CLASS / COURSE: Business Law
1. In an ordinary merger, if the number of voting shares increases by 20 percent or less, this eliminates which needed approvals when compared to ordinary mergers where the number of shares increases by more than 20 percent?
A) Shareholders and the board of the corporation that does not survive.
B) Shareholders and the board of directors of the surviving corporations.
C) Shareholders of both corporations.
D) The approval requirements are the same whether the increase in voting shares of the surviving corporation is more or less than 20 percent.
E) Shareholders of the surviving corporation.
2. Kennedy Corporation has an old plant that is currently exceeding the sulfur dioxide emissions level set by the Clean Air Act. Kennedy cannot afford to reduce production enough to come into compliance. What alternatives does Kennedy have?
A) Kennedy can buy pollution credits from either another company or the U.S. government.
B) Kennedy has no alternative but to reduce emissions.
C) Kennedy can buy pollution credits from the U.S. government.
D) Kennedy can buy pollution credits from another company that has such credits.
3. Which of the following statements best describes the procedures under the Clean Air Act?
A) Both the federal and state governments set standards and each enforces its own standards.
B) The federal government sets and enforces the standards.
C) The state governments set the standards; the federal government enforces the standards; if the federal government does not adequately enforce the standards, the states may enforce them.
D) The state governments set and enforce the standards.
E) The federal government sets the standards; the state governments enforce the standards; if the states do not adequately enforce the standards, the federal government may enforce them.
4. Solicitation of proxies is regulated under:
A) the Proxy Solicitation Act of 1968.
B) the Securities Act of 1933.
C) the Williams Act.
D) the Uniform Commercial Code.
E) the Securities Exchange Act of 1934.
5. Under what circumstances can management recover from the corporation the costs it incurs in a proxy contest?
A) In all proxy contests involving issues of policy that management wins, but never for contests involving personal issues.
B) Under all circumstances.
C) In all proxy contests management wins.
D) In all proxy contests involving issues of policy, whether or not management wins.
E) In all proxy contests involving issues of policy, and in the case of contests concerning personal matters, if management wins.
6. Which of the following items is not required to be included in a registration statement?
A) Description of how the proceeds are to be used
B) Description of the issuer's business
C) Audited (certified) financial statements
D) Description of the securities
E) The price at which the securities will sell
7. Which of the following is true about restraints of trade?
A) Under the rule of reason, all restraints of trade are illegal.
B) Price-fixing is always judged by the rule of reason.
C) Some acts are illegal per se, but other actions must be judged by the rule of reason.
D) Tying agreements are always illegal per se.
E) Under the per se rules, all restraints of trade are illegal.
8. Under the National Pollutant Discharge Elimination System:
A) old permits to discharge pollutants into water are being phased out.
B) permits to discharge pollutants into water can be bought, sold, or traded.
C) permits are granted by the EPA to discharge pollutants in water.
D) no new permits are granted to discharge pollutants into water.
9. Under the 1933 Securities Act, a person responsible may be held liable for: (More than 1 answer may apply.)
A) a material omission or misstatement.
B) failure to file a registration statement or deliver a prospectus as required by law.
C) intentional fraud.
10. The standard of whether advertising is false and deceptive is whether it would mislead:
A) a consumer sophisticated in the type of product that was advertised.
B) a reasonable person with a ninth-grade level of education.
C) a reasonable consumer.
D) the particular plaintiff in the lawsuit.
11. Which of the following is not true about limited liability companies under the Uniform Limited Liability Company Act?
A) In order to form a limited liability company, articles of organization must be filed with the state.
B) Limited liability companies can be formed with only one member.
C) Limited liability companies can only be taxed as partnerships.
D) A limited liability company must use the words "limited liability company" in its name or use "LLC" or "LC."
12. Based on duration, all LLCs can be classified as either:
A) short-term or long-term.
B) determined-length or undetermined-length.
C) fixed-length or variable-length.
D) term or at-will.
E) self-determined or statute-determined.
13. Which statute would a franchisee be violating if she continued to use the trademark of a franchisor after the franchise had been terminated?
A) The Domestic Corrupt Practices Act
B) The Franchise Investment Law
C) The Franchisor Trademark Protection Act
D) The Lanham Trademark Act
14. Which of the following is not a correct description of a defensive strategy to a tender offer?
A) Selling a crown jewel refers to a sale by the target corporation of an asset that was particularly attractive to the tender offeror.
