtheȱcurrentȱpriceȱforȱaȱshareȱofȱstock?ȱ
ȱ
ȱ
ȱ
3.ȱWhatȱwasȱtheȱpriceȱforȱaȱshareȱofȱthisȱcorporation’sȱstockȱoneȱyearȱago?ȱ
ȱ
ȱ
ȱ
4.ȱIsȱtheȱstockȱlistedȱonȱtheȱAmericanȱStockȱExchange,ȱtheȱNewȱYorkȱStockȱExȬ
change,ȱorȱanother?ȱ
ȱ
ȱ
ȱ
5.ȱDoesȱtheȱstockȱhaveȱaȱparȱvalueȱorȱisȱitȱaȱnoȬparȱstock?ȱ
ȱ
ȱ
ȱ
6.ȱAreȱdividendsȱdistributedȱtoȱshareholders?ȱ
ȱ
ȱ
ȱ
7.ȱDoesȱthisȱcorporationȱissueȱpreferredȱstock?ȱ
6-30 Chapter 27 The Law of Corporations
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ27—3ȱQUIZȱ
LegalȱConceptsȱ
Directions:ȱPlaceȱaȱTȱforȱTrueȱorȱanȱFȱforȱFalseȱinȱtheȱAnswersȱcolumnȱtoȱshowȱ
whetherȱeachȱofȱtheȱfollowingȱstatementsȱisȱtrueȱorȱfalse.ȱ
ȱȱ Answersȱ
ȱȱ1.ȱȱ Theȱdeathȱorȱwithdrawalȱofȱaȱdirector,ȱmanager,ȱorȱshareholderȱ
hasȱnoȱlegalȱeffectȱonȱaȱcorporation’sȱcontinuity.ȱ
1.ȱ______ȱ
ȱȱ2.ȱAȱcorporationȱcanȱselectȱanyȱnameȱtoȱidentifyȱitself.ȱ2.ȱ______ȱ
ȱȱ3.ȱElectioneeringȱcommunicationsȱareȱmediaȱmessagesȱforȱorȱ
againstȱpoliticalȱcandidatesȱandȱissues.ȱ
3.ȱ______ȱ
ȱȱ4.ȱAȱcorporationȱhasȱtoȱbeȱformedȱforȱaȱspecificȱpurpose.ȱ4.ȱ______ȱ
ȱȱ5.ȱAnȱunsecuredȱbondȱisȱaȱdebenture.ȱ5.ȱ______ȱ
ȱȱ6.ȱMergerȱofȱoneȱcorporationȱintoȱanotherȱcanȱoccurȱwithoutȱshareȬ
holderȱapproval.ȱ
6.ȱ______ȱ
ȱȱ7.ȱForfeitureȱofȱtheȱcorporateȱcharterȱcanȱoccurȱforȱactionsȱsuchȱasȱȱ
fraudulentȱsubmissionȱofȱtheȱarticlesȱofȱincorporationȱȱorȱreȬ
peatedȱviolationsȱofȱtheȱlawȱ
7.ȱ______ȱ
ȱȱ8.ȱȱȱ BankruptcyȱcanȱcauseȱdissolutionȱbyȱdepletingȱtheȱcorporateȱasȬ
sets.ȱ
8.ȱ______ȱ
ȱȱ9.ȱȱ Evenȱifȱshareholdersȱagreeȱtoȱdissolveȱtheȱcorporation,ȱitȱcanȱonlyȱ
occurȱifȱtheȱstateȱpermitsȱit.ȱ
9.ȱ______ȱ
10.ȱOnceȱaȱcorporationȱcompletelyȱchangesȱhands,ȱitȱmustȱreȬ
incorporateȱwithȱtheȱnewȱowners.ȱ
10.______ȱ
ȱ
LegalȱApplicationsȱ
ȱ
11.ȱTheȱboardȱofȱdirectorsȱforȱTheȱGreenTreeȱCorporationȱunilaterallyȱdecidedȱtoȱ
sellȱ1,000ȱnewȱsharesȱofȱstockȱtoȱgenerateȱadditionalȱcapital.ȱTheȱstockȱwasȱthenȱ
soldȱtoȱoutsideȱinvestors.ȱAndres,ȱanȱoriginalȱshareholder,ȱprotestedȱthisȱdeciȬ
sion.ȱIsȱAndresȱactingȱwithinȱhisȱrightsȱasȱaȱshareholder?ȱExplainȱyourȱanswer.ȱ
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