ANSWERS-CH44 - Although some states allow corporations to...

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CHAPTER 44 SHAREHOLDERS’ RIGHTS AND LIABILITIES ANSWERS TO CHAPTER 44 True-False Multiple Choice 1. F 2. T 3. T 4. T 5. T 6. T 7. F 8. F 9. T 10. T 11. T 12. F 13. F 14. d 15. a 16. b 17. a 18. d 19. b 20. b 21. d 22. c 23. a 24. d Short Essay 25. The number of shares required to elect one director under cumulative voting in this case is 121. This is reached by diving the number of share voting by 5 (number of directors to be elected, plus 1) and then adding 1 to that result. Business Law and the Regulatory Environment, 11E 73
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26. The maximum amount of the dividend, under the MBCA's solvency test, is $3,600,000. Any dividend beyond that amount would make Notbad unable to pay its currently maturing obligations and therefore insolvent. If not for the solvency test's limitation, Notbad could pay a dividend of $11,000,000--the amount by which the current value of its assets exceeds it liabilities (the balance sheet test).
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Unformatted text preview: Although some states allow corporations to pay dividends up to the amount of earned surplus, the MBCA governs maximum dividend amounts by requiring that both the balance sheet test and the solvency test be applied and passed. 27. The directors' motion should be overruled and the dismissal request should be denied. Demand on the board is excused here, because it would be futile. If a demand were made, the directors would be asked to sue themselves. They cannot make a disinterested decision on that question. The directors may ultimately prevail in the suit if they are entitled to the protection of the business judgment rule, but the case should not be dismissed at this early stage on the ground asserted by the directors. Answers to Student Study Guide and Workbook Questions 74...
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ANSWERS-CH44 - Although some states allow corporations to...

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