MA Bar Business Associations

Question 1

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

Accepted 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

Answer

Directors are strictly liable for any business decision that results in a corporate loss

Answer

Directors are protected only if they obtain prior shareholder approval before making significant business decisions

Answer

The rule applies only to directors who own at least 10% of the corporation's outstanding stock

Question 2

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

Accepted Answer

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

Answer

Each partner is liable only for debts that partner personally incurred on the partnership's behalf

Answer

Partners are liable only up to the amount of their capital contribution

Answer

Partner liability is limited unless the creditor has first exhausted all available partnership assets

Question 3

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

Accepted Answer

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

Answer

Members are personally liable for all LLC debts because they participate in management

Answer

Members have unlimited personal liability similar to general partners in a partnership

Answer

Member liability is unlimited unless the LLC maintains at least $1 million in capitalization

Question 4

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

Accepted Answer

Articles of Organization

Answer

Corporate Bylaws

Answer

Operating Agreement

Answer

Certificate of Limited Partnership

Question 5

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:

Accepted Answer

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

Answer

Void and unenforceable as a matter of law regardless of its terms

Answer

Automatically ratified if the transaction ultimately benefits the corporation

Answer

Valid because directors are always presumed to act in good faith absent proven fraud

Question 6

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

Accepted Answer

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

Answer

Seek personal damages for a reduction in the shareholder's individual stock value

Answer

Dissolve the corporation when the board of directors is deadlocked

Answer

Compel the corporation to declare a dividend at a specified rate

Question 7

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

Accepted Answer

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

Answer

The corporation fails to earn a profit for three or more consecutive fiscal years

Answer

A shareholder personally guarantees a specific corporate debt to a third-party creditor

Answer

The corporation has fewer than five shareholders of record