MGT 322 Final exam with correct answers
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Corporation - CORRECT ANSWERS ✔✔Liability of shareholders is
|\ |\ |\ |\ |\ |\ |\ |\
limited to the value of shares in the corporation
|\ |\ |\ |\ |\ |\ |\ |\
Nature: separate legal entity, limited liability, separation of mgmt. and
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
ownership, free transferability of shares |\ |\ |\ |\
Governmental Corps - CORRECT ANSWERS ✔✔City or school corps |\ |\ |\ |\ |\ |\ |\ |\ |\
that usually have the power to tax and do not seek to make a profit.
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
Nonprofit Corps - CORRECT ANSWERS ✔✔Hospitals and organizations
|\ |\ |\ |\ |\ |\ |\
that are formed and operated by private persons. They are not
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
permitted to make a profit and each state has special statute to under
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
which to be formed.
|\ |\ |\
For-profit Corps - CORRECT ANSWERS ✔✔Aimed to make a profit that
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
may be distributed to shareholders as dividends. Greater management
|\ |\ |\ |\ |\ |\ |\ |\ |\
flexibility is permitted. |\ |\
Close corporation - CORRECT ANSWERS ✔✔Held by a small group of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
people who know one another (usually family); some or most are active
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
,in management. No established market for the stock. Earnings often
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
reinvested.
*Shareholders not liable for corporate debts |\ |\ |\ |\ |\
Publicly held corps - CORRECT ANSWERS ✔✔Sells shares to people
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
who have little interest in the company, other than as investors. Profits
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
generally distributed as dividends. Formed under general incorporation
|\ |\ |\ |\ |\ |\ |\ |\
statutes.
Foreign Corporations - CORRECT ANSWERS ✔✔To do business in
|\ |\ |\ |\ |\ |\ |\ |\ |\
another state (maintaining goods), all the corp. needs to do is qualify to
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
do business there (not necessary to do incorporate there)
|\ |\ |\ |\ |\ |\ |\ |\
The Model Business Corporation Act (MBCA) - CORRECT ANSWERS
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✔✔A model statute; governs steps required to incorporate
|\ |\ |\ |\ |\ |\ |\
- Requires an organizational meeting be conducted by BOD
|\ |\ |\ |\ |\ |\ |\ |\
- There must be at least 3 people to serve as the incorporators
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
Defective Incorporation - CORRECT ANSWERS ✔✔Can lead to
|\ |\ |\ |\ |\ |\ |\ |\
personal liability on the part of the promoters, managers, and
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
shareholders, as well as voiding contracts made on behalf of the |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
defectively formed business. |\ |\ |\
,- Under MBCA all persons who assume to act as a corporation before
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
the certificate of incorporation has been issued are jointly and severally
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
liable |\
- Promoters, managers, and shareholders who participated in policy
|\ |\ |\ |\ |\ |\ |\ |\ |\
decision and know of the defective corp are liable
|\ |\ |\ |\ |\ |\ |\ |\
Internal Affairs Doctrine - CORRECT ANSWERS ✔✔Ensures that such
|\ |\ |\ |\ |\ |\ |\ |\ |\
issues as voting rights of shareholders, distributions of dividends and
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
corporate property, and the fiduciary obligations of management are all
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
determined in accordance with the law of the state in which the
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
company is incorporated. |\ |\
Articles - CORRECT ANSWERS ✔✔The constitution of a corporation
|\ |\ |\ |\ |\ |\ |\ |\ |\
prepared by a lawyer. Articles must then be filed with the secretary of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
state and a certificate will be issued. An initial organization meeting will
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
then be held. May be amended by the votes of the shareholders.
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
|\
- Mandatory: name of corporation, number of shares, address of initial
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
registered office, name of registered agent, name and address of each
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
incorporator |\
Optional: duration of corp., purpose of corp., par value of shares, names
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
of initial BOD, additional provisions
|\ |\ |\ |\ |\
, Bylaws - CORRECT ANSWERS ✔✔To establish rules for the conduct of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
the internal affairs of the corporation. Bylaws must be consistent with
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
state law and the articles of incorporation. Directors, officers and
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
shareholders are bound by the bylaws, while corporate employees are |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
not generally.
|\ |\
- MBCA gives directors the power to adopt the initial bylaws.
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
- Shareholders have an inherent right to make bylaws.
|\ |\ |\ |\ |\ |\ |\ |\ |\
- May be amended by the votes of the BOD
|\ |\ |\ |\ |\ |\ |\ |\ |\
Promoter - CORRECT ANSWERS ✔✔Brings corporation into being and
|\ |\ |\ |\ |\ |\ |\ |\ |\
has a fiduciary duty to the corporation; Responsible for organizing
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
financing for the corporation, making various contracts, filing the
|\ |\ |\ |\ |\ |\ |\ |\ |\
appropriate papers for incorporation, and other activities necessary to
|\ |\ |\ |\ |\ |\ |\ |\ |\
enable the corporation to begin operations.
|\ |\ |\ |\ |\
Promoter's Liabilities - CORRECT ANSWERS ✔✔- Must practice good|\ |\ |\ |\ |\ |\ |\ |\ |\
faith and honesty and provide full disclosure to t/ps
|\ |\ |\ |\ |\ |\ |\ |\
Under Agency Law, promoters are liable on contracts they make on
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
behalf of corporations. |\ |\
The promoter is released from liability when the promoter, corp., and t/p
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
agree to substitute the promoter for the corporation in a novation.
