OH Bar Business Associations 1 — Questions and Answers
Question 1: Under the Ohio Revised Code, what is the minimum number of incorporators required to form a corporation?
- One (Correct answer)
- Two
- Three
- Five
Correct answer: One
Under Ohio law, a corporation may be formed by one or more persons acting as incorporators, following the modern trend of allowing a single person to form a corporation.
Question 2: Under the business judgment rule, a director's decision is protected from personal liability if the director acts:
- In good faith, with the care of an ordinarily prudent person, and in a manner reasonably believed to be in the best interests of the corporation (Correct answer)
- After obtaining a formal legal opinion before making any significant decision
- With shareholder approval for all decisions that affect corporate assets
- Without any personal financial interest in the outcome of the decision
Correct answer: In good faith, with the care of an ordinarily prudent person, and in a manner reasonably believed to be in the best interests of the corporation
The business judgment rule protects directors who act in good faith, with reasonable care, and in a manner they reasonably believe to be in the corporation's best interests.
Question 3: Which of the following is NOT a factor courts typically consider when deciding whether to pierce the corporate veil?
- Whether the corporation maintained adequate capitalization
- Whether the corporation failed to observe corporate formalities
- Whether the corporation had too many shareholders (Correct answer)
- Whether the corporate form was used to perpetrate fraud
Correct answer: Whether the corporation had too many shareholders
The number of shareholders is irrelevant to piercing the corporate veil; courts focus on undercapitalization, failure to observe formalities, and fraudulent use of the corporate form.
Question 4: Under Ohio law, a shareholder's preemptive right to purchase newly issued shares:
- Exists automatically unless denied or limited by the articles of incorporation
- Must be expressly granted in the articles of incorporation to exist (Correct answer)
- Cannot be waived under any circumstances once granted
- Applies only to publicly traded corporations listed on a national exchange
Correct answer: Must be expressly granted in the articles of incorporation to exist
Under Ohio's opt-in approach, preemptive rights do not exist automatically and must be expressly granted in the articles of incorporation.
Question 5: Under Ohio law, an interested director transaction (where a director has a personal financial interest) is best characterized as:
- Voidable unless it was fair to the corporation or was approved by disinterested directors or shareholders after full disclosure (Correct answer)
- Automatically void and unenforceable as a matter of public policy
- Valid as long as the director discloses the interest and abstains from voting
- Valid if the transaction was entered into at fair market value regardless of disclosure
Correct answer: Voidable unless it was fair to the corporation or was approved by disinterested directors or shareholders after full disclosure
An interested director transaction in Ohio is not automatically void; it is voidable unless the transaction was fair to the corporation or was approved after full disclosure by disinterested directors or shareholders.
Question 6: What is the legal effect of an Ohio corporation's failure to hold required annual shareholder meetings?
- The corporation does not automatically lose its corporate status, but may face judicial dissolution or other consequences (Correct answer)
- The corporation is automatically dissolved by operation of law after one missed meeting
- All outstanding shares are forfeited to the state treasury
- The Secretary of State may void the corporation's articles of incorporation immediately
Correct answer: The corporation does not automatically lose its corporate status, but may face judicial dissolution or other consequences
Failure to hold annual meetings does not automatically dissolve an Ohio corporation, though it may provide grounds for judicial dissolution or other legal consequences.
Question 7: Under Ohio law, before a shareholder may file a derivative lawsuit on behalf of a corporation, the shareholder generally must:
- Make a written demand on the board of directors, unless demand would be futile (Correct answer)
- Obtain approval from a majority of all outstanding shareholders
- Own at least 10% of the corporation's outstanding shares
- Exhaust all available arbitration procedures specified in the articles
Correct answer: Make a written demand on the board of directors, unless demand would be futile
Ohio follows the majority rule requiring shareholders to make a written demand on the board before filing a derivative suit, with an exception when such demand would be futile.
OH Bar Business Associations 1
Under the Ohio Revised Code, what is the minimum number of incorporators required to form a corporation?