B) Under a standstill agreement, shareholders holding a large number of shares of the target corporation agree that none of them will sell to the tender offeror, even if the tender offeror raises the offer price.
C) A white knight merger refers to a merger with a different purchaser that is friendlier toward management than the company that made the tender offer.
D) A greenmail payment is a payment, usually at greater than fair market value, made by the target corporation to the tender offeror for shares already owned by the tender offeror in exchange for the tender offeror dropping the tender offer.
E) A poison pill is a strategy built into contracts, bylaws, and so forth, that can make any purchase of the corporation more expensive, such as leases that automatically expire upon the purchase and would require renegotiation, likely at a higher price.
15. State environmental statutes are valid:
A) in no circumstances.
B) in all circumstances.
C) if they were passed prior to any conflicting federal statutes.
D) if they do not conflict with a federal law or unduly burden interstate commerce.
E) if they have a similar purpose as a federal environmental law.
16. Administrative agencies can:
A) enforce laws.
B) interpret laws.
C) both enforce laws and interpret laws.
D) neither enforce laws and interpret laws.
17. The following are required to be proven in order to use the failing company doctrine except:
A) no other purchaser is available.
B) the failure of the failing company is not due to negligence of its management.
C) the assets of the failing company would disappear from the market without the merger.
D) there is no other reasonable alternative for the failing company.
18. Which of the following is not an advantage of franchising?
A) Consumers are assured of uniform product quality.
B) The franchisor gets major tax advantages.
C) The franchisee has access to the franchisor's knowledge and resources.
D) The franchisor can reach new markets.
19. The Consumer Product Safety Commission is empowered to do all of the following except:
A) adopt rules and regulations to interpret and enforce the Consumer Product Safety Act.
B) order a manufacturing to recall, repair, or replace a dangerous product or take other corrective action.
C) issue comparative safety ratings of competing products.
D) conduct research on the safety of consumer products.
E) the Consumer Product Safety Commission can do all of the above.
20. Which of the following is not one of the functions of the Securities and Exchange Commission?
A) Providing government-backed insurance to purchasers of securities.
B) Bringing enforcement actions against suspected violators of securities laws.
C) Regulating securities brokers and advisors.
D) Investigating securities violations.
E) Adopting rules to further the functions of the securities laws.
21. If an LLC fails to follow formalities such as keeping minutes of meetings, then:
A) only the party or parties responsible for the failure will lose limited liability.
B) all members will lose their limited liability.
C) only the managers of a manager-managed LLC will lose limited liability.
D) this failure will not result in imposing personal liability on any member.
E) the managers of a manager-managed LLC and all members of a member-managed LLC will lose limited liability.
22. In order for a party to be liable for false and deceptive advertising, it must be shown that:
A) the advertisement is likely to mislead a reasonable consumer.
B) the plaintiff in the lawsuit was deceived by it.
C) the advertisement could possibly mislead some consumers.
D) at least some persons have been deceived by it.
E) the advertisement has deceived a majority of the persons who have seen it.
23. What is required in order for a merger to be conducted under the short-form merger procedure?
A) Approval by the Securities and Exchange Commission to use the short-form procedure.
B) Agreement by both boards of directors to use the short-form procedure.
C) An increase of less than 20 percent in the number of outstanding shares of the surviving corporation.
D) The sale, prior to the merger, by the nonsurviving corporation of all its noncash assets.
E) Ownership by the surviving parent corporation of at least 90 percent of the shares of the nonsurviving (subsidiary) corporation prior to the merger.
24. Which of the following is not required to be set forth in an LLC's articles of organization?
A) The name and address of the LLC's agent for service of process.
B) The process by which managers of the LLC are designated.
C) Whether one or more of the members will be personally liable for the debts and obligations of the LLC.
D) Whether the LLC is a term LLC.
E) The name and address of each organizer.
25. A limited liability company with more than one member is taxed as a partnership:
A) in all circumstances.
B) only if no more than four of six listed attributes are present in the limited liability company.
C) only if at least four of six listed attributes are present in the limited liability company.
D) if the limited liability company has not elected to be taxed as a corporation.
E) only if all six listed attributes are present.
