John and Two Friends Incorporated a Closely Held Corporation

question 49

Multiple Choice

John and two friends incorporated a closely held corporation. Each bought an equal number of common shares in the corporation. Each became a director, an officer, and an authorized agent of the corporation. Which of the following is true?

• A) As director, each owes a fiduciary duty to the creditors of the corporation.
• B) The corporation is more highly regulated and less free of government regulations and control than a broadly held corporation would be.
• C) Each of them, as directors, owe a fiduciary duty to each of the others, as shareholders.
• D) Since the corporation is a legal fiction, all of its activities must be carried out through principals.
• E) If the affairs of the corporation are being conducted in a manner that is unfairly prejudicial to any one shareholder, that shareholder could seek relief from such oppression from the courts.

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Definitions:

Generates Revenues

The process by which businesses engage in activities that result in the inflow of cash or other assets from delivering goods or services.