You Have Been Asked by Two Fellow Graduates to Join

question 74

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 true.

• A) As a shareholder, you will have the right to vote for the officers of the corporation.
• B) A shareholder's agreement allows shareholders and not officers to manage the corporation.
• C) If you each take one-third of the first allotment of the shares, you will necessarily be a minority shareholder, and have no voting rights in electing the directors of the corporation.
• 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:

Discovery

Formal investigation prior to trial. Opposing parties use various methods, such as interrogatories and depositions, to obtain information from each other and from witnesses to prepare for trial.

Counterclaim

A legal claim brought against the plaintiff by the defendant within the same lawsuit.

Discovery

A pre-trial procedure in a lawsuit where each party can obtain evidence from the opposite party through various means, such as interrogatories, document requests, and depositions.

Deposition

A pretrial question and answer proceeding, usually conducted orally, in which a party or witness answers an attorney's questions. The answers are given under oath, and the session is recorded.