OK Bar Business Organizations 4 — Questions and Answers
Question 1: Under Oklahoma law, what is the default rule regarding a member's right to dissociate from an LLC?
- A member may dissociate at any time by giving notice to the LLC (Correct answer)
- A member may only dissociate upon unanimous consent of all other members
- A member may not dissociate unless the operating agreement expressly permits it
- A member may only dissociate upon court order
Correct answer: A member may dissociate at any time by giving notice to the LLC
Under the Oklahoma Limited Liability Company Act, a member has the power to dissociate at any time by giving written notice, though the dissociation may be wrongful and trigger liability.
Question 2: A corporation's articles of incorporation are silent on cumulative voting. Under Oklahoma law, do shareholders have cumulative voting rights in director elections?
- Yes, cumulative voting is the default under Oklahoma law
- No, cumulative voting requires an express provision in the articles (Correct answer)
- Yes, but only for publicly held corporations
- No, cumulative voting is prohibited unless approved by the board
Correct answer: No, cumulative voting requires an express provision in the articles
Under the Oklahoma General Corporation Act, cumulative voting is not a default right and must be expressly authorized in the articles of incorporation.
Question 3: Which of the following best describes the 'business judgment rule' as applied in Oklahoma?
- Directors are strictly liable for any business decision that results in a loss
- Courts will defer to directors' decisions made in good faith, on an informed basis, and in the honest belief the action was in the corporation's best interest (Correct answer)
- Directors must prove their decisions were profitable to avoid liability
- The rule only applies to decisions unanimously approved by the board
Correct answer: Courts will defer to directors' decisions made in good faith, on an informed basis, and in the honest belief the action was in the corporation's best interest
Oklahoma courts apply the business judgment rule to protect directors from liability when they act in good faith, on an informed basis, and with a rational belief the action serves the corporation's interests.
Question 4: Under the Oklahoma Revised Uniform Partnership Act, when is a partner personally liable for a tort committed by another partner?
- Only when the liable partner is insolvent
- When the tort was committed in the ordinary course of partnership business or with authority of the partnership (Correct answer)
- Only when the injured party first exhausts remedies against the partnership
- Never, because partners have limited liability for each other's torts
Correct answer: When the tort was committed in the ordinary course of partnership business or with authority of the partnership
Under ORUPA, the partnership and each partner are jointly and severally liable for loss caused by a partner acting in the ordinary course of business or with partnership authority.
Question 5: An Oklahoma corporation wishes to amend its articles of incorporation. Which of the following correctly states the required procedure?
- The board alone may amend the articles without shareholder approval
- The board must recommend the amendment and shareholders must approve by a majority of shares entitled to vote, unless a greater vote is required (Correct answer)
- Shareholders may amend articles by majority vote without board recommendation
- A two-thirds supermajority of all outstanding shares is always required
Correct answer: The board must recommend the amendment and shareholders must approve by a majority of shares entitled to vote, unless a greater vote is required
Under the Oklahoma General Corporation Act, amending articles requires a board recommendation followed by approval by a majority of shares entitled to vote, unless the articles require a higher threshold.
Question 6: In a limited partnership under Oklahoma law, which of the following actions by a limited partner would most likely result in liability as a general partner?
- Voting on dissolution of the limited partnership
- Serving as an employee of the limited partnership
- Taking control of or participating in the management and control of the business (Correct answer)
- Consulting with and advising a general partner on business matters
Correct answer: Taking control of or participating in the management and control of the business
Under Oklahoma's Revised Uniform Limited Partnership Act, a limited partner who participates in control of the business may become liable as a general partner to persons who reasonably believed them to be a general partner.
Question 7: XYZ Corp. is incorporated in Delaware but conducts all its business in Oklahoma. Under Oklahoma law, XYZ Corp. is considered a:
- Domestic corporation subject only to Delaware law
- Foreign corporation required to obtain a certificate of authority to transact business in Oklahoma (Correct answer)
- Illegal entity that must re-incorporate in Oklahoma
- Domestic corporation because its principal place of business is in Oklahoma
Correct answer: Foreign corporation required to obtain a certificate of authority to transact business in Oklahoma
A corporation incorporated in another state is a foreign corporation in Oklahoma and must obtain a certificate of authority before transacting business within the state.
OK Bar Business Organizations 4
Under Oklahoma law, what is the default rule regarding a member's right to dissociate from an LLC?