MD Bar MD Bar Business Organizations 2 — Questions and Answers
Question 1: Under Maryland's General Corporation Law, what is the default voting threshold required to approve a merger?
- Simple majority of shares present at the meeting
- Two-thirds of all votes entitled to be cast (Correct answer)
- Unanimous shareholder approval
- Approval by the board of directors only
Correct answer: Two-thirds of all votes entitled to be cast
Maryland's General Corporation Law requires approval by two-thirds of all votes entitled to be cast for a merger, unless the charter provides otherwise.
Question 2: In Maryland, 'piercing the corporate veil' refers to:
- A shareholder's statutory right to inspect corporate books and records
- A court imposing personal liability on shareholders for corporate debts when the corporate form is abused (Correct answer)
- A director's authority to overturn a prior board decision
- A creditor's right to audit corporate financial statements
Correct answer: A court imposing personal liability on shareholders for corporate debts when the corporate form is abused
Piercing the corporate veil allows courts to hold shareholders personally liable for corporate obligations when the corporate form is used to perpetrate fraud or injustice.
Question 3: A closely held Maryland corporation is primarily distinguished from a publicly traded corporation because:
- It pays no corporate income taxes
- Its shares are not publicly traded and it typically has a small number of shareholders (Correct answer)
- It cannot have a formal board of directors
- All shareholders must be Maryland residents
Correct answer: Its shares are not publicly traded and it typically has a small number of shareholders
A closely held corporation is characterized by shares not traded on public markets and a limited number of shareholders who often also manage the business.
Question 4: In Maryland, which of the following best describes a shareholder derivative suit?
- A shareholder directly suing the corporation to compel dividend payment
- A shareholder suing on behalf of the corporation for harm done to the corporation that it has failed to pursue (Correct answer)
- A director suing to enforce a board resolution against management
- A creditor suing shareholders directly to recover corporate debt
Correct answer: A shareholder suing on behalf of the corporation for harm done to the corporation that it has failed to pursue
A derivative suit is brought by a shareholder as a representative of the corporation when the corporation has failed to pursue a valid legal claim on its own behalf.
Question 5: Under the Maryland Limited Liability Company Act, what is the default management structure of an LLC?
- Member-managed (Correct answer)
- Manager-managed
- Board-managed
- Officer-managed
Correct answer: Member-managed
Under Maryland law, an LLC is member-managed by default unless the operating agreement specifies that it will be manager-managed.
Question 6: In Maryland, which statement about corporate dissolution is TRUE?
- Dissolution immediately extinguishes all corporate liabilities
- Dissolution may be voluntary (by shareholder action) or involuntary (by court order) (Correct answer)
- A dissolved corporation may no longer defend pending lawsuits
- Dissolution requires unanimous consent of all shareholders
Correct answer: Dissolution may be voluntary (by shareholder action) or involuntary (by court order)
Maryland corporations may be dissolved voluntarily through shareholder action or involuntarily through a court order for specified statutory grounds.
MD Bar MD Bar Business Organizations 2
Under Maryland's General Corporation Law, what is the default voting threshold required to approve a merger?