Question

(1) Appraisal right means that whenever the capital stock of a corporation is increased and new shares of stock are issued, the new issue must first be offered to the stockholders in proportion to their existing shareholdings before subscriptions are received from the general public

(2) Ultra vires acts are illegal and therefore void
(3) Certificate of incorporation is the document prepared by the persons establishing the corporation and filed with the SEC containing the matter required by the Corporation Code
A. Only (1) is true
B. Only (2) is false
C. All are false
D. All are true

Answer 1

The statements pertain to appraisal rights, ultra vires acts, and the certificate of incorporation. Statement (1) about appraisal rights is false; Statement (2) about ultra vires acts is not entirely accurate; but Statement (3) about the certificate of incorporation is true. The correct answer is B. Only (2) is false.

Step-by-step explanation:

The question pertains to various aspects of corporate law, specifically relating to the rights and processes associated with corporate stock issuance and corporate structure. When analyzing the statements provided:

• Appraisal rights refer to the right of shareholders to demand a fair cash payment for their shares if they do not agree with significant corporate changes, such as mergers or asset sales, not specifically the right to buy new shares first. Therefore, statement (1) is false.
• Ultra vires acts are actions taken by a company that lie beyond the scope of its powers as defined in its corporate charter or the law. While these acts can be unauthorized and potentially subject to legal challenge, they are not necessarily always illegal or void; thus, statement (2) is not entirely accurate as it suggests they are always illegal and void.
• The certificate of incorporation is indeed the document prepared and filed with the authorities, such as the SEC, which includes details as required by law for establishing a corporation, making statement (3) true.

Based on this analysis, the correct answer to the question is B. Only (2) is false.