Business Law: Directors' Liability and Duty of Care

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What is the purpose of the Delaware Statute in relation to Officers and the duty of care?

To protect Outside Directors from negligence claims (correct)

To impose stricter supervision of employees

To hold Officers personally liable for negligence

To require Officers to obtain D & O insurance

What is the primary purpose of D & O insurance?

To pay for employee salaries

To cover legal defense fees and judgments (correct)

To protect against natural disasters

To provide liability coverage for intentional torts

What must a Director do to avoid personal liability if a decision proves to be disastrous?

Dissent from the decision in writing (correct)

Attend all board meetings

Obtain D & O insurance

Vote in favor of the decision

What is not typically covered by D & O insurance?

Intentional torts Signup and view all the answers

What is the purpose of filing a written dissent with the secretary before the meeting is adjourned?

To avoid personal liability Signup and view all the answers

Why do larger companies often purchase D & O insurance?

As a necessity to attract and retain Directors and Officers Signup and view all the answers

What is the term for an action that exceeds a corporation's express or implied powers?

Ultra Vires Act Signup and view all the answers

What is a prerequisite for a shareholder to file a derivative lawsuit?

Must be a shareholder at the time of the act Signup and view all the answers

What is the purpose of a shareholder derivative lawsuit?

To enforce a corporation's right against a third party Signup and view all the answers

What is the timeframe within which a corporation must respond to a written demand made by a shareholder?

90 days Signup and view all the answers

What is the term for the rights of a shareholder to purchase additional shares of a corporation?

Preemptive rights Signup and view all the answers

What is the term for a lawsuit filed by a shareholder to enforce a corporation's right against a third party?

Shareholder Derivative Lawsuit Signup and view all the answers

What is the primary purpose of Delaware's Statute, §102(b)(7)?

To limit or eliminate directors' personal liability for monetary damages for breach of fiduciary duty Signup and view all the answers

Which of the following is an exception to the limitations on directors' personal liability in Delaware's Statute, §102(b)(7)?

Breach of loyalty Signup and view all the answers

How does California's Statute differ from Delaware's Statute?

It is more restrictive Signup and view all the answers

What is the consequence of an unexcused pattern of inattention under California's Statute?

Liability for an abdication of corporate duties Signup and view all the answers

What is the primary duty of directors that is protected by the Business Judgment Rule?

Duty of care Signup and view all the answers

Which of the following is a limitation on the Business Judgment Rule?

All of the above Signup and view all the answers

Business Law: Directors' Liability and Duty of Care

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