Q&A Hero

Q: Some states permit a corporate board to have fewer than three directors.

Q: Cathy causes a disturbance at Diners Cafe. She is arrested and charged with disorderly conduct, a misdemeanor. A misdemeanor is a crime punishable by imprisonment up to a. one year. b. six months. c. ten years. d. thirty days.

Q: In all states, Sports Fitness Club Company and other corporations can pay dividends from a. gross profits. b. net profits. c. retained earnings. d. surplus.

Q: Rusty and Sylvia are shareholders of Triad Hotel Corporation. Triad's directors fail to declare a dividend. Rusty and Sylvia could succeed in asking a court to order the directors to meet and declare a dividend a. if Triad has sufficient earnings available to pay a dividend. b. if Triad has cash reserves, even if earmarked for a different purpose. c. if withholding a dividend is an abuse of the directors' discretion. d. under no circumstances.

Q: The initial board of directors of a corporation is normally elected at the first annual shareholder' meeting by a majority vote of the shareholders.

Q: Gail is a "payday" lender charged with filing false claims in bankruptcy proceedings against her debtors. The standard of proof to find a defendant who has been charged with a crime guilty is a. a preponderance of the evidence. b. beyond all doubt. c. beyond a reasonable doubt. d. clear and convincing evidence.

Q: Ida, Jerzy, and Kit are the directors of Liberty Convenience Stores, Inc. Liberty has nine officers and forty-six shareholders. Dividends are ordered by the firm's a. board of directors. b. incorporators. c. officers. d. shareholders.

Q: A theft of trade secrets conducted via the Internet is a federal crime.

Q: A corporation's officers and other executive employees are hired by corporate shareholders.

Q: Lovey is a shareholder of Matchless Corporation with preemptive rights. With these rights, Lovey can a. buy a prorated share of a new issue of stock before other buyers. b. choose to have Matchless act exclusively in a certain area. c. "preempt" managerial decisions that affect shareholders. d. sell a prorated share of a new issue of stock before other sellers.

Q: Accessing a computer and taking data, even without authority, is no crime.

Q: A board of directors govern every corporation.

Q: Fiona owns one share of stock in GR8 Boards Corporation, as evidenced by a stock certificate. Fiona loses the certificate. Her ownership of the stock is a. forfeited immediately. b. forfeited within ten days of a third party's claim to ownership. c. forfeited within thirty days if she cannot find the certificate. d. not affected.

Q: Criminal suspects must be informed of their right to remain silent.

Q: When the police set a trap for an unwary criminal, he or she has a valid defense to criminal liability.

Q: Starr Cardio, Inc., is a small business. Ted, Uma, and eleven other members of the Starr family own all of its stock. Currently, Starr's income is taxed at the corporate level and, after being distributed to the family members, at the shareholder level. Can Starr retain its corporate status but oth­er­wise avoid this double taxation? If so, how?

Q: Brock is a shareholder of Competent Homebuilders Corporation (CHC). For the last few years, business has not been profitable for CHC. The firm has lost money on its operations. There has been some profit through sales of company assets, but the board of directors has refused to declare a dividend. This last year, the firm's accountants failed to file fed­eral in­come tax returns and the board refused to pay the tax. Brock takes a close look at the firm and protests to the board, in particular over the fail­ure to declare a dividend, but the board ignores the complaint. Which of these events, if any, would form a ground for a court to order the dissolu­tion of CHC, on Brock's petition? If the court denies the petition, could Brock and the other shareholders dissolve CHC?

Q: Odell, Prince, and Quinn are shareholders of Rite Corporation. Before a shareholders' meeting, they agree in writing to vote their shares together in a certain manner. Usually, such agreements are held to be a. invalid and unenforceable. b. oppressive and irresponsible. c. suspect and voidable. d. valid and enforceable.

Q: A mistake of fact can be a defense to criminal liability.

Q: Sangfroid Business Corporation can be compelled to dissolve by a. its creditors only. b. itself, through its shareholders and directors, only. c. itself, through its shareholders and directors, or the state. d. the state only.

Q: Thor Power Products Corporation permits its directors to be elected by cumulative voting. This a. allows minority shareholders to be represented on the board. b. assures directors that they will be selected by their peers. c. guarantees Thor's executive officers of the final choice. d. ensures against persons who may "cloud" the corporate direction.

