Ch 41 History and Nature
Regarding business law, what does the MBCA stand for?
Model Business Corporation Act
To form a corporation, ___________ must be filed with the secretary of state.
articles of incorporation
Owners of a corporation are called ________.
Shareholders
True or False. Most state corporation statutes specifically grant shareholders inspection rights.
true
When clients sue professionals, there are three principal bases of liability. What are the three principle bases?
Contract
Tort
Trust
True or False. Corporate law is primarily governed by federal law.
False
Corporate law is primarily state law.
True or False. Corporation fees, taxes, and laws vary from state to state.
True
The shareholders elect the _________.
board of directors
State statutes and the MBCA require an ____ meeting of shareholders to be held.
annual
Generally, under the doctrine of ___________, courts won’t intervene in a dispute between litigants who were both involved in the fraud.
in pari delicto
Corporation law provides an imaginary wall – _________ – between a corporation, its managers/directors individually, and its shareholders to protect them from personal liability for a corporation’s actions.
the corporate veil
A promoter will be liable for contracts made during the preincorporation period unless the corporation adopts contracts made by the promoter (_____) and a third party agrees to substitute the corporation for promoter (_______).
adoption
novation
The board of directors typically hires the _________ .
Officers
________ gives a shareholder the option to subscribe to a new issuance of shares in proportion to the shareholder’s current interest in the corporation.
Preemptive rights
Auditors, consultants, and securities professionals owe a general duty to their clients and other persons affected by their actions to exercise the _____ and ________ of an ordinarily prudent professional in same circumstances.
skill
care
Cavalier Co. is incorporated in Kansas but sometimes conducts business in Iowa. In Iowa, Cavalier Co. is considered a __________ corporation.
Domestic
Foreign
Alien
Foreign
A ________ of a corporation incorporates the business, organizes the initial management team, and raises the initial capital.
promoter
The Sarbanes– Oxley Act requires all publicly held firms to have ______ committees of independent directors, chaired by a director with a background in accounting or finance.
audit
_________ meetings of shareholders may be held whenever a corporate matter arises that requires immediate shareholders’ action.
Special
True or False.
Organizing a professional business to achieve limited liability (for example, LLP, LLC, or corporation) completely insulates professionals from liability for professional misconduct (malpractice).
False
Under the ___________ of the U S Constitution, the federal government has the power to regulate interstate commerce.
Commerce Clause
Preincorporation share ________ are contracts where a prospective shareholder offers to buy a specific number of shares in a new corporation at a stated price.
subscriptions
Historically, an act of a corporation beyond its powers was a nullity since it was ________ (“beyond the powers”).
ultra vires
To vote, a _______ of outstanding shares must be represented at the meeting by shareholders.
quorum
Negligence consists of what 4 elements?
Duty
Breach
Causation
Damages