Business Relationships Flashcards
7 cards from real NYLE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Business Relationships flashcards as text
A New York LLC member transferred her membership interest to a third party without obtaining the consent required by the operating agreement. What rights does the transferee obtain?
Answer: Only the economic rights (distributions and allocation of profits/losses) but not membership rights.
Under NY LLC Law § 603, an unauthorized transfer conveys only the transferor's economic interest; the transferee does not become a member and has no voting or management rights.
Under the New York Business Corporation Law, which statement correctly describes the appraisal right (right of dissent) available to shareholders?
Answer: It allows dissenting shareholders to compel the corporation to buy their shares at fair value in specified transactions such as mergers.
BCL § 623 (procedure to enforce a shareholder's right to receive payment for shares) together with BCL § 910 (right to dissent from mergers, consolidations, and sales of assets) give dissenting shareholders the right to have their shares appraised and purchased at fair value in specified extraordinary transactions.
Two members of a New York two-member LLC have a complete deadlock on every management decision. Which remedy is most likely available under New York law?
Answer: Judicial dissolution under NY LLC Law § 702 because it is not reasonably practicable to carry on business.
A complete and irresolvable deadlock between equal members renders it not reasonably practicable to carry on the LLC's business, satisfying the standard for judicial dissolution under NY LLC Law § 702.
A New York limited liability company's articles of organization state that the LLC's purpose is 'to operate retail clothing stores.' The LLC's manager instead invests all funds in real estate. Under the ultra vires doctrine as applied to LLCs in New York, the investment is:
Answer: Voidable by members in equity, and the manager may face personal liability for breach of fiduciary duty.
While NY has greatly limited the ultra vires doctrine, members may seek equitable relief against acts outside the LLC's stated purpose, and the manager may be liable for breach of the duty of loyalty.
A New York corporation's board adopts a poison pill (shareholder rights plan) without shareholder approval to defend against a hostile takeover. Under New York law, the pill is:
Answer: Presumptively valid as a board-authorized measure reviewed under the business judgment rule.
New York courts apply the business judgment rule to board-adopted rights plans, presuming validity when directors acted in good faith to protect the corporation from a perceived threat.
Under New York law, an agent acting within the scope of apparent authority binds the principal when the third party:
Answer: Reasonably relies on manifestations of authority made by the principal to the third party.
Apparent authority arises only from the principal's own words or conduct that reasonably lead the third party to believe the agent is authorized; the agent alone cannot create apparent authority.
A New York general partnership agreement states it will last for five years. After three years, the partners unanimously agree to dissolve. Under NY Partnership Law, which statement is correct?
Answer: Dissolution is rightful because unanimous partner consent always authorizes dissolution regardless of the term.
Under NY Partnership Law, unanimous consent of all partners is an independent ground for dissolution and may occur before a term expires without constituting wrongful dissolution.