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 corporation's board of directors wants to approve a transaction in which the CEO has a personal financial interest. Under BCL § 713, the transaction may be approved without voidability if:
Answer: The CEO recuses herself and the remaining disinterested directors approve after full disclosure.
BCL § 713 protects interested director transactions from voidability when the material facts are disclosed and a majority of disinterested directors approve, or disinterested shareholders ratify.
Under New York partnership law, a third party extends credit to a partnership in good faith, believing that a person named in old letterhead is still a general partner. That person actually withdrew six months ago but no public notice was filed. Who bears the loss?
Answer: The withdrawn partner, personally, under the theory of apparent authority.
New York follows the 1914 Uniform Partnership Act. Under Partnership Law § 66, a partner who withdraws (dissolving the firm) remains liable for later obligations to persons who had dealt with the firm and had no actual notice of the dissolution, and, for persons with no prior dealings, unless the dissolution was advertised in a newspaper where the firm did business. There is no statement of dissociation in New York. Where the firm itself held the person out as a partner (letterhead), partnership by estoppel (§ 27) also applies. The burden of giving notice is on the departing partner.
A New York LLC operating agreement specifies that amendments require unanimous written consent. A majority of members attempt to amend the agreement without one member's consent. The attempted amendment is:
Answer: Invalid because the operating agreement's supermajority requirement controls.
NY LLC Law permits operating agreements to require unanimous consent for amendments, and such provisions are fully enforceable against attempts to amend by a lesser vote.
A shareholder holding 10% of a New York close corporation's shares seeks access to its books and records. Under BCL § 624, the shareholder must:
Answer: Give five days' written demand stating a proper purpose.
BCL § 624 grants shareholders the right to inspect books and records upon five days' written demand stating a purpose reasonably related to their interest as a shareholder.
Under New York law, which of the following acts by a New York general partnership partner does NOT require unanimous consent of all partners?
Answer: Making decisions in the ordinary course of the partnership's business.
Ordinary course business decisions require only a majority vote under NY Partnership Law, while extraordinary acts—like admitting partners or disposing of all assets—require unanimity.
A New York corporation is administratively dissolved by the Department of State for failure to pay franchise taxes. Its officers continue to transact business on its behalf. The officers are:
Answer: Personally liable for obligations incurred after dissolution because the corporate shield is lost.
Officers and directors who continue to act for a dissolved corporation are personally liable for obligations they incur because the entity no longer provides a liability shield.
Under New York's Revised Limited Partnership Act, a limited partner who participates in control of the business is liable to third parties who:
Answer: Reasonably believed, based on the limited partner's conduct, that the limited partner was a general partner.
A limited partner who participates in control loses limited liability only as to creditors who actually and reasonably believed the limited partner was a general partner based on that conduct.