Q: In most courts, a person is not responsible for a criminal act if, as a result of a mental defect, he or she lacked substantial capacity to appreciate the wrongfulness of the act.

Q: Salt Corporation wants to acquire or merge with Pepper Corporation. Salt should a. file a plan of merger with the secretary of state. b. file an article of merger with Pepper. c. make a tender offer to the shareholders of Pepper. d. make a tender offer to the shareholders of Salt.

Q: Niche Stores, Inc., must hold a shareholders' meeting a. once a month. b. once a year. c. once every two years. d. only when it is called by the board of directors.

Q: Brad is a shareholder of Concert Promotion Corporation. As a shareholder, Brad can a. authorize major corporate policy decisions. b. decide to issue stock and bonds, and declare dividends. c. select and remove corporate officers. d. vote to amend the articles of incorporation or bylaws.

Q: White-collar crimes may be prosecuted under RICO.

Q: Ruff Games, Inc., wishes to ac­quire a controlling interest in Smart Toy Com­pany by buying its stock. Smart Toy is a. an alien corporation. b. an acquiring corporation. c. a receiver. d. a target corporation.

Q: Denise, Ervin, and Flem occupy the positions of directors on the board of Gallery Corporation. As directors, they may not a. authorize major corporate policy decisions. b. decide to issue stock and bonds, and declare dividends. c. select and remove corporate officers. d. support businesses that directly compete with Gallery.

Q: Making "dirty" money appear to be the "profit" of a legitimate business is money laundering.

Q: Corporate Properties, Inc., attempts to acquire a substantial number of the shares of Downtown Investment Corporation through a public offer to Downtown's shareholders. This is a. a consolidation. b. a tender offer. c. a short-form merger. d. a termination.

Q: Eve is a director of Fab Stuff Corporation. Without informing Fab, Eve goes into business with GR8 Things, Inc., in competition with Fab. Eve is li­able for breach of a. no duty or rule b. the business judgment rule. c. the duty of care. d. the duty of loyalty.

Q: A crime of bribery can be committed even if the recipient does not do what the person offering the bribe asks.

Q: Giant Lift Corporation purchases all of the assets of Heavy Hydraulics Corporation. With respect to Heavy Hydraulics's liabilities, Giant Lift is a. automatically responsible. b. not responsible under any circumstances. c. responsible if Heavy Hydraulics is a competitor of Giant Lift. d. responsible if the sale is in fact a merger or consolidation.

Q: Chip is a director of Diners Restaurants, Inc. Chip would breach his duty of loyalty if he a. becomes a director of Fluffy Mattresses, Inc., a noncompeting firm. b. buys a controlling interest in Gulpin" Foods Corporation, a competing firm. c. votes for Diners to buy a controlling interest in Eateries, Inc., which causes Diners to suffer a loss. d. votes against Diners' purchase of a controlling interest in Eateries, Inc., which causes Diners to suffer a loss.

Q: It is not a crime to defraud the public through the use of television.

Q: Raven is a shareholder of Quantum Mechanix Corporation. Raven could normally ex­er­cise appraisal rights if Quantum participated in a. a consolidation. b. a dissolution. c. a liquidation. d. a winding up.

Q: Luke is a director of Motor Parts Corporation. Luke makes decisions with respect to Motor Parts in good faith, in what he believes is the firm's best interest, and without violating any duties owed to it. If, despite these circumstances, Luke exercises poor business judgment, under the business judgment rule Luke is a. immune from liability. b. liable only to the extent that he gains as a result. c. liable only to the extent that Motor Parts suffers as a result. d. wholly liable.

Q: Mall Stores Corporation owns 95 percent of the shares of Niche Retail Corporation. Mall Stores combines with Niche Retail, but only Mall Stores continues to exist. This transaction was a. a consolidation. b. a tender offer. c. a short-form merger. d. a termination.

Q: Embezzlement is like robbery in that neither crime requires the use of force or fear.

Q: Stealing a computer program is a crime.

Q: Rafi, a director of Super Service Station Corporation, does not attend a board meet­ing for three years. During that time, Twyla, Super's president, makes improper loans that cost the company $100,000. Rafi is most likely a. liable for negligence or mismanagement. b. liable for violation of the business judgment rule. c. not liable because missing meetings is an honest mistake. d. not liable because missing meetings is only poor judgment.

