Business Entities & Negotiable Instruments

Question 2

Commendam partnership requirements

Answer 2

1. Written partnership agreement filed with SOS
2. Name must reflect Commendam partnership status
3. Cannot suggest Commendam partner is general partner
4. Describe contribution and value

Question 3

Illegal dividends

Answer 3

All directors who knowingly or without due care vote in favor of disbursement are joint and severally liable.

Shareholders who receive dividends are subrogated to faulty directors for repayment of dividend received.

Question 4

A Commendam parter will lose status as Commendam partner if the following are done by him

Answer 4

1. Allow name to be used in business dealings
2. Participates in management
3. Conducts business with 3rd party on behalf of partnership or leads the 3rd party to believe they are conducting business obo the partnership

Question 5

Negotiable instrument elements

Answer 5

1. Written and signed
2. unconditional
3. promise or order
4. to pay a fixed sum of money
5. to order or bearer
6. on demand or at a later date
7. No extraneous undertakings

Question 6

Holder in due course (HIDC)

Answer 6

1. Holder
2. Acquired for value
3. GF
4. Without notice of defect to payment (overdue, forged, adverse claim, valid defense)

Question 7

Real defenses (BIIF)

Answer 7

1. Bankruptcy
2. Illegality
3. Infancy of maker
4. Fraud in factum

Question 8

Withdrawal from LLC without term

Answer 8

Anytime w/ 30 days notice

Question 9

Withdrawal from Partnership w/out term

Answer 9

Anytime with notice in good faith and at a time not unfavorable to partnership

Question 10

Withdrawal from LLC with a term

Answer 10

1. Consent of majority members, OR

2. Upon failure of another member to perform a material obligation

Question 11

Expulsion of a partner

Answer 11

1. Just cause, or

2. Majority vote of partners

Question 12

Partnership withdrawal with a term

Answer 12

1. Approval of all partners, OR

2. If a partner fails to perform a material obligation

Question 13

Articles of incorporation (corporation)

Answer 13

1. Name of Corp
2. Purpose
3. Number of shares
4. Par/no par value
5. If more than one type of stock
6. Duration (unless perpetual)
7. Name & address of incorporators

Question 14

How much time is available for an account holder to review statements before being precluded from asserting improper payment for instruments paid in good faith by payee bank?

Answer 14

An account holder has the first month of the fraudulent payments, and 30 days to review the statement. Functionally, this entitles an account holder to two months of protection.

Question 15

Initial report

Answer 15

1. Signed by each incorporator
2. Location and address of corp office
3. Name and address of registered agents
4. Name and address of initial directors (if any)

Question 16

Defenses to not properly payable instruments

Answer 16

1. Account holder precluded from asserting an item isn’t properly payable if his failure to exercise ordinary care substantially contributed to the theft/forgery.
2. Account holder failed to review bank statements “reasonably promptly”

Question 17

Who generally bears the loss for forged instruments?

Answer 17

1. Payor bank can’t charge drawer’s account for forged checks b/c they’re “not properly payable”
2. writing someone else’s name counts as the writer’s signature, not the named person.
3. Payor Bank, not the drawer, bears the loss for payment of a “not properly payable” instrument.

Question 18

Cumulative voting

Answer 18

• Must be provided for in articles

- shares of stock count as separate votes and may be cumulated to vote in favor of one or more directors

Question 19

Is a director a Mandatary of a corporation?

Answer 19

No! Acts must be approved by vote of the board of directors

Question 20

Is a partner a Mandatary of a partnership?

Answer 20

Yes, with respect to all matters in the course of ordinary business.

**Does not extend to lease, alienation or encumbrance of an immovable

Question 21

Articles of Organization (LLC)

Answer 21

File w/ initial report

1. Name of LLC
2. Purpose

Question 22

Initial report for LLC

Answer 22

1. Name and address of LLC
2. Name and address of registered agent
3. Names and addresses of members (or managers if manager managed)

Question 23

Preemptive Rights

Answer 23

*Must be provided for in articles of incorporation if they are to exist- provides a right to existing shareholders that allows them to purchase an equal % of newly issued shares

Question 24

Initial report (corporation)

Answer 24

1. Location and address of corporation’s registered office
2. Name and address of registered agents
3. Name and addresses of directors (if elected)

Question 25

Duties of directors and officers of a corporation

Answer 25

Fiduciary duties of:
1. Due care (discharge duties with dilligence and skill of a person in like circumstances), and

2. Loyalty (act in best interest of corporation)

Duty of care is subject to the business judgment rule, and can be waived in the articles.

Duty of loyalty cannot be waived

Question 26

Conflict of interest transaction

Answer 26

Ok if:

1. Disinterested majority of board ratifies
2. Majority of SH ratify
3. It is fair to corporation

Question 27

Percentage of Shareholder vote to sell majority of corporate assets

Answer 27

2/3 of SH

Question 28

Manager managed LLC

Answer 28

Members elect board of managers