Limited Partnerships & Intro to Corporate Form Flashcards
Headphones, LP was a limited partnership registered in a state that has adopted the latest version of the Uniform Limited Partnership Act. Headphones, LP had three limited partners: Allison, who owned 60% of the equity; Brian, who owned 25% of the equity; and Clara, who owned 14% of the equity. Headphones, LP also had one general partner, Daniel, who owned 1% of the equity. Headphones, LP negligently designed and manufactured headphones that gave an electric shock to their users, causing many serious injuries and five deaths. A jury found Headphones LP liable and awarded the plaintiffs $50 million in damages. Headphones LP had only $30 million in assets, which it paid to the plaintiffs and then declared bankruptcy. The plaintiffs have now sued Allison, Brian, Clara, and Daniel personally in their capacity as partners of Headphones and not because of any action they themselves took. Which of the following statements best describes the most likely outcome of the plaintiffs’ suit?
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A. Daniel will be personally liable, but Allison, Brian, and Clara will not.
B. Allison will be personally liable, but Brian, Clara, and Daniel will not.
C. Allison and Daniel will both be liable, but Brian and Clara will not.
D. All four partners will be personally liable.
A. Daniel will be personally liable, but Allison, Brian, and Clara will not.
Limited Partnerships: one or more general partners who exercise control and bear personal liability for the limited partnership’s obligations AND one or more limited partners who don’t exercise control and do not bear the personal liability for the limited partnership’s obligations.
Abby, Beth, and Charlie formed a corporation. Abby invested $100,000 and bought 1,000 shares of Class A stock. Beth invested $50,000 and bought 500 shares of Class B stock. Charlie invested $25,000 and bought 250 shares of Class C stock. Under the corporation’s certificate of incorporation, Class A stock and Class B stock have one vote per share, while Class C stock has ten votes per share. Who controls the corporation?
A. Abby and Beth together.
B. Abby.
C. Beth.
D. Charlie.
D. Charlie
Because Class C stock has 10 votes per share, Charlie has the most shares of the corporation at 2,500 shares.
Software, Inc. is a corporation registered in Delaware that is publicly traded on the New York Stock Exchange. For the next shareholder meeting, several shareholder bylaws have been proposed by different groups of shareholders (one bylaw per group). Which of the following bylaws is most likely to be within the power of the shareholders without the approval of the board?
A. Software, Inc. shall build a new factory in Beaumont, Texas.
B. Software, Inc.’s board of directors shall declare a dividend of $1/share every quarter.
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C. Software, Inc. shall have a new officer, the Chief Environmental Officer, who shall be responsible for reporting to the shareholders on the company’s environmental policies.
D. Software, Inc. shall purchase Hardware, Inc., a California corporation.
C. Software, Inc. shall have a new officer, the Chief Environmental Officer, who shall be responsible for reporting to the shareholders on the company’s environmental policies.
Business, Inc. is a Delaware corporation. It has 100 shares outstanding and five directors on its board. Allison owns 56 shares, and Beth and Clarissa each own 22 shares. The corporation uses cumulative voting to elect its board. At a properly noticed shareholder meeting, Allison voted her 56 shares to fire one of the directors, Geraldine. Beth and Clarissa voted their 44 shares to keep Geraldine on the board. Is Geraldine still on the board?
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A. Yes, unless the shareholders had cause to fire her.
B. Yes, because a majority of shareholders voted to keep her.
C. No, because a majority of the shares voted to fire her.
D. No, because not enough shares voted to keep her to have elected her.
A. Yes, unless the shareholders had cause to fire her.
Removal of Directors by SHs: only for cause if votes against removal would be sufficient to elect a director. Del. 141(k) (purpose= minority representation)
Manufacturing, Inc. is a Delaware corporation with 1,000 shares outstanding and ten directors on its board. Abraham owns 100 shares, Bethany owns 200 shares, Carl owns 199 shares, and Denise owns 501 shares. Abraham, Bethany, and Carl are all part of a group (“the Group”) and vote together on all matters. Who will elect a majority of the board of Manufacturing, Inc.?
A. The Group.
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B. Denise.
C. The Group if the corporation uses cumulative voting, but Denise if the corporation uses straight voting.
D. Denise if the corporation uses cumulative voting, but the Group if the corporation uses straight voting.
B. Denise.
Cumulative voting: a shareholder has votes that are equal to the number of shares multiplied by number of positions the shareholders are voting for.
Straight Voting: a shareholder may cast 1 vote per share equal to the number of shares the shareholder has. Vote on each director’s seat separately.
Denise has the majority in cumulative voting and with straight voting.
