When a corporate manager makes an hoest error in judgement, the business judgment rule directs that:
The manager will not be liable if he acted with care and in good faith.
A corporate officer can be found liable for the illegal behavior of a subordinate when the officer:
Knew or should have known of the illegal conduct failed to take steps to prevent it..
When a general partner sells his partnership interests, the purchaser:
Does not become a partner until he is unanimously accepted by the other partners.
A director or officer will be held to have failed to act with due care and diligence if he:
Fails to make a resonable investigation before making any corporate decisions.
A governmental corporation seeks to make a profit:
False
Trading on inside information is in vilation of fiduciary duties:
True
A corporate officer is never held liable for the illegal behavior of a subordinate:
False
Anyone who buys the interest of an LLP partner is automatically a partner
False
Shareholders in close corporation are often restricted in the sale of their stock
True
The limited partnership certificate must be canceled when all limited partners have died or withdrawn:
True
An officer or director who has acted in bad faith or who is found liable to the corporation can be indemnified under any circumstances:
False
Charlene, Derwood and Elwyn form a partnership. They make no express agreement concerning how profits are to be divided. Of the 30k initial capital of the firm , Charlene and Derwood each contributed 12k. Elwyn contributed 6k. The partnership had a profit of 15k during the first year of operation of the business. What is Derwood's share of the profit?
$5000
The major distinction between a joint venture and partnership is that a joint venture:
Relates to a single enterprise
A partner is free to engage in activites that are in competition with the partnership:
False
When a corporation is held by a family or a small group of people who know one another, the corporation is called a
Closely held corporation
A____is a majority of the number of directors fixed by the articles or bylaws.
Quorum
From a risk standpoint, a shareholder or limited partner is better off than a general partner.
True
Which of the following business organizations faces the threat of double taxation?
Corporation
One of the baseic principles of corporation law is that:
Majority rule applies to both shareholder and director action.
A court may pierce the corporate veil if a corporation defruads its creitors by not having sufficent assets available to meet expected claims.
True
A person's status as a shareholder in a coroporation automatically gives such person a right to be an employee of the corporation if the person so desires.
False
The model business corporation act requreies that a corporation have a minimum of five directors.
False
A corporation that merges into another is dissolved
True
An indidvidual who joins an existing partnership has no liability for partnership debts that arose prior to his joining the partnership.
True
Jones & Co. is a busienss concern in the process of being set up. Its promoters have entered into preincorporation contracts. The promoters can be released from liabilitiy through:
An agreement with the corporation and third party wherein all three agree that the corporation will be substituted for the promoter.
The formation of a general partnership requires:
No express agreement
Piercing the corporate veil implies that:
Corporate shareholders are stripped of their limited liability to prevent unfair results
To obtain the protection of the busienss judgment rule, a director must meet certain requirements in arriving at his decisions. He must:
Make an informed decision; be free from conflicts of interest; and must have a rational basis for believing that the decision is in the best interests of the corporation.
In a general partnership, each of the partners is an owner and has a right to share in the profits of the business.
True
If articles of incorporation provide for a limited life:
The corporation automatically terminates at the end of the designated time
Sarbanes-Oxley requires CEOs and CFOs of publicly traded corporations to certify that, to their knowledge, all finacial information in quarterly reports is not false.
True
Smiley is heavily involved in the management of a certain business. If Smiley dies, under which of the following alternative fact situations would the business entity be considered legally dissolved as a result of Smiley's death?
If the business is a partnership and Smiley is a partner in it
A partnership is a
Voluntary and consensual association involving two or more persons
Under general incorporation laws
Formation of a corporation requires the preparation of articles of incorporation that comply with the state's incorporation statute
A partner withdrawing from an existing partnership remains liable for all partnership obligations that existed at the time of her withdrawal.
True
The corporation is viewed as the alter ego of the shareholder-manager when shareholders mix their personal dealings and corporate transactions aas if all were personal.
True
A corporation iwll be dissoved upon the death or insolvecy of a shareholder.
False
Which of the folowing is a taxable entity?
Corporation
The function of bylaws is to establish rules for the conduct of the internal affairs of the corporation.
True
The function of bylaws is to establish rules for the conduct of the internal affairs of the corporation
True
The function of bylaws is to establish rules for the conduct of the internal affairs of the corporation
True
When notice of a special meeting is defective, the defect may be cured if:
All of the directores waive notice
The business judgment rule consists of all of the following except:
Letting the shareholders to second guess on almost all of the directors judgements
Parners have the right to sell, mortage or devise to an heir any individual item of the firm's property.
