Attorney Corporate Attorney

Question 1

What is the business judgment rule?

Accepted Answer

A legal presumption that corporate directors acted on an informed basis, in good faith, and in the honest belief that their decisions were in the company's best interest

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A rule requiring business disputes to go to arbitration

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A regulation limiting executive compensation

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A rule requiring shareholder approval for all major business decisions

Question 2

What is a fiduciary duty in corporate law?

Accepted Answer

A legal obligation to act in the best interests of another party, such as directors' duties to the corporation and its shareholders

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A duty to maximize short-term profits

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A requirement to disclose all business transactions publicly

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An obligation to maintain adequate insurance coverage

Question 3

What is the difference between a merger and an acquisition?

Accepted Answer

In a merger two companies combine into a new entity; in an acquisition one company purchases and absorbs another

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Mergers are friendly; acquisitions are always hostile

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Mergers require shareholder approval; acquisitions do not

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Mergers involve publicly traded companies; acquisitions involve private companies

Question 4

What is a shareholder derivative suit?

Accepted Answer

A lawsuit filed by a shareholder on behalf of the corporation to remedy harm done to the corporation, typically by directors or officers

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A lawsuit by a shareholder to recover a personal debt from the corporation

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A class action suit by shareholders against a competitor

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A regulatory proceeding initiated by the SEC on behalf of investors

Question 5

What is the purpose of a non-disclosure agreement (NDA) in corporate transactions?

Accepted Answer

To legally obligate parties to keep confidential information shared during negotiations or business dealings secret

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To prevent employees from leaving the company

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To restrict a company's ability to compete in a market

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To set the terms of a corporate acquisition

Question 6

What is a letter of intent (LOI) in corporate law?

Accepted Answer

A preliminary document outlining the key terms of a proposed deal before a final binding agreement is negotiated

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A formal binding contract to complete a transaction

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A regulatory filing required before a merger closes

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A shareholder resolution approving a proposed acquisition