CLA/CP Exam Business and Corporate Law 2

Question 1

A shareholder who believes corporate directors have acted fraudulently may bring a lawsuit on behalf of the corporation under which type of action?

Accepted Answer

Derivative action

Answer

A derivative action allows a shareholder to sue on behalf of the corporation when the board fails to act against wrongdoers.

Question 2

Which of the following best describes 'piercing the corporate veil'?

Accepted Answer

Holding shareholders personally liable for corporate debts

Answer

Courts pierce the corporate veil to hold shareholders liable when the corporate form is used fraudulently or to evade obligations.

Question 3

Under the Uniform Commercial Code, a 'firm offer' made by a merchant to buy or sell goods is irrevocable for up to how long without consideration?

Accepted Answer

3 months

Answer

UCC § 2-205 provides that a merchant's signed written firm offer is irrevocable for the stated period, not to exceed three months.

Question 4

Which type of agency relationship is created when a principal leads a third party to believe an agent has authority, even though none was actually granted?

Accepted Answer

Apparent authority

Answer

Apparent authority arises from the principal's conduct that causes a third party to reasonably believe the agent is authorized.

Question 5

A corporation's articles of incorporation are filed with which entity?

Accepted Answer

The state where the corporation is incorporated

Answer

Articles of incorporation are a state filing, typically with the Secretary of State of the incorporating state.

CLA/CP Exam Practice Test

CLA/CP Exam Practice Test

CLA/CP Exam Business and Corporate Law 2