0538452803_269413 - the corporation for payment The...

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BLTC-9e Sample Answer for End-of-Chapter Hypothetical Question with Sample Answer Chapter 34: Corporate Formation and Financing 34–2 Hypothetical Question with Sample Answer Kora Nayenga and two business associates formed a corporation called Nayenga Corp. for the purpose of selling computer services. Kora, who owned 50 percent of the corporate shares, served as the corporation’s president. Kora wished to obtain a personal loan from his bank for $250,000, but the bank required the note to be cosigned by a third party. Kora cosigned the note in the name of the corporation. Later, Kora defaulted on the note, and the bank sued
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Unformatted text preview: the corporation for payment. The corporation asserted, as a defense, that Kora had exceeded his authority when he cosigned the note. Had he? Explain. Sample Answer: It could be argued that Kora exceeded his authority when he co-signed the note on behalf of the corporation. The board of directors of a corporation delegates the authority to transact all ordinary business of the corporation to the president. If co-signing a note for a personal loan is not “ordinary business of the corpora-tion,” then the board, as principal, must ratify the act. There is no indication in the question that the board did so in this case....
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