Business Associations: Formation/Liability Flashcards

A person represents himself as an agent of a corporation that does not yet authorize him. The corporation later learns of the transaction and remains silent. A court could find the corporation bound under which theory?

Answer: Ratification by acquiescence

A principal who learns of an unauthorized act and fails to repudiate it within a reasonable time may ratify it by acquiescence.

Under Connecticut's Business Corporation Act, which of the following statements about piercing the corporate veil in a parent-subsidiary relationship is accurate?

Answer: Courts may pierce if the parent so dominates the subsidiary that it is a mere instrumentality

Connecticut courts will pierce the corporate veil between parent and subsidiary when the parent so dominates the subsidiary that it functions as the parent's alter ego or mere instrumentality.

A Connecticut LLC member transfers her entire economic interest to a third party. What rights does the transferee acquire?

Answer: Only the right to receive distributions to which the transferring member was entitled

Under Connecticut LLC law, a transferee of an LLC interest receives only the transferring member's economic rights (distributions), not management or voting rights, absent consent of the other members.

A corporation's board of directors wants to issue shares beyond those authorized in the articles of incorporation. What must they do first?

Answer: Amend the articles of incorporation to increase authorized shares, with shareholder approval

A corporation may only issue shares up to the authorized amount in its articles; exceeding that number requires an amendment to the articles approved by shareholders.

Partner A and Partner B form a general partnership. Partner A then files for personal bankruptcy. What is the effect on the partnership?

Answer: The trustee receives only Partner A's economic rights, not management rights

A bankruptcy trustee stands in the shoes of the debtor partner's transferee and receives economic rights only; the trustee does not automatically become a member or gain management rights.

A corporation's certificate of incorporation is defective because the registered agent's address was not included. The incorporators nonetheless acted as a corporation. Which doctrine may STILL shield the organizers from personal liability?

Answer: Corporation by estoppel

Corporation by estoppel prevents a party who dealt with the entity as a corporation from later denying its corporate existence to impose personal liability on organizers.

A general partnership agreement is silent on duration. Partner X gives proper notice of her withdrawal. What is the legal effect under the Revised Uniform Partnership Act (RUPA)?

Answer: Partner X's withdrawal is a dissociation; the partnership may continue or wind up

Under RUPA, withdrawal causes dissociation; the remaining partners may vote to continue the business, avoiding automatic dissolution.