QUESTION $2$

Dividends may not be paid if the corporation is insolvent or will become insolvent through the payment of dividends.

True

False

QUESTION $3$

Hero Hub, Inc., has fast food stores in New York. Its Board of Directors holds a number of meetings wherein it considers banning the use of mayonnaise in all of its stores. The Board reviews substantial research connectiong mayonnaise consumption to an increase in bad cholesterol and it reviews feedback from health$-$conscious consumer groups and customers pushing to remove mayonnaise from its stores. The Board then votes to ban the use of mayonnaise in its stores. Customers opposed to the decision boycott the store and sales decline. Luca is a shareholder angered about the profit decline and he seeks to sue the Board, claiming that it violated its duty of care. The Board argues that it is entitled to the protection of the Business Judgment Rule $($BJR$)$ The Board will win because the BJR protects even bad decisions by the Board if those decisions were informed, had a rational basis behind them, and were absent of fraud or bad faith.

True

False