CLA/CP Exam CLA/CP Business and Corporate Law Questions and Answers 3

Question 1

Under the doctrine of ultra vires, what happens when a corporation acts beyond the scope of its stated corporate purposes?

Accepted Answer

Modern statutes generally allow shareholders, the corporation, or the state to challenge the act

Answer

Under modern corporate law, ultra vires acts are not automatically void but may be challenged by shareholders, the corporation in a proceeding against officers, or the state in a dissolution action.

Question 2

Which type of business entity provides pass-through taxation while also offering limited liability to all of its owners?

Accepted Answer

Limited liability company (LLC)

Answer

An LLC combines pass-through taxation, where income is taxed only at the member level, with limited liability protection for all members.

Question 3

What is the primary purpose of a corporate resolution?

Accepted Answer

To formally document decisions made by the board of directors or shareholders

Answer

A corporate resolution is a formal record of a decision authorized by the board of directors or shareholders at a properly convened meeting.

Question 4

In a merger, what generally happens to the liabilities of the absorbed corporation?

Accepted Answer

The surviving corporation assumes the liabilities of the absorbed corporation

Answer

In a statutory merger, the surviving corporation succeeds to all rights and assumes all liabilities of the absorbed corporation by operation of law.

Question 5

Which remedy allows a minority shareholder to bring a lawsuit on behalf of the corporation when the board of directors refuses to act?

Accepted Answer

Derivative action

Answer

A derivative action permits a shareholder to sue on the corporation's behalf to enforce a corporate right when the board wrongfully refuses to pursue the claim.

CLA/CP Exam Practice Test

CLA/CP Exam Practice Test

CLA/CP Exam CLA/CP Business and Corporate Law Questions and Answers 3