26. Which of the following terms need not be disclosed under the Truth-in-Lending Act?
A) Amount of payments
B) The cash price of the product
C) The annual percentage rate (APR)
D) The total finance charge
E) The terms available from competitors
27. An agency can: (More than one answer may be correct.)
A) prosecute a violation of a rule.
B) adopt a new rule.
C) adjudicate a dispute over the violation of a rule.
D) Only adopt a new rule or adjudicate a dispute over the violation of a rule.
28. The Resource Conservation and Recovery Act addresses:
A) the transportation, storage, and disposal of hazardous wastes.
B) energy efficiency standards for specified products.
C) the cleanup of hazardous waste sites.
D) export limitations on products that cause significant pollution in their manufacture.
E) mandatory recycling programs for certain specified substances.
29. What remedies are generally available to the aggrieved party for the breach of a franchise agreement if it is the franchisee of a distributorship-type franchise who is the aggrieved party?
A) Rescission only
B) Restitution only
C) Damages only
D) Rescission, restitution, and damages
E) Rescission and restitution only
30. What actions can the SEC take against a violator of the Securities Exchange Act of 1934?
A) It may seek a court order requiring defendants to disgorge illegal profits.
B) It may enter into consent orders with defendants.
C) It may seek injunctions in Federal District Court.
D) It may seek civil penalties up to three times the illegal profits from insider trading.
31. Richard wants to franchise his pastry business. However, he has no knowledge of what laws govern franchises. Richard comes to you for advice. Which laws govern franchises of this type? (More than one answer may be correct.)
A) Federal Agency law
B) State statutes covering franchises
C) State contract law
32. If a member properly disassociates herself from an LLC, the member is entitled to receive:
A) the amount negotiated with a willing purchaser of the interest.
B) the amount originally invested by the member.
C) fair market value for the distributional interest.
D) the highest amount that a remaining current member is willing to pay for the interest.
E) no payment because the disassociation is voluntary.
33. Which types of businesses can be converted to an LLC?
A) Corporations only
B) General partnerships only
C) Corporations, general partnerships, and limited partnerships
D) General partnerships and limited partnerships only
E) Corporations and limited partnerships only
34. JKL corporation has acquired 7 percent of Target Corporation in a hostile takeover attempt. Target is opposed to this takeover, so Target offers to purchase the 7 percent of its shares owned by JKL for $40 per share. The actual fair market value of that stock is $25 per share. JKL accepts the offer. This is an example of:
A) a poison pill and is legal.
B) a golden parachute and is legal.
C) greenmail and is legal.
D) greenmail and is illegal.
E) a golden parachute and is illegal.
35. In a proxy contest involving management on one side and dissenting shareholders on the other side, what is true about the right to recover the costs incurred in conducting the proxy fight?
A) Neither side can recover its costs in the proxy contest.
B) Management is the only side that can ever recover its costs from the corporation in a proxy contest involving a personal issue.
C) Each side can recover its costs from the corporation in a proxy contest involving matters of policy regardless of the outcome.
D) The victorious side can always recover its costs from the corporation in a contest involving a policy issue.
E) If the contest involves a policy issue, the winning side can recover its costs from the losing side.
36. Who is classified as a statutory insider under Section 16(a. of the Securities Exchange Act of 1934?
A) Anyone, such as accountants or lawyers, who has provided services to the corporation.
B) All officers and directors.
C) Officers and directors, but only if they own at least 10 percent of the outstanding shares.
D) Anyone, whether or not an officer or director, who owns at least 10 percent of the outstanding shares of a corporation.
E) Both officers and directors AND anyone, whether or not an officer of director, who owns at least 10 percent of the outstanding shares of a corporation.
37. An administrative law judge's decision is issued as:
A) a judgment.
B) a mandate for enforcement.
C) an order.
D) a notice.
E) a request for further action.
38. What is the legal significance of the distinction between rule of reason violations and per se violations under the Sherman Act?
A) Rule of reason violations must be proven beyond a reasonable doubt, and per se violations must be proven with a preponderance of the evidence.
B) Rule of reason violations relate to actions brought by private parties, and per se violations relate to actions brought by the government.
C) Rule of reason violations relate to horizontal situations, and per se violations relate to vertical situations.
D) Rule of reason violations require an agreement with at least one other party, but per se violations can occur without an agreement with others.
E) Rule of reason violations might be proven to be acceptable, but per se violations cannot be acceptable under any circumstances.