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
|\ |\ |\ |\ |\ |\
Corporation - CORRECT ANSWERS ✔✔Liability of shareholders is
|\ |\ |\ |\ |\ |\ |\ |\
limited to the value of shares in the corporation
|\ |\ |\ |\ |\ |\ |\ |\
Nature: separate legal entity, limited liability, separation of mgmt. and
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
ownership, free transferability of shares |\ |\ |\ |\
Governmental Corps - CORRECT ANSWERS ✔✔City or school corps |\ |\ |\ |\ |\ |\ |\ |\ |\
that usually have the power to tax and do not seek to make a profit.
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
Nonprofit Corps - CORRECT ANSWERS ✔✔Hospitals and organizations
|\ |\ |\ |\ |\ |\ |\
that are formed and operated by private persons. They are not
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
permitted to make a profit and each state has special statute to under
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
which to be formed.
|\ |\ |\
For-profit Corps - CORRECT ANSWERS ✔✔Aimed to make a profit that
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
may be distributed to shareholders as dividends. Greater management
|\ |\ |\ |\ |\ |\ |\ |\ |\
flexibility is permitted. |\ |\
Close corporation - CORRECT ANSWERS ✔✔Held by a small group of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
people who know one another (usually family); some or most are active
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
,in management. No established market for the stock. Earnings often
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
reinvested.
*Shareholders not liable for corporate debts |\ |\ |\ |\ |\
Publicly held corps - CORRECT ANSWERS ✔✔Sells shares to people
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
who have little interest in the company, other than as investors. Profits
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
generally distributed as dividends. Formed under general incorporation
|\ |\ |\ |\ |\ |\ |\ |\
statutes.
Foreign Corporations - CORRECT ANSWERS ✔✔To do business in
|\ |\ |\ |\ |\ |\ |\ |\ |\
another state (maintaining goods), all the corp. needs to do is qualify to
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
do business there (not necessary to do incorporate there)
|\ |\ |\ |\ |\ |\ |\ |\
The Model Business Corporation Act (MBCA) - CORRECT ANSWERS
|\ |\ |\ |\ |\ |\ |\ |\ |\
✔✔A model statute; governs steps required to incorporate
|\ |\ |\ |\ |\ |\ |\
- Requires an organizational meeting be conducted by BOD
|\ |\ |\ |\ |\ |\ |\ |\
- There must be at least 3 people to serve as the incorporators
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
Defective Incorporation - CORRECT ANSWERS ✔✔Can lead to
|\ |\ |\ |\ |\ |\ |\ |\
personal liability on the part of the promoters, managers, and
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
shareholders, as well as voiding contracts made on behalf of the |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
defectively formed business. |\ |\ |\
,- Under MBCA all persons who assume to act as a corporation before
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
the certificate of incorporation has been issued are jointly and severally
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
liable |\
- Promoters, managers, and shareholders who participated in policy
|\ |\ |\ |\ |\ |\ |\ |\ |\
decision and know of the defective corp are liable
|\ |\ |\ |\ |\ |\ |\ |\
Internal Affairs Doctrine - CORRECT ANSWERS ✔✔Ensures that such
|\ |\ |\ |\ |\ |\ |\ |\ |\
issues as voting rights of shareholders, distributions of dividends and
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
corporate property, and the fiduciary obligations of management are all
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
determined in accordance with the law of the state in which the
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
company is incorporated. |\ |\
Articles - CORRECT ANSWERS ✔✔The constitution of a corporation
|\ |\ |\ |\ |\ |\ |\ |\ |\
prepared by a lawyer. Articles must then be filed with the secretary of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
state and a certificate will be issued. An initial organization meeting will
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
then be held. May be amended by the votes of the shareholders.
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
|\
- Mandatory: name of corporation, number of shares, address of initial
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
registered office, name of registered agent, name and address of each
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
incorporator |\
Optional: duration of corp., purpose of corp., par value of shares, names
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
of initial BOD, additional provisions
|\ |\ |\ |\ |\
, Bylaws - CORRECT ANSWERS ✔✔To establish rules for the conduct of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
the internal affairs of the corporation. Bylaws must be consistent with
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
state law and the articles of incorporation. Directors, officers and
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
shareholders are bound by the bylaws, while corporate employees are |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
not generally.
|\ |\
- MBCA gives directors the power to adopt the initial bylaws.
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
- Shareholders have an inherent right to make bylaws.
|\ |\ |\ |\ |\ |\ |\ |\ |\
- May be amended by the votes of the BOD
|\ |\ |\ |\ |\ |\ |\ |\ |\
Promoter - CORRECT ANSWERS ✔✔Brings corporation into being and
|\ |\ |\ |\ |\ |\ |\ |\ |\
has a fiduciary duty to the corporation; Responsible for organizing
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
financing for the corporation, making various contracts, filing the
|\ |\ |\ |\ |\ |\ |\ |\ |\
appropriate papers for incorporation, and other activities necessary to
|\ |\ |\ |\ |\ |\ |\ |\ |\
enable the corporation to begin operations.
|\ |\ |\ |\ |\
Promoter's Liabilities - CORRECT ANSWERS ✔✔- Must practice good|\ |\ |\ |\ |\ |\ |\ |\ |\
faith and honesty and provide full disclosure to t/ps
|\ |\ |\ |\ |\ |\ |\ |\
Under Agency Law, promoters are liable on contracts they make on
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
behalf of corporations. |\ |\
The promoter is released from liability when the promoter, corp., and t/p
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
agree to substitute the promoter for the corporation in a novation.
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