General

Question 1

The de facto corporation doctrine, in which a failed incorporation is treated as valid, has been applied in tort, contract, both, or neither?

Answer 1

Both.

Question 2

the doctrine of corporation by estoppel, in which a party that has acted as though the corporation exists is estopped from asserting otherwise in court, generally will apply to _______ cases, but not apply in ____ cases. Why?

Answer 2

Contract, not tort.

because the existence of a corporation usually has no relevance to the commission of a tort.

Question 3

Generally, notice must be given at least ___ days prior to a shareholders’ meeting. However, if notice is to be given by bulk mail, it must be sent at least _____ days prior to the meeting.

Answer 3

5

20

Question 4

The right of a shareholder to inspect corporate records can/cannot be limited by a corporation’s articles of incorporation or bylaws.

Answer 4

Cannot

Question 5

Selling a controlling stake to a third party that is expected to loot the corporation to the detriment of minority shareholders may result in liability, unless . . .

Answer 5

reasonable measures were taken to investigate the buyer.

Question 6

The BOD may remove one its directors with/withORwithout cause.

Answer 6

With or without

Question 7

Where it is alleged that a director has violated the duty of loyalty (i.e., putting his own interests ahead of those of the corporation), the burden of proof is on whom?

Answer 7

Director

Question 8

Where it is alleged that a director has violated the duty of care (i.e., failing to exercise her business judgment reasonably), the burden of proof is on whom?

Answer 8

Plaintiff

Question 9

Within the duty of loyalty, there is no exception for transactions that were disclosed to and approved by . . .

Answer 9

Officers

Question 10

Although compensation of corporate officers and directors must generally be fair and reasonable, excessive compensation can be approved by majority/unanimous shareholder action, SO LONG AS . . .

Answer 10

Unanimous

No creditor of the corporation is prejudiced.

Question 11

In general, when a corporation sells substantially all of its assets to another corporation, the transferee is not liable for the liabilities of the transferor. However, there are a number of exceptions to this rule, including where: (3)

Answer 11

(i) the purchaser has impliedly agreed to assume the obligations;
(ii) the purchaser is a continuation of the seller; or
(iii) the transfer was not made for adequate consideration and provisions were not made for the transferor’s creditors.

Question 12

A transferee will/won’t be on the hook for the transferor’s liabilities where the sale involved substantially all of the transferor’s assets. Explain

Answer 12

Won’t.

In general, when a corporation sells substantially all of its assets to another corporation, the transferee is not liable for the liabilities of the transferor. There is no exception to that rule here.

Question 13

A shareholder may/may not require purchase of her shares if the corporation has not requested a judicial valuation for the shares.

Answer 13

May

Question 14

A shareholder is/isn’t entitled to have the corporation purchase her shares if, among other things: (i) the corporation is listed on a national securities exchange; (ii) she voted for the merger; or (iii) she was not entitled to vote on the merger.

Answer 14

Is not

Question 15

Under section 14(d) of the Williams Act, a tender offer for corporate securities must follow a number of rules to protect holders of the securities sought to be acquired. The offer must be open to all security holders of the class of securities subject to the tender offer.

If the offer is oversubscribed, the bidder must purchase on a pro rata basis from among the tendering securities holders.

True or False?

Answer 15

True

Question 16

T or F? During liquidation, a corporation may sue in its own name for any claims existing prior to the dissolution.

Answer 16

True

Question 17

A corporation may be sued in its own name provided that the action is brought within (how long?) after the date of dissolution.

Answer 17

Two years

Question 18

Corporations are not entitled to what constitutional privilege?

Answer 18

Privilege against self-incrimination.

Question 19

Articles of incorporation are/are not required to set forth the number of directors the corporation is to have.

Answer 19

Are not

Question 20

Under PA law, what is true of an outright restriction on transfer of stock?

Answer 20

Unreasonable and void

Question 21

A conflicting interest transaction can be upheld if one of the following three things are true.

Answer 21

(i) the material facts of the transaction were disclosed to or known by the board of directors and the board authorized the transaction by an affirmative vote of the majority of the disinterested directors, even if less than a quorum;
(ii) the material facts of the transaction were disclosed to or known by a majority of the shares entitled to vote on the action and they voted in good faith to approve the transaction; or
(iii) the transaction was fair to the corporation at the time it was approved or adopted.