DE Bar DE Bar Business Organizations 2 — Questions and Answers
Question 1: Under the DGCL, which doctrine requires entire fairness review when a controlling shareholder stands on both sides of a transaction?
- Business judgment rule
- Entire fairness doctrine (Correct answer)
- Weinberger standard
- Revlon duty
Correct answer: Entire fairness doctrine
When a controlling shareholder is on both sides of a transaction, Delaware requires entire fairness review, examining both fair dealing and fair price.
Question 2: Which Delaware statute governs the formation and operation of limited liability companies?
- 6 Del. C. Title 17
- 6 Del. C. Title 18 (Correct answer)
- 8 Del. C. Title 8
- 6 Del. C. Title 15
Correct answer: 6 Del. C. Title 18
The Delaware Limited Liability Company Act is codified at 6 Del. C. §§ 18-101 through 18-1208 (Title 18).
Question 3: Under Revlon, Inc. v. MacAndrews & Forbes Holdings, when does a Delaware board's duty shift to maximizing shareholder value?
- Whenever the board adopts a defensive measure
- When the sale or breakup of the company becomes inevitable (Correct answer)
- Only when a hostile bidder emerges
- Whenever the board negotiates with any acquirer
Correct answer: When the sale or breakup of the company becomes inevitable
Revlon duties are triggered under Delaware law when the sale or breakup of the company becomes inevitable, requiring the board to maximize value for shareholders.
Question 4: Under the DGCL, what is the purpose of a Section 220 demand?
- To demand a special shareholder meeting
- To inspect corporate books and records (Correct answer)
- To compel a shareholder vote on a merger
- To seek appraisal rights
Correct answer: To inspect corporate books and records
DGCL § 220 permits shareholders to demand inspection of the corporation's books and records for a proper purpose.
Question 5: Under the DGCL, what is a Section 102(b)(7) provision?
- An anti-takeover clause in the certificate
- A provision eliminating director monetary liability for duty-of-care breaches (Correct answer)
- An indemnification bylaw for officers
- A supermajority voting requirement
Correct answer: A provision eliminating director monetary liability for duty-of-care breaches
DGCL § 102(b)(7) allows corporations to eliminate or limit director personal liability for breaches of the duty of care, but not the duty of loyalty.
Question 6: In Delaware partnership law, which type of partner bears unlimited personal liability for partnership debts?
- Limited partner
- Silent partner
- General partner (Correct answer)
- Dormant partner
Correct answer: General partner
General partners bear unlimited personal liability for all debts and obligations of the partnership under Delaware partnership law.
DE Bar DE Bar Business Organizations 2
Under the DGCL, which doctrine requires entire fairness review when a controlling shareholder stands on both sides of a transaction?