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1 | | A corporation's promoter is not an agent of the corporation. Nevertheless, he owes a fiduciary duty to the corporation. |
| | A) | True |
| | B) | False |
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2 | | Preincorporation share subscriptions ensure that the corporation has capital when it comes into existence. |
| | A) | True |
| | B) | False |
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3 | | If a novation occurs on a preincorporation contract, the corporation becomes liable on the contract. However, the promoter is not released from liability. |
| | A) | True |
| | B) | False |
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4 | | The basic governing document of a corporation is its bylaws. |
| | A) | True |
| | B) | False |
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5 | | If a corporation is defectively formed, it may qualify as a "de jure" corporation if the promoters substantially comply with the mandatory conditions precedent, in other words, the most significant and important requirements for corporate formation. |
| | A) | True |
| | B) | False |
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6 | | ABC Company wishes to incorporate. It does business throughout the United States, but its principal place of business is located in California. If it chooses, it may incorporate in a state other than California. |
| | A) | True |
| | B) | False |
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7 | | ABC Corporation issues stock in exchange for cash to its investors. Such securities are known as __________ securities. |
| | A) | equity |
| | B) | debt |
| | C) | debenture |
| | D) | All of the above |
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8 | | Common shareholders in a corporation: |
| | A) | normally have the exclusive right to elect the board of directors. |
| | B) | have liquidation preferences in the event the corporation dissolves. |
| | C) | have dividend preferences if the board elects to declare and distribute a dividend. |
| | D) | have the least amount of risk of any other types of shareholders. |
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9 | | When the board of directors issues shares: |
| | A) | It must only receive par value in return. |
| | B) | It must ensure that the type of consideration it receives in return represents real legal value. |
| | C) | It must only accept cash or marketable securities in return. |
| | D) | It may give them to friends and relatives as gifts from the corporation. |
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10 | | Shares that are repurchased by the corporation, not canceled or restored to unissued statues, are called: |
| | A) | Preferred shares. |
| | B) | Options. |
| | C) | Common shares. |
| | D) | Treasury shares. |
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