OK Bar Business Organizations 1 — Questions and Answers
Question 1: Under the Oklahoma General Corporation Act, what is the minimum number of directors a newly formed corporation must have?
- One (Correct answer)
- Two
- Three
- Five
Correct answer: One
Oklahoma's corporation statute allows a newly formed corporation to have as few as one director, consistent with modern corporate law trends.
Question 2: A shareholder derivative suit allows a shareholder to:
- Sue another shareholder for breach of fiduciary duty
- Sue on behalf of the corporation for wrongs done to the corporation (Correct answer)
- Sue the corporation directly for personal damages suffered
- Sue the board for wrongful termination of corporate officers
Correct answer: Sue on behalf of the corporation for wrongs done to the corporation
In a derivative suit, the shareholder is the nominal plaintiff but sues on behalf of the corporation to redress wrongs done to the corporation itself.
Question 3: The business judgment rule protects corporate directors from personal liability when they:
- Act in their personal financial interest when approving transactions
- Fail to conduct any due diligence before making decisions
- Act in good faith, with due care, and in the honest belief that the action serves the corporation's best interest (Correct answer)
- Approve transactions without disclosing their conflicts of interest
Correct answer: Act in good faith, with due care, and in the honest belief that the action serves the corporation's best interest
The business judgment rule creates a rebuttable presumption that directors act on an informed basis, in good faith, and in the honest belief that the action is in the corporation's best interest.
Question 4: Piercing the corporate veil is a doctrine that:
- Allows shareholders to inspect confidential corporate records
- Holds shareholders personally liable for corporate debts by disregarding the separate corporate form (Correct answer)
- Requires directors to disclose potential conflicts of interest to shareholders
- Describes the formal process for dissolving a corporation under state law
Correct answer: Holds shareholders personally liable for corporate debts by disregarding the separate corporate form
Courts pierce the corporate veil to hold shareholders personally liable when the corporate form is used to perpetrate fraud, evade obligations, or when the corporation lacks a separate identity from its owners.
Question 5: Under the Oklahoma General Corporation Act, which of the following is NOT required to be included in a corporation's articles of incorporation?
- The name of the corporation
- The names of the initial board of directors (Correct answer)
- The total number of authorized shares
- The name and address of the registered agent
Correct answer: The names of the initial board of directors
Oklahoma's articles of incorporation require the corporate name, authorized shares, registered agent information, and incorporators' names, but not the names of initial directors.
Question 6: A shareholder's preemptive right grants the shareholder the ability to:
- Vote to remove any director without cause at a special meeting
- Purchase a pro-rata share of any new stock issuance before it is offered to the public (Correct answer)
- Demand immediate dissolution if the corporation becomes insolvent
- Inspect the corporation's books and financial records at any time
Correct answer: Purchase a pro-rata share of any new stock issuance before it is offered to the public
Preemptive rights allow existing shareholders to maintain their proportional ownership interest by purchasing newly issued shares before outsiders are given the opportunity.
Question 7: Under Oklahoma law, the primary purpose of the required annual meeting of shareholders is to:
- Approve all contracts exceeding a threshold amount set by the board
- Elect directors and transact other business properly before the meeting (Correct answer)
- Set compensation packages for corporate officers and key employees
- Review and formally approve the corporation's annual operating budget
Correct answer: Elect directors and transact other business properly before the meeting
The annual shareholder meeting primarily serves the corporate governance purpose of electing directors and conducting other shareholder business.
OK Bar Business Organizations 1
Under the Oklahoma General Corporation Act, what is the minimum number of directors a newly formed corporation must have?