False
Sockholders have the ability to effectively reject a merger agreement.
True
In the management of an LLP
All partners have equal say in its management.
The Securities Act of 1933
Requires that issuers selling securities make necessary disclosures at the time the issuer sells the securities to the public
Consideration must have monetary value to have legal value.
False
Shareholders are prohibited from submitting resolutions that are social or political in nature.
False
A principal may transact, through an agent, any business the principal lawfully could do in person.
True
The timing of pror dealings is relevant when determining a reasonable time for acceptance, if the parties have dealt with each other on a regular basis.
True
In order for an agency to be created:
There need not be any express agreement by the parties.
An agency can never be oral
False
A bankrupt person may not be granted a discharge if the person has obtained one within:
The last eight years
Arthur and Alan decide to open a retail store and operate the business as a partnership. As they require some additional funds to get the business in operation, they ask Jayne whether she would like to invest some funds in the business and become a limited partner. Assuming that Jayne becomes and remains a limited partner, which of the following statements concerning her status is correct:
She will have no personal liability for parnership debts, although the debts may be significant enough that she may lose the amount she invested in the business
To avoid being bound by the acts of the agent after the agency has ended, the principal:
Should give actual notice to those who have dealt with the former agent
The general rule is that an offeror can revoke an offer at any time prior to acceptance.
True
Distanet Corp. is a competitior of telenex Corp. in the personal computer market. After examining past and futrue price and sales data and after consulting an economist and an accountanat, the directors of Distanet voted to reduce the price of that company's computers, believing that by reducing the price of their product, the corporation could compete more successfully with Telenex. Tha plan was put into operation, but it did not prove to be effective. In fact, Distanet lost money as a result of the plan. Aileen, a stockholder of Distanaet, brings an action against the directors, seeking to hold them liable for the liable for the fialure of the plan to improve Distanet's position in the computer market and for the losses experience by the corporation as a result of the implemtation of the plan. Will she succed in her suit?
No, Because the director's decision was one subject to the business judgement rule.
In a contract involving elements of both goods and services, a court will determine whether Article 2 of the UCC applies by:
Asking which element predominates
Directors are agents for the corporation by virtue of that office
False
If time is not of the essence of a contract, the promisee must accept late performance rendered within a reasonable time of when performance was due.
True
Laura Riding offered to sell Louis Zukofsky a tract of land. The offer was complete and certain as to all material terms. The offer stated that a telegraphed acceptance was required. Within a reasonable time, Louis telephoned Laura to accept. Which is a true statement about the situation?
Louis has not accepted and there is no contract.
The person who files a voluntary petition must be insolvent.
False
Persons who file a voluntary petition
Must be able to allege that they have debts
Macks Bar sent Olive Outlet an order for 200 cases of olives, to be shipped, asap. The day Olive outlet receives Mack's order, it ships the olives. Later that day, Mack phones the Outlet and tries to revoke his offer. Under these circumstances:
Mack cannot revoke, since a contract was created when Outlet shipped the olives
Which of the following is not generally considered to be unique?
Personal Property
Scott was a member of the seven person board of directors of Buffalo Corporation. Officers of that corporation were considering a large purchase of new equipment to begin roduction of a completely new product line. The board of directors had not been consulted about the new venture, but Scott found out about the plan and objected to it being implemented. He sought to inspect the corporate books and records to gain factual information supportive of his position. The officers refused his inspection request, asserting that Scott had no management function or power. Under these circumstances, Scott:
Has the right to inspect corporate books and records, as information regarding the corporation and its affairs is essential to perform his duties.
The main thing courst look for in deciding whether the parties entered into a contract is a "meeting of the minds" between the parties
True
A prospectus
Is the basic selling document of the 1933 Act registered offering
The duty to mitigate damages:
Requires the non-breaching party to take steps to minimize the damage
Metz and Desman contracted for Metz to build a house for Desman on Desman's lot according to specifications provided by Desman. The contract provided that Metz would be paid $125,000 for this. Metz unintentionally deviated from the specifications in several minor respects. The house is soundly constructed and Metz completed the work within the promised time. Desman refused to pay Metz any of the $125000, arguing that the house did not conform to the specifications. In this case:
If the court finds that Metz has substantially performed, he will be able to recover the contract price less any damages caused by his failure to perform as promised
Independent contractors
Are under the control of their principals as to the result that is to be achieved, but no t as to the means used to accomplish that result
A freeze-out
Results in the minority shareholder having little influence in important corporate issues such as loss of employment
A person has the capacity to act as an agent only if he has the legal capacity to contract
False
A bidder making a tender offer must file a tender offer statement with the SEC before the offer is made
True
Hart recently filed a Chapter 7 bankruptcy petition. First Bank held a lien on Harts car as security for a 10k loan it had made to Hart. Assuming that the value of the car is less than the amount Hart still owes on the loan, which of the following statements is correct?
