OK Bar Business Organizations 5 — Questions and Answers
Question 1: Under Oklahoma law, what duty does a majority shareholder owe to minority shareholders in a closely held corporation?
- No duty; majority shareholders may act in their own interest
- A fiduciary duty of good faith and fair dealing (Correct answer)
- A duty only to avoid criminal conduct
- A duty equivalent to that of a stranger in an arm's-length transaction
Correct answer: A fiduciary duty of good faith and fair dealing
Oklahoma courts recognize that majority shareholders in closely held corporations owe a fiduciary duty of good faith and fair dealing to minority shareholders.
Question 2: Which of the following correctly describes 'piercing the corporate veil' under Oklahoma law?
- Shareholders are automatically liable for corporate debts once the corporation is insolvent
- Courts may disregard the corporate entity and hold shareholders personally liable when the corporation is a mere instrumentality or alter ego used to perpetrate a fraud (Correct answer)
- Piercing is available whenever a corporation fails to pay a judgment
- Only the Oklahoma Attorney General may seek to pierce the corporate veil
Correct answer: Courts may disregard the corporate entity and hold shareholders personally liable when the corporation is a mere instrumentality or alter ego used to perpetrate a fraud
Oklahoma courts will pierce the corporate veil when the corporation is used as an alter ego or mere instrumentality, particularly to perpetrate fraud or injustice.
Question 3: An LLC operating agreement is silent on how profits are allocated. Under the Oklahoma Limited Liability Company Act, profits are allocated:
- In proportion to each member's capital contributions
- Equally among all members regardless of contribution (Correct answer)
- In proportion to each member's percentage ownership interest as set by statute
- By decision of the manager
Correct answer: Equally among all members regardless of contribution
Under the Oklahoma LLC Act, when the operating agreement is silent, profits and losses are allocated equally among members.
Question 4: A promoter signs a contract on behalf of a corporation not yet formed. After incorporation, the corporation expressly adopts the contract. What is the promoter's liability?
- The promoter is fully released from liability once the corporation adopts the contract
- The promoter remains liable unless the other party expressly agrees to release the promoter (novation) (Correct answer)
- The corporation's adoption automatically novates the contract, releasing the promoter
- The promoter has no liability because they acted as an agent
Correct answer: The promoter remains liable unless the other party expressly agrees to release the promoter (novation)
Adoption of a pre-incorporation contract by the corporation does not automatically release the promoter; a novation requiring the other party's agreement to substitute the corporation for the promoter is needed.
Question 5: Under Oklahoma's Revised Uniform Partnership Act, what is the effect of filing a 'statement of authority' with the Oklahoma Secretary of State?
- It converts the general partnership into a limited partnership
- It grants or limits the authority of partners to enter transactions on behalf of the partnership and provides constructive notice to third parties (Correct answer)
- It eliminates personal liability of all partners going forward
- It is required for a general partnership to conduct business in Oklahoma
Correct answer: It grants or limits the authority of partners to enter transactions on behalf of the partnership and provides constructive notice to third parties
A statement of authority filed under ORUPA grants or limits partner authority for transactions affecting real property and provides constructive notice of the limitations to third parties.
Question 6: Under Oklahoma law, which of the following is a proper ground for judicial dissolution of a corporation?
- A shareholder disagrees with a single board decision
- Deadlock among directors that cannot be broken and threatens irreparable injury to the corporation (Correct answer)
- The corporation has operated at a loss for two consecutive years
- Shareholders holding 25% of shares petition for dissolution
Correct answer: Deadlock among directors that cannot be broken and threatens irreparable injury to the corporation
Oklahoma courts may order judicial dissolution when director deadlock cannot be broken and irreparable injury threatens the corporation, among other statutory grounds.
Question 7: In an Oklahoma general partnership, a partner transfers her entire partnership interest to a third party. What rights does the transferee acquire?
- Full partnership rights including voting, management, and profit rights
- Only the right to receive the distributions the transferring partner would have received; no management or voting rights (Correct answer)
- The right to become a substituted partner automatically upon transfer
- No rights, because partnership interests are non-transferable under Oklahoma law
Correct answer: Only the right to receive the distributions the transferring partner would have received; no management or voting rights
Under ORUPA, a transferee of a partnership interest receives only the transferor's economic rights (distributions) and does not become a partner or acquire management or voting rights without consent of all partners.
OK Bar Business Organizations 5
Under Oklahoma law, what duty does a majority shareholder owe to minority shareholders in a closely held corporation?