MT Bar Business Organizations 2 — Questions and Answers
Question 1: An agent acting with apparent authority in Montana binds the principal when:
- The agent believes they have authority
- A third party reasonably believes the agent has authority based on the principal's representations (Correct answer)
- The agent is a licensed professional
- The principal later ratifies the act
Correct answer: A third party reasonably believes the agent has authority based on the principal's representations
Apparent authority arises when the principal's words or conduct cause a third party to reasonably believe the agent has authority to act on the principal's behalf.
Question 2: Under Montana law, a corporation's articles of incorporation must include all of the following EXCEPT:
- The corporation's name
- The number of authorized shares
- The name of the registered agent
- The names of all initial shareholders (Correct answer)
Correct answer: The names of all initial shareholders
Montana's articles of incorporation require the corporate name, authorized shares, and registered agent information, but the identities of initial shareholders are not required in the articles.
Question 3: A Montana close corporation differs from a publicly held corporation primarily in that:
- It pays no taxes
- It has a small number of shareholders and typically imposes share transfer restrictions (Correct answer)
- It cannot enter contracts
- Its shareholders have no voting rights
Correct answer: It has a small number of shareholders and typically imposes share transfer restrictions
A close corporation in Montana typically has few shareholders, restricts transfer of shares to outsiders, and often operates informally with shareholders also serving as directors and officers.
Question 4: Under the Montana Uniform Limited Partnership Act, a limited partner loses limited liability protection if they:
- Vote on partnership matters
- Take part in the control of the business in a way that a third party reasonably believes they are a general partner (Correct answer)
- Receive distributions from the partnership
- Assign their partnership interest
Correct answer: Take part in the control of the business in a way that a third party reasonably believes they are a general partner
Historically, a limited partner who participates in control of the business can be held liable to third parties who reasonably believed them to be a general partner.
Question 5: Under Montana law, a merger of two corporations requires approval by:
- Only the board of directors
- The board of directors and a majority of shareholders entitled to vote (Correct answer)
- Only the shareholders
- The Montana Secretary of State alone
Correct answer: The board of directors and a majority of shareholders entitled to vote
A Montana corporate merger requires both board approval of the merger plan and shareholder approval by a majority of shares entitled to vote, under MCA § 35-1-801.
Question 6: In Montana, the fiduciary duty of loyalty requires corporate officers and directors to:
- Maximize profits at all costs
- Put the corporation's interests ahead of their own personal interests (Correct answer)
- Inform shareholders of all business decisions
- Avoid all risk in business decisions
Correct answer: Put the corporation's interests ahead of their own personal interests
The duty of loyalty prohibits self-dealing and requires that directors and officers act in the best interests of the corporation rather than their own personal interests.
MT Bar Business Organizations 2
An agent acting with apparent authority in Montana binds the principal when: