You Have Been Asked by Two Fellow Graduates to Join

question 110

Multiple Choice

You have been asked by two fellow graduates to join them in incorporating a closely held corporation that would commence a consulting business. One was in your class, so you know him quite well, but the other is graduating from a different school. You have been discussing the law to review the protection it gives you. Read each of the following statements separately and indicate which is false.

• A) As a shareholder, you will have the right to vote for the directors, who in turn will choose the officers.
• B) A shareholder's agreement would lessen any misunderstandings about rights and obligations.
• C) If you each take one-third of the first allotment of the shares, you will necessarily be a minority shareholder.
• D) If you have pre-emptive rights and the directors decide to issue a new allotment of shares, the corporation must offer you a portion of the new issue to allow you to keep your proportional share of the corporation.
• E) If you were voted out as a director by the others, who could show that it was in the best interests of the corporation, you could always sell your shares to any interested buyer without interference from the other directors.

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Definitions:

Variations

Differences or deviations within a population, group, or set of phenomena, often considered in genetics, language, and statistics.

Illusion Of Control

The tendency for individuals to overestimate their ability to control events, an error in judgment often observed in various psychological contexts.

Gamblers

Gamblers are individuals who wager money or something of value on an event with an uncertain outcome, often involving risk in the hope of gaining more.

Dice

Small cube-shaped objects with dots on each of their six faces, used for generating random numbers in games.