59 Questions
What does the mid-term short exam primarily assess?
Basic notions and applied knowledge
According to the class rules and suggestions, what is the recommended method to take notes?
By hand or using computers
What is one of the class rules regarding phone usage during the session?
Keep phones away
What happens if there is any class disruption according to the class rules?
Disciplinary procedure will be initiated
What study approach does the final exam take according to the information provided?
Transversal approach to questions and activities
According to class suggestions, when should students ask the professor questions?
Any question, when necessary
When the corporate veil is 'pierced', what happens to the shareholders?
They are personally liable for the company's debts.
In which situations can the corporate veil be pierced according to the text?
When the company acts fraudulently or abusively against the law.
What does it mean when the text mentions a company being a 'mere façade' or a 'sham'?
The company is used to carry out improper purposes.
In the given example of Corporations A, B, and C, why did Corporation B transfer all its assets to Corporation C?
To continue operating essentially the same business.
What happens to limited liability when the corporate veil is pierced?
It is no longer available to shareholders.
Why would a court disregard the corporate entity and hold shareholders personally liable?
In cases of fraud, wrongdoing, or injustice to third parties.
What legal concept did the House of Lords firmly establish in the Salomon case?
Corporate veil
What did the liquidator on behalf of unsecured creditors allege about the company in the Salomon case?
That it was a sham and essentially an agent of Salomon
What rights did Salomon have through the floating charge in the liquidation process?
Recovery priority over unsecured creditors
According to the House of Lords ruling, what is irrelevant when discussing a company's rights and liabilities?
Motives of those involved in promoting the company
What did the liquidator allege regarding the relationship between Salomon and the company?
Company was essentially an agent of Salomon
What did the House of Lords determine about the company's status despite allegations of being a sham?
It is an independent legal entity with its own rights and liabilities
What type of contribution does Shareholder A make to the company?
Real estate
Which type of contribution does not contribute to the constitution of share capital?
Services
What type of contribution does Shareholder B make to the company?
Cash
Which shareholder contributes services to the company?
None of the above
What is the total share capital of the company with Shareholders Liam, Kate, and Lucy?
It's not provided in the text
In the Ocala Breeders v. Hialeah case, which company was considered the parent company?
Hialeah Park
What activities did the subsidiary company of Ocala Breeders handle?
Non-racetrack activities like weddings
What was the monetary amount involved in the lawsuit against the subsidiary?
USD 1.5 million
Which factor is NOT listed as a reason to lift the corporate veil according to the reading?
Involvement in legal disputes
What must a creditor prove to show that the owner intentionally underfunded the entity?
Undercapitalization to deceive creditors
How does courts analyze if the level of capital in a company is reasonable or enough?
By comparing it to the object and purpose of the business
What happens to a shareholder's stake when a company issues new shares and the shareholder does not subscribe to any of them?
It decreases
Which method can existing shareholders use to avoid dilution of their stake if the company issues new shares?
Exercising pre-emptive rights
What is one way for shareholders to increase the share capital through a tangible contribution?
Contributing machinery or computers
If the value of each share increases without changing the number of shares, what happens to the share capital?
Increases
In what scenario would a shareholder's voting rights and dividends be diluted?
When the shareholder does not participate in new share issuance
How does increasing the nominal value of existing shares impact the share capital?
Increases the share capital without affecting the number of shares
What is required within 8 days of receiving funds paid as a contribution in cash?
Deposit at a notary or dedicated bank account
Who has the authority to appoint a contribution auditor for assessing goods brought in as contributions in kind?
All shareholders unanimously
What is the consequence of a capital increase without considering pre-emptive rights of shareholders?
The capital raise becomes invalid
What happens if no valuation is conducted by a contribution auditor for assets contributed?
Shareholders have joint and several liability for 5 years
What is included in the reserves used for capital increase under the 'Incorporation of reserves' section?
Retained earnings
When can new shares be subscribed by third parties according to the text?
If pre-emptive rights of shareholders are disregarded
What is the main aim of a capital raise for a company?
To gain credibility with customers and suppliers
How can companies raise capital by issuing new shares?
By increasing the number of shares
What may happen to existing shareholders when a company issues new shares to new members?
Their approval may be required for new shareholders
In a capital raise, what could possibly prevent a company from facing dissolution?
Having equity remain above half of the share capital
How does an increase in share capital impact a company's financial structure?
It enhances the company's capability to avoid dissolution
What is one way a company may raise capital according to the text?
Issuing debt securities
What percentage of votes cast in favor of the resolution is generally required for a special resolution to decide on capital raising?
75%
In what cases does a capital increase require a unanimous decision according to the text?
Increasing the number of newly issued shares
What is the minimum deadline for subscribing to shares before a capital increase in cash?
5 days
What is one requirement when initiating a capital increase in cash?
The initial share capital must be fully paid up
What does a special resolution for capital raising generally state according to the text?
The overall amount of the capital increase
What formal step needs to be taken regarding the articles of association during a capital increase?
Amendment of the articles of association
What are the 3 standards applied to directors/officers to determine compliance with the Business Judgment Rule?
Exercise of due care, act in good faith, reasonable belief in corporate interest
In Smith v. Van Gorkom, why was the director found to be grossly negligent?
He took quick actions without any informed business judgment
What are the limitations on the powers of directors mentioned in the text?
Amending articles without shareholder approval, lawful actions only, following bylaw provisions
What type of actions may directors not take without first obtaining shareholder approval?
Amending the articles of incorporation
What is required for a director's inaction to be protected by the Business Judgment Rule?
Conscious decision to refrain from acting
In what scenario can a director's actions breach the duty of care?
When informed business judgment is lacking
Test your knowledge on the legal concept of 'piercing the corporate veil' in company law, where shareholders may be held personally liable for the company's obligations. Learn about the implications of this legal principle.
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