Andrea Agreed to Form a Corporation with Two Friends, but Lay

question 98

Multiple Choice

Andrea agreed to form a corporation with two friends, but lay awake last night rethinking her decision. They agreed that they all wanted to be directors and officers and that they all would have signing authority with the bank from whom the corporation is borrowing the money. Nevertheless, she began to review her assumptions. Which of the following is true?

• A) When she signs the promissory note at the bank on behalf of the corporation, she can just sign her own name; she will not be personally liable as long as she intended to sign on behalf of the corporation.
• B) As a major shareholder, she would be elected as a director every year even without such a provision in the shareholders' agreement.
• C) She would be able to ask the court for relief from oppression if she disliked a decision passed by the majority of the directors.
• D) As a shareholder, she is free to compete with the company even if she is a director as well.
• E) She would be able to bring an action on behalf of the company if one of the directors breached his fiduciary duty to the corporation and the other directors refused to do anything about it.

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Definitions:

Current Stock Price

The price at which a specific stock is currently trading on the stock market.

Preferred Stock

A category of corporate ownership that has a greater entitlement to the company's assets and profits compared to common stock, typically receiving payouts before common stockholders.

Rate of Return

The profit or deficit yielded from an investment across a specific timespan, explicated as a percentage of the investment’s base cost.

Shares Purchased

Refers to the act of acquiring ownership in a company through the buying of shares, either in the open market or through an ownership stake.