Corporations

Question 1

Business Judgment Rule

Answer 1

Director’s decision may not be challenged if:
1. acted in good faith
2. with the care that a reasonable person in a like position would exercise, and
3. In a manner director reasonably believed to be in best interest of corporation

Question 2

When will a director’s personal interest transaction be valid?

Answer 2

1. Director disclosed material facts
2. to disinterested members
3. Who approved the transaction
4. The transaction was fair to the corporation

Question 3

When can board seek dismissal of a shareholder derivative suit?

Answer 3

Majority of disinterested directors determine in good faith that:
a. after conducting a reasonable inquiry, continuance would be contrary to corporation’s best interest
b. there must be some support for those findings

Question 4

When are proxies irrevocable?

Answer 4

1. Say irrevocable
2. Coupled with an interest

Question 5

When are articles of incorporation unable to limit directors’ personal liability for money damages to shareholders for corporate actions taken?

Answer 5

1. Director received a benefit to which not entitled
2. Director intentionally inflicted harm
3. Direction approved unlawful distributions
4. Director intentionally committed a crime

Question 6

Can the operating agreement of an LLC change the fiduciary duties owed by members?

Answer 6

Yes, as long as not manifestly unreasonable

Question 7

What must an LCC do to wind up properly?

Answer 7

1. Consent of all members
2. Provide notice of dissolution to creditors that outlines steps to enforce their claims

Question 8

How much can each LLC member be required to pay if liable?

Answer 8

Equal to the amount they contributed or the amount they will receive from winding up the LLC.