39. The Squirrel Tail Ale Microbrewery has granted a franchise to Jimmy to run a Squirrel Tail Ale Brewpub in Chicago. Jimmy opens the brewpub, but has started purchasing a less expensive beer and selling it in this brewpub as Squirrel Tail Ale. Jimmy has most likely:
A) breached the franchise agreement, but nothing more.
B) not done anything wrong because requiring the sale of Squirrel Tail Ale would be an illegal tying arrangement.
C) perhaps done something wrong, but he could not lose his franchise because it is against public policy to unilaterally terminate a franchise.
D) infringed the trademark of Squirrel Tail Ale.
40. Rachel has a business that she has franchised to hundreds of franchisees over the last twenty years. In seeking additional franchisees, which of the following is true about financial disclosures to potential new franchisees?
A) She can choose whether to include actual income statements and balance sheets of existing franchisees or use hypothetical examples, but she must do one or the other.
B) She is not required to make any financial disclosures about franchisees, but if she chooses to make such disclosures, she can make them in anyway she chooses.
C) She must include income statements and balance sheets for each existing franchisee.
D) She must include income statements and balance sheets for each franchisee that has been operating for 3 years or more, and if none, she must use hypothetical examples.
E) She is not required to make any financial disclosures about franchisees, but if she chooses to make such disclosures, she must make certain additional disclosures, with the specific required disclosures depending on whether she provides actual results of existing franchisees or hypothetical examples.
41. Administrative agencies are often informally referred to as:
A) Courts of no resort.
B) The Mini Congress.
C) The constitutional aberration.
D) The fourth branch government.
E) The rule-mongers.
42. Which of the following organizations is exempt from the antitrust laws? More than one answer may be correct.)
B) Labor unions
C) Businesses that are substantially regulated by the states
D) Only Railroads and Labor Unions
43. Which of the following is correct regarding administrative law judges? (More than 1 answer may apply.)
A) They must state reasons for their decisions.
B) They are employed by the administrative agency for which they hear cases.
C) They decide questions of both law and fact.
44. In a short-form merger, which approvals are needed?
A) No approvals are needed by the surviving corporation, and for the corporation that does not survive, recommendation by the board of directors and vote by the shareholders.
B) Votes by both boards of directors, but shareholders need not approve.
C) Vote by the board of directors of the surviving corporation.
D) For both corporations, a vote by the shareholders, but no action by the board of directors.
E) Vote by the board of directors of the surviving corporation, and for the corporation that does not survive, recommendation by the board of directors and vote by the shareholders.
45. What type of law is franchise law?
A) State law, based only on common law
B) Both federal and state law
C) Federal law only
D) State law only
46. If a member of an LLC executes a personal guarantee for the debt of an LLC, which of the following is true?
A) The personal guarantee would result in personal liability of the member for any obligation of the LLC.
B) Because of the member's apparent authority, the personal guarantee would create liability for all other members if the LLC is a member-managed LLC.
C) The personal guarantee would be unenforceable because it would circumvent the limited liability of the member.
D) The member will have personal liability according to the terms of the guarantee, but would not be personally liable for any other obligations of the LLC.
47. A transaction in which two corporations combine such that afterwards neither of the combining corporations continues to exist, but that a new corporation is formed is called a:
A) purchase of assets.
C) hostile takeover.
D) share exchange.
48. An issuer of securities subject to resale restrictions must do each of the following except:
A) place a legend on the stock certificate describing the restriction.
B) require each purchaser to sign an affidavit acknowledging the resale restriction.
C) notify the transfer agent to not record a transfer that would violate the restriction.
D) include a description of the restriction in the registration statement.
49. The Fair Debt Collection Practices Act:
A) applies to all creditors who collect debts.
B) prohibits creditors from suing debtors to collect their debts.
C) basically prohibits abusive, deceptive, and unfair practices by collection agencies in the collection of debts.
D) both applies to all creditors who collect debts and basically prohibits abusive, deceptive, and unfair practices by collection agencies in the collection of debts
E) both prohibits creditors from suing debtors to collect their debts and basically prohibits abusive, deceptive, and unfair practices by collection agencies in the collection of debts.
50. A shareholder's proxy can be granted to:
A) officers or directors only.
B) officers only.
D) other shareholders only.
E) shareholders who are also officers or directors.
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SUBJECTS / CATEGORIES:
2. Business Law/Corporate Law