1 Introduction to Law

Which of the following is NOT one of the five core characteristics of a business corporation?

• Legal personality

• Unlimited liability

• Transferable shares

• Investor ownership

What is the primary purpose of entity shielding in corporate law?

• To protect shareholders from personal liability

• To grant creditors priority claims over corporate assets before personal creditors of shareholders

• To prevent shareholders from withdrawing their capital at will

• To ensure companies have perpetual existence

How does the principle of limited liability benefit shareholders?

• It ensures they receive guaranteed dividends

• It protects their personal assets from the company's debts

• It allows them to directly manage company operations

• It prevents them from selling their shares without board approval

What is the primary distinction between an 'open' (public) and 'closed' (private) corporation?

• Public corporations are always more profitable than private corporations

• Public corporations have freely tradable shares, while private corporations have restrictions on share transfer

• Private corporations are not subject to any legal regulations

• Public corporations must have a two-tier board structure

Which of the following is NOT a function of a board of directors in corporate governance?

• Directly managing day-to-day business operations

• Electing executive officers

• Monitoring and ratifying major business decisions

• Protecting the interests of minority shareholders