IL Bar Business Associations 3

Question 1

In a statutory merger between two corporations, which of the following best describes what happens to the absorbed corporation?

Accepted Answer

The absorbed corporation ceases to exist and the surviving corporation automatically assumes all of its assets and liabilities

Answer

The absorbed corporation continues to exist as a wholly owned subsidiary of the surviving corporation

Answer

Both corporations dissolve and their assets are transferred to a newly formed third corporation

Answer

Shareholders of the absorbed corporation receive only cash and are prohibited from holding equity in the survivor

Question 2

Shareholders who object to a merger may exercise appraisal rights, which entitle them to:

Accepted Answer

Receive the judicially determined fair value of their shares in cash rather than accept the merger consideration

Answer

Obtain a court injunction to block the merger from being consummated

Answer

Automatically sue the board of directors for breach of fiduciary duty

Answer

Convert their shares into shares of the surviving corporation at a negotiated premium

Question 3

Under the Illinois Business Corporation Act, which of the following is a recognized ground for involuntary judicial dissolution at the request of shareholders?

Accepted Answer

The directors are deadlocked in managing the corporation's affairs and irreparable injury to the corporation is threatened

Answer

The corporation has operated at a loss for any single fiscal year

Answer

The corporation has fewer than five shareholders of record

Answer

The corporation has not declared or paid a dividend for two consecutive fiscal years

Question 4

Which of the following best describes the 'alter ego' doctrine in the context of business associations?

Accepted Answer

A doctrine under which courts disregard the corporate form because the entity is merely an instrumentality of the shareholder, operated to commit fraud or injustice

Answer

A theory allowing a parent corporation to enforce its subsidiary's contractual rights against third parties

Answer

A theory permitting creditors to pursue only those shareholders who directly participated in causing the specific debt at issue

Answer

A rule allowing courts to compel two nominally separate corporations to merge their assets for creditor satisfaction

Question 5

Which of the following is generally NOT required for voluntary dissolution of a corporation under the Illinois Business Corporation Act?

Accepted Answer

Court approval of the plan of dissolution

Answer

A board of directors resolution recommending dissolution

Answer

Shareholder approval of the dissolution by the required vote

Answer

Filing articles of dissolution with the Illinois Secretary of State

Question 6

An LLC operating agreement provision that completely eliminates the duty of loyalty among members is:

Accepted Answer

Unenforceable under the Illinois LLC Act, which prohibits the complete elimination of the duty of loyalty

Answer

Fully enforceable if all current members unanimously consent to the provision

Answer

Enforceable only in a manager-managed LLC where managers hold all decision-making authority

Answer

Valid only if the LLC has five or fewer members and files notice with the Secretary of State

Question 7

Under the Revised Uniform Partnership Act as adopted in Illinois, a partner's dissociation from the partnership:

Accepted Answer

May or may not cause dissolution depending on the type of partnership and the circumstances of the dissociation

Answer

Automatically dissolves and requires winding up of the partnership in all cases

Answer

Triggers mandatory dissolution only if a majority of the remaining partners vote to dissolve within 90 days

Answer

Requires a court order before it can legally take effect