GA Bar GA Bar Business Organizations 1 — Questions and Answers
Question 1: Under the Georgia Business Corporation Code, what is the default voting threshold required to approve a merger for a domestic corporation?
- Simple majority of shares entitled to vote (Correct answer)
- Two-thirds of shares entitled to vote
- Unanimous consent of all shareholders
- Three-fourths of shares entitled to vote
Correct answer: Simple majority of shares entitled to vote
Georgia law requires approval of a merger by a majority of shares entitled to vote, unless the articles require a higher threshold.
Question 2: In Georgia, which of the following best describes the 'business judgment rule' as applied to corporate directors?
- Directors are personally liable for any business decision that results in a loss
- Directors are presumed to have acted in good faith and in the best interest of the corporation (Correct answer)
- Directors must prove the reasonableness of every business decision
- Directors are liable unless approved by a unanimous board vote
Correct answer: Directors are presumed to have acted in good faith and in the best interest of the corporation
The business judgment rule presumes Georgia directors acted on an informed basis, in good faith, and in the honest belief the action was in the corporation's best interest.
Question 3: Under Georgia law, when may a court pierce the corporate veil and hold shareholders personally liable?
- Whenever the corporation is insolvent
- When the corporate form is used to perpetrate fraud or is a mere instrumentality of a shareholder (Correct answer)
- Whenever the corporation fails to hold annual meetings
- When the corporation has fewer than three shareholders
Correct answer: When the corporate form is used to perpetrate fraud or is a mere instrumentality of a shareholder
Georgia courts pierce the corporate veil when the corporation is used as a mere alter ego or instrumentality of a shareholder to commit fraud or evade legal obligations.
Question 4: Under the Georgia Revised Uniform Limited Partnership Act, what is the default liability rule for a limited partner?
- A limited partner is personally liable for all partnership debts
- A limited partner's liability is limited to their capital contribution (Correct answer)
- A limited partner is liable only for debts incurred after they joined
- A limited partner has the same liability as a general partner
Correct answer: A limited partner's liability is limited to their capital contribution
A limited partner's personal liability is limited to the amount of their capital contribution, provided they do not participate in control of the business.
Question 5: Under the Georgia LLC Act, which of the following statements about member-managed LLCs is correct?
- Any member may bind the LLC in the ordinary course of business (Correct answer)
- Only the managing member may bind the LLC under any circumstances
- Members must unanimously approve all ordinary business decisions
- Members have no authority to act as agents of the LLC
Correct answer: Any member may bind the LLC in the ordinary course of business
In a member-managed Georgia LLC, each member is an agent of the LLC and may bind it with respect to acts in the ordinary course of business.
Question 6: A Georgia corporation's board of directors wishes to declare a dividend. Under the Georgia Business Corporation Code, which test must be satisfied?
- The corporation must have retained earnings exceeding par value of all shares
- The distribution must not render the corporation unable to pay debts as they become due or make total assets less than total liabilities (Correct answer)
- Dividends require approval of at least two-thirds of shareholders
- Only preferred shareholders may receive dividends without a surplus
Correct answer: The distribution must not render the corporation unable to pay debts as they become due or make total assets less than total liabilities
Georgia law prohibits distributions that would render the corporation insolvent or that would make total liabilities exceed total assets.
GA Bar GA Bar Business Organizations 1
Under the Georgia Business Corporation Code, what is the default voting threshold required to approve a merger for a domestic corporation?