MN Bar Business Organizations and Corporations 2 — Questions and Answers
Question 1: Under Minnesota corporate law, shareholders in a closely held corporation may bring a derivative action when:
- They disagree with any board decision
- The board refuses to sue on behalf of the corporation after a demand or demand is excused (Correct answer)
- They hold more than 50% of outstanding shares
- They have been shareholders for at least one year
Correct answer: The board refuses to sue on behalf of the corporation after a demand or demand is excused
A derivative action in Minnesota requires a shareholder to first make a demand on the board (or show demand futility) before filing suit to enforce the corporation's rights.
Question 2: Under the Minnesota Business Corporation Act, a shareholder may inspect corporate books and records upon:
- Paying a fee set by the board
- Making a written demand describing the shareholder's purpose (Correct answer)
- Obtaining a court order only
- Holding at least 10% of outstanding shares
Correct answer: Making a written demand describing the shareholder's purpose
Under Minn. Stat. § 302A.461, shareholders have inspection rights upon written demand that describes a proper purpose for the inspection.
Question 3: Under the Minnesota Business Corporation Act, the duty of loyalty requires directors to:
- Maximize short-term shareholder value
- Subordinate their personal interests to those of the corporation when conflicts arise (Correct answer)
- Disclose all business opportunities discovered outside their role
- Vote in favor of every shareholder proposal
Correct answer: Subordinate their personal interests to those of the corporation when conflicts arise
The duty of loyalty requires directors to put the corporation's interests ahead of their own personal interests when conflicts arise, and to deal fairly in self-interest transactions.
Question 4: In Minnesota, which event triggers a shareholder's right to dissent and seek payment of fair value for their shares (appraisal rights)?
- Any change to the articles of incorporation
- Certain fundamental corporate changes such as a merger or sale of substantially all assets (Correct answer)
- Annual dividend reductions
- Any change in the board of directors composition
Correct answer: Certain fundamental corporate changes such as a merger or sale of substantially all assets
Under Minn. Stat. § 302A.471, appraisal rights arise upon fundamental changes such as mergers, plan of exchange, or sale of substantially all assets not in the ordinary course of business.
Question 5: Under Minnesota law, an agent acting within the scope of their actual authority binds the principal because:
- The third party believed the agent had authority
- The principal expressly or impliedly authorized the specific act (Correct answer)
- The agent is an employee of the principal
- The agent disclosed the principal's identity
Correct answer: The principal expressly or impliedly authorized the specific act
Actual authority — express or implied — arises from the principal's manifestations to the agent that the agent is authorized to act, making the principal bound by acts within that authority.
Question 6: In a Minnesota limited partnership, general partners differ from limited partners in that:
- General partners have no management rights
- General partners have unlimited personal liability and management control (Correct answer)
- General partners receive preference in profit distributions
- General partners cannot be removed by limited partners
Correct answer: General partners have unlimited personal liability and management control
General partners in a Minnesota limited partnership have management control and bear unlimited personal liability, while limited partners have liability limited to their investment.
MN Bar Business Organizations and Corporations 2
Under Minnesota corporate law, shareholders in a closely held corporation may bring a derivative action when: