RI Bar Business Associations 2

Question 1

Which of the following most accurately describes a corporation's duty of loyalty as applied to corporate officers?

Accepted Answer

Officers must act in the corporation's best interest and refrain from self-dealing without disclosure and approval

Answer

Officers must maximize short-term shareholder profit in every transaction

Answer

Officers owe loyalty only to the board of directors, not to shareholders

Answer

Officers must place the interests of creditors above those of shareholders during normal operations

Question 2

An 'interested director transaction' can be validated under most state corporate laws if:

Accepted Answer

The transaction is approved by disinterested directors after full disclosure of the material facts

Answer

The interested director recuses themselves from all board discussions

Answer

The transaction produces a profit for the corporation greater than market rate

Answer

The transaction is reported to the SEC within 30 days

Question 3

Under the Revised Uniform Limited Partnership Act (RULPA), which partner bears management responsibility and unlimited liability?

Accepted Answer

General partners

Answer

Limited partners with more than a 50% capital interest

Answer

All partners equally

Answer

The managing limited partner elected by the other partners

Question 4

A limited partner who participates substantially in the control of a limited partnership's business risks:

Accepted Answer

Being held liable to third parties who reasonably believed they were a general partner

Answer

Forfeiting their right to receive future distributions

Answer

Having their capital interest diluted by the general partner

Answer

Automatic conversion to general partner status by statute

Question 5

A shareholder derivative suit may be brought when:

Accepted Answer

The corporation suffers a wrong that the board refuses to address, and the shareholder sues on the corporation's behalf

Answer

A shareholder personally suffers a direct economic injury from the corporation's actions

Answer

A majority of shareholders vote to authorize litigation against a director

Answer

The SEC brings an enforcement action and private shareholders intervene

Question 6

Under corporate law, the pre-emptive right gives existing shareholders the right to:

Accepted Answer

Purchase a proportional share of newly issued stock before it is offered to the public

Answer

Vote against any new issuance of shares at a shareholder meeting

Answer

Demand that the corporation repurchase their shares at book value

Answer

Block the board from issuing stock options to executives

Question 7

Which of the following is an accurate statement about an LLC's operating agreement?

Accepted Answer

It can override most default statutory provisions governing the LLC's internal affairs

Answer

It must be filed with the state to be effective

Answer

It cannot alter the default rule requiring equal profit distributions among members

Answer

It must be approved by a two-thirds supermajority of members to amend