NYLE - New York Law NY Business Relationships Questions and Answers

Question 1

A shareholder of a New York corporation wishes to bring a derivative suit against the board of directors for mismanaging corporate assets.
According to New York's Business Corporation Law, which of the following is a mandatory prerequisite for commencing this action, unless it is excused?

Accepted Answer

Making a demand on the board of directors to initiate the action themselves.

Answer

Posting a bond for the corporation's legal expenses.

Answer

Obtaining the approval of a majority of the minority shareholders.

Answer

Filing a notice of claim with the New York Attorney General.

Question 2

An employee at a Manhattan art gallery, who has previously been authorized to sell paintings up to $50,000, finalizes a sale of a painting for $75,000 to a repeat customer. The gallery owner had privately told the employee last week not to sell any piece for more than $60,000. The customer was unaware of this new limitation. Is the gallery bound by the contract?

Accepted Answer

Yes, because the employee had apparent authority to complete the sale.

Answer

No, because the employee lacked actual authority to make the sale.

Answer

No, because the employee intentionally disobeyed the owner's instructions.

Answer

Yes, because all sales made by an employee are automatically binding on the employer.

Question 3

Under New York Partnership Law, what is the default liability of a general partner in a limited partnership for the debts and obligations of the partnership?

Accepted Answer

Liable jointly and severally for all debts and obligations, the same as a partner in a general partnership.

Answer

Liable only up to the amount of their capital contribution.

Answer

Not liable for any partnership debts, as that is the role of limited partners.

Answer

Liable only for tortious acts, but not for contractual obligations.

Question 4

A plaintiff in a lawsuit is attempting to hold the sole member of a New York LLC personally liable for the company's debts, a concept known as 'piercing the corporate veil.' Which of the following is a key element the plaintiff must prove to be successful?

Accepted Answer

That the member exercised complete domination over the LLC and used that domination to commit a fraud or wrong against the plaintiff.

Answer

That the LLC was unprofitable for three consecutive years.

Answer

That the LLC failed to hold an annual meeting of its members.

Answer

That the member was also the chief executive officer of the LLC.

Question 5

Three individuals attempt to form a corporation in New York. They properly draft the certificate of incorporation but, due to a clerical error at their law firm, the certificate is never filed with the Department of State. They proceed to conduct business as 'ABC Corp.' Under New York law, what is the likely status of their business?

Accepted Answer

A general partnership, because a de jure corporation was never formed.

Answer

A de jure corporation, because they had the intent to incorporate.

Answer

A corporation by estoppel, because they held themselves out as a corporation.

Answer

A de facto corporation, because they made a good faith attempt to comply with incorporation statutes.

Question 6

The board of directors of a New York corporation decided to invest in a new, unproven technology that ultimately failed, causing a significant financial loss. A shareholder sued the directors for breaching their duty of care. The directors' decision was made in good faith and with adequate information. Which legal principle will most likely protect the directors from liability?

Accepted Answer

The business judgment rule.

Answer

The doctrine of ultra vires.

Answer

The principle of limited liability.

Answer

The concept of par value.