GA Bar GA Bar Business Organizations 2 — Questions and Answers
Question 1: Under Georgia partnership law, which of the following best describes a partner's right to indemnification from the partnership?
- A partner may only be indemnified if expressly stated in the partnership agreement
- A partner is entitled to indemnification for liabilities incurred in the ordinary course of partnership business (Correct answer)
- Indemnification is available only if the partner acted without negligence
- Partners have no indemnification rights under Georgia law
Correct answer: A partner is entitled to indemnification for liabilities incurred in the ordinary course of partnership business
Georgia's Uniform Partnership Act entitles partners to indemnification for liabilities reasonably incurred in the ordinary course of partnership business.
Question 2: Under the Georgia Business Corporation Code, what is the required notice period for a shareholder meeting?
- No less than 5 days and no more than 30 days before the meeting
- No less than 10 days and no more than 60 days before the meeting (Correct answer)
- No less than 20 days and no more than 90 days before the meeting
- At least 30 days before the meeting with no maximum
Correct answer: No less than 10 days and no more than 60 days before the meeting
Georgia law requires notice of a shareholder meeting to be given no fewer than 10 days and no more than 60 days before the meeting date.
Question 3: In Georgia, a closely held corporation's shareholders enter into a shareholder agreement restricting stock transfers. Which of the following is required for the restriction to be enforceable against a subsequent purchaser?
- The restriction must be noted conspicuously on the share certificate or in an electronic notice (Correct answer)
- The restriction must be filed with the Georgia Secretary of State
- All directors must approve the restriction by written consent
- The restriction is automatically enforceable without notice to third parties
Correct answer: The restriction must be noted conspicuously on the share certificate or in an electronic notice
A transfer restriction is only enforceable against a purchaser with notice, which requires conspicuous notation on the stock certificate or equivalent electronic notice.
Question 4: Under Georgia law, which of the following correctly describes the fiduciary duty owed by general partners to each other in a general partnership?
- Partners owe only a duty of loyalty, not a duty of care
- Partners owe a duty of loyalty and a duty of care to the partnership and other partners (Correct answer)
- Partners owe no fiduciary duties unless specified in the partnership agreement
- Partners owe fiduciary duties only to third-party creditors
Correct answer: Partners owe a duty of loyalty and a duty of care to the partnership and other partners
Georgia's Uniform Partnership Act imposes both a duty of loyalty and a duty of care on general partners owed to the partnership and co-partners.
Question 5: Under the Georgia LLC Act, what is the effect of a manager's unauthorized act that purports to bind a manager-managed LLC?
- The act is always void and cannot bind the LLC
- The act binds the LLC if the third party had no knowledge of the lack of authority (Correct answer)
- The act binds the LLC only if ratified by all members
- The act never binds the LLC regardless of third-party knowledge
Correct answer: The act binds the LLC if the third party had no knowledge of the lack of authority
A manager's unauthorized act can still bind the LLC under apparent authority principles if the third party reasonably believed the manager had authority and lacked knowledge of the restriction.
Question 6: Under Georgia corporate law, which of the following is a correct statement about a director's duty of care?
- Directors must guarantee the profitability of corporate decisions
- Directors must act with the care an ordinarily prudent person in a like position would exercise under similar circumstances (Correct answer)
- Directors are held to the standard of a professional financial advisor
- Directors must independently investigate all facts before any vote
Correct answer: Directors must act with the care an ordinarily prudent person in a like position would exercise under similar circumstances
Georgia's statutory duty of care requires directors to act with the care an ordinarily prudent person in a like position would exercise under similar circumstances.
GA Bar GA Bar Business Organizations 2
Under Georgia partnership law, which of the following best describes a partner's right to indemnification from the partnership?