Q: Nina is a director of Omega, Inc. Under the standard of due care owed by di­rectors of a corporation, Nina's decisions must be a. ambiguous and questionable. b. arguable and defensible. c. informed and reasonable. d. perfect and unassailable.

Q: Realty Credit Company and Second Mortgage Corporation plan to con­solidate. Most likely, the articles of consolidation will be filed with a. the county recording office. b. the Securities and Exchange Commission. c. the state's secretary of state. d. the U.S. Department of Justice.

Q: The recipient of stolen goods who does not know the identity of the owner or the thief has a defense to criminal liability.

Q: Precise Device Corporation and Quality Instruments, Inc., decide to merge. This corporate combination does not require the approval of a. Precise and Quality's directors. b. Precise and Quality's officers and employees. c. Precise's shareholders. d. Quality's shareholders.

Q: Jen files a suit against Kopper Kettle Company. While the suit is pending, Kopper Kettle merges with Luminous Pans, Inc., with Luminous absorbing Kopper Kettle. Now, liability in the suit, if any, rests with a. Jen. b. Kopper Kettle. c. Luminous. d. no one.

Q: Cara and Dru are officers of EZ Trucking Corporation. As cor­porate officers, the rights of Cara and Dru are a. determined by their employment contracts. b. specified in state corporation statutes. c. the same as those of the directors. d. the same as those of the shareholders.

Q: Obtaining another person's phone card number so that it may be used to make unauthorized long-distance calls is theft.

Q: Eye Appliance Company and Fresh Views, Inc., wish to combine all of their assets, stock, and personnel into a new firm to be called Goggles Corporation. This is a. a consolidation. b. a merger. c. an exchange of assets. d. a takeover.

Q: Coast-to-Coast Distribution, Inc., is a direct-mail distribution company. Like most corporations, Coast-to-Coast's employees include its a. board of directors. b. incorporators. c. officers. d. shareholders.

Q: Larceny relies on stealth while robbery relies on fear and force.

Q: Eagle Financial Corporation merges with First Bank Corporation, with Eagle Financial absorbing First Bank. After the merger a. a different, new corporation is the surviving corporation. b. Eagle Financial and First Bank are both surviving corporations. c. Eagle Financial is the surviving corporation. d. First Bank is the surviving corporation.

Q: Frawsty Corporation distributes beverages in the greater Northwest. Frawsty's board of directors can delegate some of its functions to a. Frawsty's incorporators. b. Frawsty's officers. c. Frawsty's shareholders. d. no one.

Q: Counterfeiting constitutes forgery.

Q: The board of directors of Integral Components Corporation consists of Frida, Gayla, and Hart. A quorum is the minimum number of these directors a. who must be at odds in a dispute to call for its resolution. b. who must be present to validly transact business. c. that the shareholders may remove from office at any one time. d. whose positions must be vacant to warrant an election.

Q: Lyla is a common shareholder in Norman's Nutty Nuts Corporation. As a common shareholder, Lyla is a. guaranteed regular payments of dividends. b. not guaranteed any payments of dividends. c. not given any voting rights. d. liable for all of Norman's Nutty Nuts's debts.

Q: If a person does not know that he or she is taking the property of someone else, the person cannot be convicted of theft.

Q: Criminal liability does not depend on a specific state of mind or intent.

Q: Sol is chairman of the board of Tasty Foods Corporation. Uma, a con­sumer, falls sick after eating a Tasty product. Uma sues Tasty, and Sol individu­ally. Tasty may pay Sal's legal fees a. only if Sol wins the suit. b. only if Tasty wins the suit. c. only if Uma wins the suit. d. regardless of the outcome.

Q: Only public officials prosecute criminal defendants.

Q: Flite-Craft Corporation makes and sells aircraft parts. In most states, the minimum number of directors that must be present before Flite-Craft's board can transact its business is a. all of the directors authorized in the articles or bylaws. b. a majority of the number authorized in the articles or bylaws. c. any odd number. d. one.

Q: The prosecution in a criminal case need only establish by a preponderance of the evidence that the defendant committed the crime.

Q: Rosa and Sean are directors of Tech, Inc. The right of Rosa and Sam to be notified of special meetings of the board is the right to a. compensation. b. indemnification. c. participation. d. preemption.

Q: Reba is a director of Superb Performance Corporation. Reba's rights, as a di­rector, do not include a right of a. indemnification. b. inspection of books. c. participation. d. preemption.

