MA Bar Business Associations 2 — Questions and Answers
Question 1: Under Massachusetts corporate law, shareholders generally have the right to vote on which of the following matters?
- Day-to-day operational decisions such as vendor contracts and staffing
- Fundamental corporate changes such as mergers, amendments to the articles, and dissolution (Correct answer)
- Vetoing any decision made by the board of directors with a majority vote
- Inspecting all confidential trade secrets and proprietary business plans upon demand
Correct answer: Fundamental corporate changes such as mergers, amendments to the articles, and dissolution
Shareholders have voting rights on fundamental corporate transactions but do not manage daily operations, which is delegated to the board of directors.
Question 2: Which of the following best describes an 'ultra vires' act by a Massachusetts corporation?
- An act performed by a corporate officer without prior board of directors approval
- An act that exceeds the authority granted in the corporation's articles of organization or by law (Correct answer)
- An act by the board that harms a minority shareholder's economic interests
- An act performed during a period when the corporation's annual report is overdue
Correct answer: An act that exceeds the authority granted in the corporation's articles of organization or by law
An ultra vires act is one that falls outside the scope of powers conferred upon the corporation by its articles of organization or applicable law.
Question 3: Under the Massachusetts Uniform Partnership Act, when a general partnership is dissolved, which of the following correctly describes what occurs?
- The partnership automatically ceases to exist upon the triggering event
- The partnership requires immediate court-supervised liquidation
- A winding-up process is triggered, during which the partnership continues to exist to settle its affairs before termination (Correct answer)
- Court approval is required before partners may distribute any assets to themselves
Correct answer: A winding-up process is triggered, during which the partnership continues to exist to settle its affairs before termination
Under Massachusetts partnership law, dissolution triggers the winding-up phase, during which the partnership continues to exist for purposes of settling obligations before final termination.
Question 4: Under agency law, an agent has 'apparent authority' to bind a principal when:
- The agent genuinely and honestly believes they have authority to act on the principal's behalf
- The principal's conduct causes a third party to reasonably believe the agent is authorized (Correct answer)
- The agent has received express written authorization from the principal in advance
- The agent acts consistently with a prior course of dealing between the parties
Correct answer: The principal's conduct causes a third party to reasonably believe the agent is authorized
Apparent authority arises from the principal's own manifestations to third parties that reasonably cause them to believe the agent has authority, regardless of actual authority.
Question 5: A minority shareholder in a Massachusetts close corporation claims majority shareholders are freezing her out of management and refusing to declare dividends. Her most appropriate remedy is likely:
- Filing a derivative suit on behalf of the corporation against the majority shareholders
- Seeking judicial dissolution or a court-ordered buyout under Massachusetts's close corporation protections (Correct answer)
- Suing the majority shareholders for breach of the implied covenant of good faith in an employment contract
- Petitioning the court to appoint a permanent receiver to manage the corporation's daily affairs
Correct answer: Seeking judicial dissolution or a court-ordered buyout under Massachusetts's close corporation protections
Massachusetts provides minority shareholders in close corporations specific remedies including judicial dissolution or a court-ordered buyout when majority shareholders engage in oppressive freeze-out conduct.
Question 6: Under the Massachusetts LLC Act, if an LLC does not have an operating agreement specifying a management structure, the LLC defaults to being:
- Manager-managed, with managers appointed by the Secretary of State upon formation
- Member-managed, with all members having equal rights in the conduct of LLC business (Correct answer)
- Automatically dissolved due to the failure to adopt a required operating agreement
- Required to adopt a governance structure identical to that of a Massachusetts corporation
Correct answer: Member-managed, with all members having equal rights in the conduct of LLC business
Under Massachusetts law, an LLC is member-managed by default unless the articles of organization or an operating agreement specifies that it is manager-managed.
Question 7: In a Massachusetts limited partnership governed by MRULPA, which statement correctly describes a limited partner's personal liability?
- Limited partners have the same unlimited personal liability as general partners
- Limited partners become personally liable for partnership debts if they participate in management
- Limited partners may never share in the profits of a limited partnership
- Limited partners are shielded from personal liability for partnership debts regardless of their participation in management (Correct answer)
Correct answer: Limited partners are shielded from personal liability for partnership debts regardless of their participation in management
Under the Massachusetts Revised Uniform Limited Partnership Act (MRULPA), limited partners are protected from personal liability for partnership debts even if they participate in management.
MA Bar Business Associations 2
Under Massachusetts corporate law, shareholders generally have the right to vote on which of the following matters?