Business Associations Flashcards

Under Massachusetts law, which of the following best describes the business judgment rule as it applies to corporate directors?

Answer: Courts will not second-guess a director's business decision if the director acted on an informed basis, in good faith, and in the honest belief the decision served the company's best interest

The business judgment rule shields directors from liability when they act on an informed basis, in good faith, and with the honest belief that their decision serves the corporation's best interests.

Under the Massachusetts Uniform Partnership Act, which statement is TRUE regarding liability of partners in a general partnership?

Answer: Partners are jointly and severally liable for all partnership debts and obligations

Under the Massachusetts Uniform Partnership Act, all general partners are jointly and severally liable for all partnership obligations without any cap.

In Massachusetts, which of the following best describes the personal liability of members of a member-managed LLC?

Answer: Members are generally not personally liable for the debts and obligations of the LLC

Massachusetts LLC members enjoy limited liability protection and are generally not personally responsible for the LLC's debts, regardless of their participation in management.

Under Massachusetts law, which document must be filed with the Secretary of State to form a for-profit corporation?

Answer: Articles of Organization

In Massachusetts, a corporation is formed by filing Articles of Organization with the Secretary of State, which serves as the foundational public formation document.

A corporate director approves a contract without disclosing that he has a personal financial interest in the contracting party. Under Massachusetts law, this transaction is best characterized as:

Answer: Voidable unless subsequently approved by disinterested directors or shareholders after full disclosure

Under Massachusetts law, a self-interested transaction is voidable unless approved by disinterested directors or shareholders after full and fair disclosure of the director's conflict of interest.

Under Massachusetts law, a shareholder derivative suit is brought by a shareholder primarily to:

Answer: Enforce a right belonging to the corporation that management has wrongfully failed to pursue

A derivative suit permits a shareholder to sue on the corporation's behalf to enforce corporate rights when management has wrongfully declined to act.

Massachusetts courts are most likely to pierce the corporate veil and hold shareholders personally liable when:

Answer: The corporation is used as an alter ego to perpetrate fraud or injustice, with commingling of assets

Massachusetts courts pierce the corporate veil when shareholders exploit the corporate form as an alter ego to commit fraud or injustice, treating corporate and personal affairs as indistinguishable.