Multiple Choice Questions
- If a manager engages in self-dealing, which of the following answers will NOT protect him from a finding that he violated the business judgment rule:
(a) The disinterested members of the board approved the transaction
(b) The transaction was of minor importance to the company
(c) The disinterested shareholders approved the transaction
(d) The transaction was entirely fair to the corporation
Answer: B.
- In the Lippman case involving a payout to the son and son-in-law:
(a) The son-in-law was entitled to the payment because he represented the daughter’s interest in the company
(b) The son-in-law was entitled to the payment because he had the same employment contract as the son.
(c) The son-in-law was entitled to the payment because the business judgment rule protects corporate directors.
(d) The son-in-law was not entitled to the payment.
Answer: D.
- The duty of care:
(a) Is not a requirement of the business judgment rule
(b) Protects directors who make an uninformed decision if it was entirely fair to the company
(c) Protects a decision that has a rational business purpose, even if the activity was illegal
(d) Will not protect directors who make a decision that harms the company
Answer: B.
- Under the Williams Act:
(a) If shareholders offer more stock than the bidder wants, it must purchase shares pro rata
(b) Target companies must reveal the names of any shareholders who acquire more than five percent of its stock
(c) A bidder must file a disclosure statement at least 24 hours before the tender offer begins
(d) Once a shareholder has accepted a tender offer, she cannot withdraw it
Answer: A.
- Takeovers are NOT regulated by:
(a) Federal statute
(b) Federal common law
(c) State statutes
(d) State common law
Answer: B.
- If the terms of a company’s charter and bylaw conflict, which governs:
(a) The charter
(b) The bylaw
(c) They are both invalid
(d) Shareholders must vote to determine which is valid
Answer: A.