When Corporations Default on Their Debt

question 17

Multiple Choice

When corporations default on their debt:

• A) bondholders may receive the firm's assets.
• B) bondholders will suffer a loss.
• C) the Board of Directors is liable for the payments.
• D) the corporation is forced to default on its stock also.

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Definitions:

Battered Spouse Syndrome

A defense to criminal liability available to defendants if they can prove that they believed the only way to escape death or severe bodily injury was to use force against their tormentors.

Self-Defense

A defense to criminal liability available to defendants if they can demonstrate (1) that they did not start the altercation, (2) that they had good reason to believe they were in danger of death or severe bodily injury, and (3) that they used only enough force to repel the attack.

Irresistible Impulse Test

Under this rule, criminal defendants are judged not guilty by reason of insanity if, at the time of the action in question, they suffered from a mental disease that either prevented them from knowing right from wrong or compelled them to commit the criminal act.

Insanity

A legal term referring to a mental dysfunction that exempts individuals from legal responsibility for their actions.