Business and Corporate Law Flashcards
7 cards from real ACCA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Business and Corporate Law flashcards as text
Under US corporate law, which doctrine holds that courts will not substitute their judgment for that of directors who made informed, good-faith business decisions?
Answer: Business judgment rule
The business judgment rule protects directors from liability for decisions made in good faith, on an informed basis, and in the honest belief they are in the company's best interest.
In contract law, which remedy requires the breaching party to perform their contractual obligations rather than pay damages?
Answer: Specific performance
Specific performance is an equitable remedy that compels the breaching party to fulfill contractual duties, typically granted when monetary damages are inadequate.
A corporation's articles of incorporation serve what primary legal function?
Answer: Establish the corporation's existence with the state
Articles of incorporation are filed with the state to legally create the corporation and contain basic information such as name, purpose, and share structure.
Which type of business organization provides limited liability to all owners while allowing pass-through taxation?
Answer: Limited liability company (LLC)
An LLC combines limited liability protection for all members with pass-through taxation, avoiding the double taxation associated with C-corporations.
Under agency law, when does an agent have 'apparent authority' to bind a principal?
Answer: When the principal's conduct leads a third party to reasonably believe the agent has authority
Apparent authority arises when the principal's representations or conduct cause a third party to reasonably believe the agent has authority to act.
What legal term describes a contract that appears valid on its face but may be voided by one party due to a defect such as fraud or misrepresentation?
Answer: Voidable contract
A voidable contract is valid and binding unless the injured party elects to void it due to grounds such as fraud, duress, or misrepresentation.
Which shareholder right allows minority shareholders to prevent oppressive majority actions by seeking court-ordered remedies?
Answer: Derivative suit
A derivative suit allows shareholders to sue on behalf of the corporation when directors fail to act, and can also address oppressive majority conduct harming the corporation.