NY BAR REVIEW BUSINESS RLTSHP 3

Question 1

interested director transaction

Answer 1

between corp. and director
or
corp. and entity in which director is director or officer or has substl financial interest

Question 2

centuries ago, who was tainted, void, voidable - by the corp.

Answer 2

interested director

Question 3

business corporations law sec 713

Answer 3

when an interested director transaction can be voided

Question 4

material facts of the transaction of an interested director MUST be what?

Answer 4

disclosed or known to those who are voting

Question 5

vote of board is sufficient without counting vote of interested directors

Answer 5

first material fact

Question 6

unanimous vote of disinterested directors is needed to reach a QUORUM

Answer 6

second material fact

Question 7

shareholder approval

Answer 7

third material fact

Question 8

failure to reach a required vote

Answer 8

corp. may void the transaction unless parties establish was fair and reasonable to corp. at time of approval

Question 9

approval

Answer 9

doesnt automatically validate the transaction

Question 10

transactions with interested director

Answer 10

may be subject to close court scrutiny

Question 11

interested director considerations

Answer 11

1. did he/she satisfy fiduciary duties to corp.
2. acted in good faith and loyalty
3. fully disclosed terms with the board
4. was transaction fair to corp.

Question 12

bus corp. law sec 714

Answer 12

loan to officers

Question 13

lend money or guarantee money to officer/director IF

Answer 13

approved by shareholders where quorum, majority of shares entitled to vote, not counting shares owned by director who’s seeking loan/guarantee

Question 14

corp.’s formed after 2.22.98 (and other corp.’s where designated in their bylaws), re loans/guarantees

Answer 14

can be approved by board after finding that benefits the corp.

Question 15

dissipation/improper transfer of assets, suits ag. director/officer for misconduct - liability?

Answer 15

directors are jointly and severally liable to corp./creditor/shareholder if vote for/concur in:

1. declaration of dividend or other distribution purchased by corp. of own shares contrary to bus corp. law / cert of incorp.
2. distribution of assets after co. dissolved, without adequately providing for known liabilities
3. making of a loan to a director contrary to bus corp. law

Question 16

director doesnt need to benefit personally in order to be ________?

Answer 16

liable

Question 17

director presumed to have ________ in an action, unless expressly ______.

Answer 17

concur

dissent

Question 18

absent director dissents how?

Answer 18

file his/her dissent with the meeting minutes a reasonable time after learning of the action

Question 19

director is not liable if discharges his duties in _________ with degree of _________ that an ordinary prudent person in similar circumstances would in a likely position

Answer 19

good faith

diligence, care, and skill

Question 20

reliance in good faith on _________, prepared by others

Answer 20

information, opinion, reports, statements

Question 21

defense against liability

Answer 21

good faith reliance on report, even if erroneous

Question 22

compel an accounting of _________

Answer 22

managing of duties and disposing of assets, waste , misappropriation, self dealing

Question 23

must demonstrate more in order to set aside corp. decision

Answer 23

lacking a legitimate business purpose, involving a conflict of interest, bad faith, fraud, unlawful transfer of assets - which knows to be unlawful, didnt assent to merger

Question 24

amending cert of incorp.

Answer 24

shareholder vote required

Question 25

appraisal rights

Answer 25

right to receive fair value of shares if voted adversely and amendment alters or abolishes preferential rights of their shares, changes the redemption rights of their shares, alters or abolishes preemptive right of shareholder to acquire shares/securities, exclude / limit voting rights of shareholder except by authorizing the issuance of new voting shares

Question 26

merger / consolidation with another firm requires _______ vote

Answer 26

shareholder

Question 27

short form merger is between a ______ and a _____

Answer 27

parent subsidiary when shareholder is shareholder of surviving company

Question 28

appraisal rights do not arise when?

Answer 28

1. regular merger between 2 companies when shareholder is shareholder of surviving company 2.unless cert of incorporation is amended to give those shareholders appraisal rights mentioned 3. shareholder shares are listed on national securities exchange or on NASDAQ national market system

Question 29

appraisal right DO arise when?

Answer 29

in connection with any transfer of substantially all assets of a corp. other than for cash

Question 30

when consideration IS cash / transfer of corp. assets, selling company dissolved, cash distribution to shareholders, appraisal rights?

Answer 30

NO

Question 31

shareholder of target company participating in share exchange, all of outstanding shares acquired by acquiring corp. appraisal rights?

Answer 31

YES, but not applicable when youre the shareholder of the acquirer, NOT of the target

Question 32

holdout problem

Answer 32

any shareholder can block from happening of merger, change of cert of incorporation in as such that will affect shareholders rights

Question 33

________ than all of shareholders can approve corporate decision

Answer 33

LESS

Question 34

protect minority shareholders from risk that would have to sell shares in a merger at unfair price, they are permitted to turn to court for what?

Answer 34

demand appraisal rights payment for their shares

Question 35

shareholder written objections before or after vote must be given?

Answer 35

BEFORE

Question 36

shareholder chooses appraisal rights and by that cuts off what?

Answer 36

all other actions/rights as shareholder except actions based on fraud or unlawfulness of action being objected to, NO action for money damages

Question 37

corporate dissolution

Answer 37

company continues to exist to wind up affairs, distribute assets to stakeholders according to their respective rights, but cannot carry out business

Question 38

dissolution may be ...

Answer 38

voluntary or involuntary = judicial action

Question 39

shareholder petition for judicial dissolution of corp. whose shares NOT publicly traded under special circumstances

Answer 39

20% of voting shares may petition for judicial dissolution if directors or majority shareholders are guilty of illegal oppressive acts, in which they are squeezing out the minority corporate assets looted, wasted, diverted

Question 40

oppression

Answer 40

change in policy concerning corporate dividends to provide minority shareholders with NO return on their investment

Question 41

judicial dissolution is __________

Answer 41

DISCRETIONARY

Question 42

court considerations for judicial dissolution

Answer 42

1. whether liquidation is ONLY feasible way petitioners may reasonably expect return on their investment 2. protect petitioners / shareholders

Question 43

court may consider imposing

Answer 43

1. impose surcharge on directors or those who control the corp. 2. order majority shareholders to buy petitioners' shares at fair value / independent appraiser + terms approved by court