A. The money is distributed equally between the bondholders and shareholders because they have equal footing as to the corporation. B. The money is distributed on a pro-rated basis to the bondholders and the shareholders based on the percentage value of their present holdings versus the entire 1 million dollars in assets to be distributed. C. The shareholders are paid first at the rate of $2,000.00 per share and the bondholders are left unpaid. D. The bondholders are paid first, and the remaining 9 hundred thousand dollars is divided on a per share basis among the shareholders because the bondholders are creditors to the corporation and the shareholders are owners. Consequently, the bondholders are entitled to be paid before the shareholders divide any remaining assets. 10. A group of six gentlemen are considering the creation of a corporation. In preparing for the operation of the corporation, one of these gentlemen goes out and discusses deals with potential clients. As a result of these discussions, he enters several contracts on behalf of the corporation in the process being created. After its incorporation, the corporation ultimately fails, and several of the contracts entered prior to its incorporation by the one individual are left unresolved. The parties injured by the corporations breach of these contracts seeks redress individually from the person who signed on behalf of the corporation. Can they be successful? A. Yes. The individual who signed the papers in a pre-incorporation is a promoter and has personal liability for those contracts. B. Yes. All of the people who were involved in forming the corporation remain responsible for all the contracts of the corporation whether entered into before incorporation or after corporation. C. No. Because of the concept of limited liability none of the investors are responsible for corporate debts and liabilities over and above their original investment. D. Yes. All of the people seeking incorporation of the entity are responsible personally for all pre-incorporation debts whether they have signed on a contract for the same or not. 11. Corporation X is located in a state that requires the chair holder to be able to cumulatively vote their shares. The minority shareholder of the corporation holds ten shares which he can vote. The two majority shareholders hold a total of 90 shares which they always vote together. By using cumulative voting to its best advantage, how many members of the board of directors can the minority shareholder ensure will be elected if they are voting for ten directors? A. None. Because he can only vote ten shares, he will be defeated 90 to 10 on every board of director seat for which he votes. B. Five. Under the terms of cumulative voting, the minority shareholders are guaranteed a representation of one-half on the board of directors. C. One. By exercising cumulative voting, the minority can use all 100 of his cumulative votes ( 10 votes for 10 directors) to vote for one particularly director. By doing this, he ensures that he will defeat the 90 votes that all of the other board of director candidates will receive and will elect one member of the board. D. One. Under the terms of cumulative voting minority shareholders are guaranteed a representation on the board of directors which is equal to the percentage of the shares of stock which they own. Bob is a member of the board of directors of Corporation X. A tender offer is made to Corporation X by Corporation Y to purchase all of the assets and the goodwill of Corporation X. The result of the purchase would combine Corporation Y superior marketing skills with the excellent distribution capacity of Corporation X thereby creating a stronger and better corporation. However, if this occurs it is most likely that Bob will lose his position as a member of the board of directors because of the merged boards. Should Bob vote in favor of or against the merger? A. Bob is obliged to vote in favor of the merger because he has a duty of loyalty of the corporation as a member of the corporation and cannot violate this fiduciary duty. B. Bob should vote in favor of the merger because not only is it good for Corporation X in the long run, but it will probably provide some personal spring board for him at a later time. C. Bob must weigh his personal involvement and the good of the company against one another and determine what is the appropriate course for him to take in regard to this. D. Bob should vote against the merger because it would be personally devastating to him. A. The money is distributed equally between the bondholders and shareholders because they have equal footing as to the corporation. B. The money is distributed on a pro-rated basis to the bondholders and the shareholders based on the percentage value of their present holdings versus the entire 1 million dollars in assets to be distributed. C. The shareholders are paid first at the rate of $2,000.00 per share and the bondholders are left unpaid. D. The bondholders are paid first, and the remaining 9 hundred thousand dollars is divided on a per share basis among the shareholders because the bondholders are creditors to the corporation and the shareholders are owners. Consequently, the bondholders are entitled to be paid before the shareholders divide any remaining assets. 10. A group of six gentlemen are considering the creation of a corporation. In preparing for the operation of the corporation, one of these gentlemen goes out and discusses deals with potential clients. As a result of these discussions, he enters several contracts on behalf of the corporation in the process being created. After its incorporation, the corporation ultimately fails, and several of the contracts entered prior to its incorporation by the one individual are left unresolved. The parties injured by the corporations breach of these contracts seeks redress individually from the person who signed on behalf of the corporation. Can they be successful? A. Yes. The individual who signed the papers in a pre-incorporation is a promoter and has personal liability for those contracts. B. Yes. All of the people who were involved in forming the corporation remain responsible for all the contracts of the corporation whether entered into before incorporation or after corporation. C. No. Because of the concept of limited liability none of the investors are responsible for corporate debts and liabilities over and above their original investment. D. Yes. All of the people seeking incorporation of the entity are responsible personally for all pre-incorporation debts whether they have signed on a contract for the same or not. 11. Corporation X is located in a state that requires the chair holder to be able to cumulatively vote their shares. The minority shareholder of the corporation holds ten shares which he can vote. The two majority shareholders hold a total of 90 shares which they always vote together. By using cumulative voting to its best advantage, how many members of the board of directors can the minority shareholder ensure will be elected if they are voting for ten directors? A. None. Because he can only vote ten shares, he will be defeated 90 to 10 on every board of director seat for which he votes. B. Five. Under the terms of cumulative voting, the minority shareholders are guaranteed a representation of one-half on the board of directors. C. One. By exercising cumulative voting, the minority can use all 100 of his cumulative votes ( 10 votes for 10 directors) to vote for one particularly director. By doing this, he ensures that he will defeat the 90 votes that all of the other board of director candidates will receive and will elect one member of the board. D. One. Under the terms of cumulative voting minority shareholders are guaranteed a representation on the board of directors which is equal to the percentage of the shares of stock which they own. Bob is a member of the board of directors of Corporation X. A tender offer is made to Corporation X by Corporation Y to purchase all of the assets and the goodwill of Corporation X. The result of the purchase would combine Corporation Y superior marketing skills with the excellent distribution capacity of Corporation X thereby creating a stronger and better corporation. However, if this occurs it is most likely that Bob will lose his position as a member of the board of directors because of the merged boards. Should Bob vote in favor of or against the merger? A. Bob is obliged to vote in favor of the merger because he has a duty of loyalty of the corporation as a member of the corporation and cannot violate this fiduciary duty. B. Bob should vote in favor of the merger because not only is it good for Corporation X in the long run, but it will probably provide some personal spring board for him at a later time. C. Bob must weigh his personal involvement and the good of the company against one another and determine what is the appropriate course for him to take in regard to this. D. Bob should vote against the merger because it would be personally devastating to him