CGA CGA Business Law & Governance 2

Question 1

What is the legal concept of 'piercing the corporate veil'?

Accepted Answer

Holding shareholders personally liable for corporate obligations in cases of abuse

Answer

Piercing the corporate veil occurs when courts hold shareholders personally liable for corporate debts because the corporate form was used improperly or fraudulently.

Question 2

Under corporate governance best practices, what is the recommended composition of an audit committee?

Accepted Answer

Comprised of independent, financially literate outside directors

Answer

Best practices and SOX require audit committees to consist of independent directors who are not company employees, with at least one financial expert.

Question 3

Which of the following is a characteristic of a general partnership under US law?

Accepted Answer

Each partner has unlimited personal liability for all partnership obligations

Answer

In a general partnership, all partners have unlimited personal liability for the partnership's debts and obligations, unlike limited partners or LLC members.

Question 4

The business judgment rule protects corporate directors from liability when they:

Accepted Answer

Make informed business decisions in good faith without personal conflict

Answer

The business judgment rule presumes directors acted appropriately if they made decisions in good faith, with adequate information, and without personal interest in the outcome.

Question 5

Which federal law primarily governs employee retirement benefit plans and imposes fiduciary duties on plan administrators?

Accepted Answer

ERISA (Employee Retirement Income Security Act)

Answer

ERISA sets minimum standards for pension and benefit plans, requiring plan fiduciaries to act in the best interests of plan participants and beneficiaries.

(CGA) Certified General Accountant Practice Test

(CGA) Certified General Accountant Practice Test

CGA CGA Business Law & Governance 2