IL Bar Business Associations 2

Question 1

A corporate director who approves a transaction in which she has a personal financial interest must demonstrate all of the following to avoid liability EXCEPT:

Accepted Answer

That the transaction resulted in profits for both the director and the corporation

Answer

Full disclosure of the conflict to the disinterested board members

Answer

That the transaction was substantively fair to the corporation

Answer

That disinterested directors or shareholders approved the transaction after full disclosure

Question 2

Under the Illinois Business Corporation Act, a shareholder's right to inspect corporate books and records:

Accepted Answer

Requires a proper purpose related to the shareholder's interests as a shareholder

Answer

Is absolute and cannot be restricted by the board of directors under any circumstances

Answer

Is available only to shareholders holding more than 10% of outstanding shares

Answer

Requires a court order before any inspection may be conducted

Question 3

The duty of loyalty requires corporate directors to:

Accepted Answer

Put the corporation's interests above their own personal interests when the two conflict

Answer

Maximize short-term stock price above all other corporate interests

Answer

Consult with every shareholder before making any major corporate decisions

Answer

Avoid making any business decisions that carry financial risk to the corporation

Question 4

In a limited partnership, which of the following most accurately describes the liability of a limited partner?

Accepted Answer

A limited partner's liability is generally limited to the amount of their capital contribution

Answer

A limited partner is personally liable for all debts and obligations of the partnership

Answer

A limited partner loses limited liability protection only if they receive distributions from the partnership

Answer

A limited partner is jointly and severally liable alongside the general partner for all obligations

Question 5

Which of the following most accurately describes a shareholder derivative lawsuit?

Accepted Answer

A suit brought by a shareholder on behalf of the corporation to recover for harm done to the corporation

Answer

A suit brought by a creditor directly against a corporation for unpaid debts

Answer

A suit by one shareholder against another shareholder for breach of fiduciary duty owed directly to them

Answer

A suit brought by the corporation to collect debts owed by shareholders

Question 6

Under the Illinois Business Corporation Act, the board of directors may authorize a distribution to shareholders only if, after the distribution:

Accepted Answer

The corporation has total assets exceeding its liabilities and can pay its debts as they come due in the ordinary course of business

Answer

The shareholders have approved the distribution by a majority vote at a duly called meeting

Answer

The distribution amount equals the corporation's net earnings for the current fiscal year

Answer

The distribution has been reviewed and approved by a licensed certified public accountant

Question 7

When a corporation's articles of incorporation are defective, a court may treat the entity as a de facto corporation if:

Accepted Answer

A law authorizing incorporation existed, there was a colorable attempt to comply, and the business was conducted in the corporate name in good faith

Answer

The incorporators deliberately chose not to file proper articles to avoid state fees

Answer

All shareholders formally agreed in writing to be personally liable for corporate debts

Answer

The defect was discovered within 30 days of the purported formation