Q: Luke is an owner of Lucky Luke's Corporation. Luke uses the corporate entity of Lucky Luke's to perpetuate fraud. In this case, a court is likely to expose Luke to personal liability by a. piercing the corporate veil. b. issuing a de facto judgment. c. issuing a de jure judgment. d. issuing a ultra vires judgment.

Q: Hawk Corporation begins making and selling motorcycles in 1995 under the mark "Hawk." Ten years later, Hawk.com, Inc., a different company selling medical equipment and supplies, begins to use "hawk" as part of its URL and registers it as a domain name. Can Hawk Corporation stop Hawk.com's use of "hawk"? If so, what must the motorcycle-maker show?

Q: Clifton is a director of Dri-Cleaning Corporation. In this capacity, Clifton has a right of a. accounting. b. loyalty. c. participation. d. service.

Q: Memphis Music Makers Incorporated has a stated purpose to sell musical instruments. If chief executive officer Tabitha contracts with Frenzied Firearms in Memphis Music Makers's name to sell a shotgun, she has likely committed a. an ultra vires act. b. a de facto act. c. a de jure act. d. a legal act.

Q: For five years, baby-food makers Baby-One Corporation and Baby-B-Mine, Inc., both use the phrase "Tastes Good" on their labels. Baby-One files a suit against Baby-B-Mine, claiming trademark infringement. Baby-B-Mine argues that the phrase is not generally associated with any particular firm, pointing to other companies that use the same phrase on their labels. In whose favor is the court most likely to rule, and why?

Q: Sophie and Tiny incorporate their beverage-container business as U-Twist Products, Inc. The first board of directors may be appointed by the firm's a. employees. b. incorporators. c. officers. d. shareholders.

Q: When a conflict arises among the documents that involve Express Flights Corporation, the first priority for resolving the conflict is given to a. resolutions of the board of directors. b. Express Flights's bylaws. c. state statues. d. the U.S. Constitution.

Q: Alpha Company develops "Browser Lite," software to speed the display of graphics on Web sites. Browser Lite has the most copyright protection under a. the Berne Convention. b. the Paris Convention c. the TRIPS Agreement. d. none of the above.

Q: ABC Software, Inc., develops the software for a new series of computer games. Under the law that applies to trade secrets, this software is protected in a. its idea only. b. its expression only. c. its idea and its expression. d. none of the above.

Q: Perfect Tone Phones, Inc., is a corporation. Perfect Tone's implied powers enable it to a. amend the articles of incorporation. b. bring a derivative suit. c. declare dividends. d. borrow funds, extend credit, and make charitable contributions.

Q: Lexy and Mort act as the incorporators for NuGame Corporation. After the first board of directors is chosen, subsequent directors are elected by a vote of NuGame's a. board of directors. b. employees. c. officers. d. shareholders.

Q: The idea for "On Your Mark," a computer game featuring racing cars, is protected by a. copyright law. b. patent law. c. trademark law. d. trade secrets law.

Q: Rhea is a director of Spex Corporation, which makes and sells sunglasses and other eyewear. As a Spex director, Rhea is a. a trustee because Rhea occupies a position of trust over Spex. b. a trustee because Rhea holds title to Spex's property for the use and benefit of others. c. not a trustee because Rhea does not hold title to Spex's property for the use and benefit of others. d. not a trustee because Rhea is not in a position of trust over Spex.

Q: O.K. Oil holds itself out to others as being a corporation but makes no attempt to incorporate. In this circumstance, O.K. is most likely a. a corporation by estoppel. b. a de facto corporation. c. a de jure corporation. d. ultra vires.

Q: Egan is a director of First Realty Corporation. As a director, Egan can act as an agent to bind First Realty a. in all circumstances. b. in no circumstances. c. to any contract in which Egan does not have a conflict of interest. d. to any contract that represents a corporate opportunity for First Realty.

Q: Creative Marketing Corporation (CMC) obtains, and gives its employees, a list of the customers of Dandy Sales, Inc. (DSI), without DSI's permission. Under the law that applies to trade secrets, CMC's use of the list is actionable a. only if CMC and DSI are competitors. b. only if DSI's customers are confused. c. only if CMC and DSI are competitors and DSI's customers are confused. d. regardless of whether CMC and DSI are competitors or DSI's customers are confused.