Question 11 pts

Question 1

ABC Corporation entered into a contract with Jane Jones. Jones breached the contract but ABC has not sued Jones for that breach.

May a shareholder of ABC sue Jones directly?

Group of answer choices

Yes, because the shareholder was also injured directly as a result of the breach.

No, because the decision by ABC not to sue Jones was clearly within the business judgment rule.

Yes, because the shareholder can successfully argue that ABC's failure to sue Jones was negligence.

No, because Jones' breach did not injure the shareholder directly.

Question 2

Assume that Corporation A fails to pay an amount due to its supplier, and the supplier wins a lawsuit against Corporation A.

Who is likely to have personal liability for the obligation to the supplier?

Group of answer choices

The employee who contracted with the supplier.

The Officer who directed an employee to contract with the supplier.

The Board of Directors who delegated decisions on hiring suppliers to the Officers.

No answers are correct.

Question 3

Handy Andy (HA) contracts with X Corporation to perform extensive repairs on X's broken assembly line. The parties agree that payment will be made in full upon completion of the repairs. After HA completes his work and submits an invoice for payment, X Corporation informs him that it cannot pay because it has been undercapitalized for some time and has to pay other creditors first. HA sues and obtains a judgment against X Corporation.

How likely is it that HA can pierce the corporate veil and obtain a judgment against the very wealthy sole shareholder of X Corporation?

Group of answer choices

Likely because of the wealth of the sole shareholder of X Corporation.

Likely because of X Corporation's undercapitalization.

Unlikely because courts have never pierced the veil in breach of contract cases.

Unlikely because HA could have negotiated better payment terms.

Question 4

Individual I owns 100% of I Corporation and also owns 100% of Me and Myself Corporation. You obtain a judgment against I Corporation and are successful in extending the judgment to I because I Corporation was inadequately capitalized.

Under what theory or rule might you be able to extend the judgment to the assets of Me and Myself Corporation?

Group of answer choices

No answers are correct.

Business judgment rule.

Piercing of the corporate veil.

Reverse piercing of the corporate veil.

Question 5

Jack and Queen join forces to start a business manufacturing playing cards. They sign a simple agreement stating that they are forming the business to operate under the name Card Corporation and that they will share profits equally. Jack designates himself President and Queen designates herself Vice President and Treasurer.

Assuming no other facts than these, what form of business organization best describes the operation of Card Corporation?

Group of answer choices

Partnership, because Jack and Queen are engaged in a for profit business as co-owners.

Agency, because there is no agreement on how losses will be shared.

Agency, because there is no written agreement between Jack and Queen.

Corporation, because their agreement to form a corporation and subsequent operation as such is sufficient to establish corporation status.

Question 6

Shareholder derivative lawsuits can be settled without court approval if there is unanimous agreement among the board of directors.

Group of answer choices

True

False

Question 7

The business judgment rule is applicable if a court determines that the decision of a board of directors was more likely than not the correct decision.

Group of answer choices

True

False

Question 8

Which of the following is least likely to persuade a court that the unity-of-interest test has been met?

Group of answer choices

Complying with corporate formalities.

A corporation's treating the assets of a separate corporation as its own.

Lack of adequate capitalization.

Commingling of funds.

Question 9

Which of the following statements most accurately describes the extent to which a board of directors of a for-profit corporation has flexibility to direct corporate money for charitable purposes?

Group of answer choices

A board of directors has discretion to make corporate charitable contributions absent a conflict of interest or an obvious purpose to sacrifice the interests of shareholders.

Charitable contributions by corporations are prohibited in all circumstances.

Charitable contributions are permitted but only if the shareholders have given their prior consent.

A board of directors, as agent for the shareholders, has unlimited discretion to make corporate charitable contributions.

Question 10

Which of the following statements most accurately describes why Delaware is chosen as the state incorporation for many companies?

Group of answer choices

Delaware minimizes the cost of incorporation.

Decisions of courts in Delaware tend to be well-reasoned and predictable.

Applicable Delaware corporation statutes are vague, which allows for creative strategies to be implemented by management.

Delaware law tends to allow management to take advantage of investors.