Psychology Chapter 36 Homework When There Cumulative Voting For Directors Stockholder

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CHAPTER 36

MANAGEMENT AND DISSOLUTION OF A CORPORATION

Answers to Learning Objectives

1. The board of directors and officers manage a corporation. The directors select the officers, who are

the chief agents of the corporation. The stockholders control management by electing the board of

directors. Theoretically, if the directors do not carry out the will of the stockholders, the

stockholders can elect a new board.

3. The powers of directors are to manage and direct the corporation and to perform any legal act

reasonably necessary to achieve the purpose of the corporation as long as this power is not

expressly limited. The directors have the responsibility of establishing policies that will achieve the

purpose of the corporation, selecting executives to carry out these policies, and supervising these

Lesson Outline

1. The stockholders elect a board of directors that selects officers and appoints other agents to operate

the corporate business.

2. The stockholders meet at the place and time specified in the articles of incorporation or bylaws to

conduct the business devolving upon the stockholders. The board of directors may call special

meetings when necessary or desirable.

6. A stockholder possesses the following rights:

a. To receive a properly executed certificate of stock ownership

b. To attend corporate meetings and to vote unless the right to vote has been given up by

agreement

Chapter 36 Management and Dissolution of a Corporation

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g. To share pro rata in the assets remaining after all obligations of the company have been paid

when the corporation is dissolved

7. The governing body of a corporation is the board of directors. The directors have the following

powers, duties:

a. Powers granted to them by law, by the articles of incorporation, and by the bylaws

b. Duty to establish all major policies of the corporation

Comments on Cases

(p. 428) The court stated that there was no reasonable basis for suspecting the validity of the

signature on a proxy just because no vote was indicated. Because Gordon’s proxy was

valid, there was a quorum for the meeting. P.F.P. Family Holdings, L.P. v. Stan Lee

Media, Inc., 252 P3d 1 (Co. Ct. App.)

(p. 433) The court pointed out that the fact that Harris had not learned of the opportunity to purchase the

property through her connection to the business of the club was irrelevant. The key was that the

opportunity was closely related to a business in which the club was engaged or expected to

engage. Northeast Harbor Golf Club v. Harris, 725 A.2d 1018 (Me.)

Answers to Questions

(Page 436)

1. As an artificial being a corporation can perform business transactions only through actual people

acting as agents. The directors of the corporation constitute agents of the corporation.

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4. A quorum is normally a majority of the outstanding stock and this is set in statute, bylaws, or the

articles of incorporation.

5. A stockholder’s most important right to vote is the most important right because only in this way

Answers to Case Problems

(Page 436)

1. No. Since the bylaws required a member to pay the full annual assessment in order to vote and only

1/12 of the annual assessment was paid, and since the “new members” had not applied for

membership, they were ineligible to vote. Nelson had no right to hold a meeting of claim to be an

officer or director of BWSIA. Nelson v. Big Woods Springs Imp. Ass’n, Inc., 322 S.W.3d 678 (Tex.

4. Yes. The court pointed out that after a merger, the surviving corporation is subject to all the

liabilities of the disappearing corporation. PDSC had the same obligation to Maudlin as it did

before the merger. Since the transaction was enforceable by Maudlin before the merger, it was

enforceable against PDSC after the merger. Maudlin v. Pacific Decision Sciences Corp., 40

Cal.Rptr.3d 724 (Cal. Ct. App.)

5. Yes. The court said that although the ESOP was technically the owner of KMC’s stock, KMC

viewed the ESOP participants as stockholders and they were the beneficial owners of the shares, so

they were entitled to stockholders’ rights. In addition, since their purpose in inspecting the records

was to ensure proper corporate governance, their purpose was proper. Kelley Mfg. Co. v. Martin,

674 S.E.2d 92 (Ga. Ct. App.)

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Answers to Summary Cases for Part Seven

(Page 439)

1. Since there was no indication of the traditional evidence of a partnership—the intent of the parties,

joint control in managing the business, sharing of profits and losses, and capital contribution—the

court held there was no oral partnership.

2. Since the shares were cumulative, the court stated that the dividends each payment period should be

figured on $2.14 PLUS the accrued unpaid dividends. The EPS holders were correct that the

redemption price should be $8.69 and not $5.241 per share.

continue the partnership it was not dissolved.

6. No. The court said a general partner had a fiduciary duty of the utmost good faith and loyalty to the

other partners. Della Ratta’s decision not to pursue refinancing after he said he would and his

attempt to force out the withdrawing partners and put them in default did not comply with his

fiduciary duty. The court enjoined enforcement of the capital call.

7. No. The court said the directors must approve a sale of stock. Board approval for the issuance of

stock is not limited to the act of transferring the shares of stock to the would-be stockholder, but

includes an antecedent transaction that purports to bind the corporation to do so. Director approval

of the transaction fixing such consideration is required.