The bank will be treated as having a secured claim to the extent of the value of the car and as having a general unsecured claim for the difference between the outstanding loan balance and thevalue of the car
The board of directors of Meckes corporation, at a regular meeting of the board, entered into a contract with Peter, one of the directors. The agreement called for the sale to Peter of a retail store the corporation operated. There were 12 board members, 10 of whom were present at the meeting. One of the directors present was Peter. After a lengthy discussion in which Peter participated, nine directors, including Peter, voted in favor of the contract and one voted against it. In view of these facts, which of the following is correct?
If the contract is unfair to the corporation, it is voidable at the option of the corporation
The Securities Act of 1933 is a one time disclosure statute, although some of its liability provisions purport to cover all fraudulent sales of securities
True
Failing to obey court orders will bar the debtor from being discharged.
True
A person with inside information must either disclose the information before trading or refrain from trading
True
Fillmore, Willis and Polk form a partnership. Fillmor's capital contribution to the firm is 10k. Willis and Polk contribute 5k each. The parties make no express agreement concerning how profits are to be divided, but they agree to tshare losses as follows: Fillmore, 40%, Willis and Polk, 30% each. During the partnership's first year, the business has a profit of 40k. What is Fillmore's share of the profit?
10k
Foster received a discharge in her Chapter 7 bankruptcy proceeding. Her creditors received approximately 30 percent of what Foster originally owed them. Two years after the discharge, Foster inherited a substantial amount of money. One of Foster's former creditors, Know, then persuaded Foster to agree to pay him the remaining 70 percent of the discharged debt that he had not received through the bankruptcy process. Swveral weeks later, Foster refused to abide by the agreement, even though the money she had inherited would have enabled her to pay what Knox sounght several times over. Under these circumstances:
Foster will not be required to abide by the agreement because the remainder of the debt Foster owed was discharged in the liquidation proceeding
On October 29, 1989, Al Glitz agrees to paint Georgia's house during thanksgiving week for 4k in exchange for Georgias promise to pay him 4k in cash immediately upon completion of the work. Which of the following statements is true with regard to this case?
Both parties are bound on October 29 because each has given cosideration for the other's promise and neither may back out without legal liability
Six months before filing bankruptcy, Shirley sold her new car to her brother, Claude for $100. The calue of the car was $8k at the time of the sale. Under these circumstances.
The transfer is voidable by the trustee
A bankrupt debtor
Can elect either the state or the federal set of exemptions
The Securities Exchange Act of 1934 requires periodic disclosures from issuers of securities.
True
Which of the following statements about debt securities is true:
They arise in the form of notes, debentures or bonds
Which of the following is correct regarding the definition of "Merchant" by UCC?
It sometimes imposes a higher standard of behavior on merchants than non-merchants
If an offer does not state a time for acceptance, it is:
Valid for a reasonable time, which depends on the circumstances of the offer
The plaintiff in a contract action has not duty to mitigate his damages because he is the injured party
False
Under the Bankruptcy Act, a debtor may keep both property exempted by state law and property exempted under federal law
False
One type of stock enables the shareholder to have her usual divident. Then, after the common shareholders receive their normal dividend, she is able to share with the common shareholders in any additional income available for distribution. This type of stock is:
Participating preferred
Fran promises to reimburse Tim $700 for a new scooter for his own use. After Tim delivers the scooter, Fran refuses to pay Tim. Tim may recover under the doctrine of:
Promissory estoppel
An agency relationship arises when the agent acts for the benefit of and under the direction of the principal.
True
A corporate officer can be found liable for the illegal behavior of a subordinate when the officer:
Knew or should have known of the illegal conduct and failed to take steps to prevent it
All business corporations derive their existence from:
The state in which they are incorporated
A creditor of a partner can attach any property owned by the partnership
False
Generally, businesses start out as publicly traded corporations.
False
Whcih of the following states has traditionally been considered attractive for incorporation?
