MA Bar Business Associations 3

Question 1

A corporation's bylaws conflict with its articles of organization on the procedure for electing directors. Under Massachusetts law, which document controls?

Accepted Answer

The articles of organization control because they are the superior corporate document

Answer

The bylaws control because they are typically more recently adopted than the articles

Answer

Shareholders may elect to follow whichever document produces the more favorable outcome

Answer

Courts will apply whichever provision most benefits the corporation's financial interests

Question 2

Under agency law, which of the following best describes the doctrine of 'ratification'?

Accepted Answer

A principal retroactively authorizes an agent's previously unauthorized act, binding the principal as if authority had existed at the time

Answer

A third party validates the agent's authority after the transaction is completed

Answer

A principal delegates authority to an agent in advance of a specific transaction

Answer

An agent's contract is voided because the agent lacked actual or apparent authority

Question 3

Which of the following is a defining characteristic of a Massachusetts close corporation?

Accepted Answer

It typically has a small number of shareholders with restrictions on the transferability of shares

Answer

Its shares are freely and publicly traded on a recognized stock exchange

Answer

It is managed exclusively by professional managers who are not shareholders

Answer

It is exempt from fiduciary duty requirements under Massachusetts statutory law

Question 4

Under Massachusetts law, which of the following most reliably establishes that an agency relationship exists?

Accepted Answer

The principal has the right to control the manner and means by which the agent performs the assigned work

Answer

The alleged agent acts entirely for their own economic benefit with no direction from a principal

Answer

The agent receives a flat fee rather than an hourly or commission-based payment

Answer

The agent independently determines all material aspects of how to complete the assigned task

Question 5

A general partner in a Massachusetts limited partnership wishes to withdraw from the partnership. Under MRULPA, what is the default effect of that withdrawal?

Accepted Answer

The withdrawal causes dissolution unless remaining partners vote to continue pursuant to MRULPA and the partnership agreement

Answer

The limited partnership is automatically and immediately dissolved upon the general partner's withdrawal

Answer

The withdrawal has no legal effect unless consented to unanimously by all limited partners

Answer

Withdrawal requires prior judicial approval and is otherwise prohibited under Massachusetts law

Question 6

Under Massachusetts law, the duty of loyalty owed by corporate directors requires which of the following?

Accepted Answer

Directors must act in the corporation's best interests and must not usurp corporate opportunities for personal gain without disclosure and approval

Answer

Directors may freely compete with the corporation as long as they disclose the competitive activity to shareholders

Answer

The duty of loyalty applies only to directors who simultaneously serve as corporate officers

Answer

The duty of loyalty may be waived entirely by an express provision in the corporation's articles of organization

Question 7

Under Massachusetts law, a corporation may indemnify a director for liability incurred in a third-party proceeding if:

Accepted Answer

The director acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation

Answer

The director was found liable for gross negligence in the underlying proceeding

Answer

The corporation's articles of organization expressly prohibit indemnification of directors

Answer

Indemnification is automatic for any monetary judgment entered against a serving director