VT Bar Business Organizations

Question 1

Under the Model Business Corporation Act (MBCA), what is the minimum number of incorporators required to form a corporation?

Accepted Answer

One

Answer

Two

Answer

Three

Answer

Five

Question 2

The business judgment rule protects directors who make decisions that:

Accepted Answer

Were made in good faith, with due care, and in the honest belief the action was in the corporation's best interest

Answer

Result in profit for the corporation

Answer

Were approved by a majority of shareholders

Answer

Were made only after consulting independent legal counsel

Question 3

When will a court most likely pierce the corporate veil and hold shareholders personally liable?

Accepted Answer

When the corporate form is used as a sham or to perpetrate fraud, and there is such unity of interest that the corporation and shareholder are indistinguishable

Answer

Whenever the corporation is insolvent

Answer

When the corporation fails to hold annual shareholder meetings

Answer

Whenever the corporation has fewer than three shareholders

Question 4

A shareholder's preemptive right allows the shareholder to:

Accepted Answer

Purchase newly issued shares in proportion to their current ownership before they are offered to outsiders

Answer

Vote on all corporate transactions above a certain value

Answer

Receive dividends before other shareholders

Answer

Inspect all corporate books and records at any time

Question 5

An act performed by a corporation outside the scope of its stated purposes in the articles of incorporation is known as:

Accepted Answer

Ultra vires

Answer

Intra vires

Answer

A breach of the duty of care

Answer

A violation of the business judgment rule

Question 6

In a short-form merger under the MBCA, which approval is required when a parent corporation owns at least 90% of a subsidiary?

Accepted Answer

Only the parent board's approval is required; no shareholder vote of either corporation is needed

Answer

Both boards of directors and shareholders of both corporations must approve

Answer

A majority of all outstanding shares of both corporations must vote in favor

Answer

The subsidiary's shareholders must approve by a two-thirds supermajority

Question 7

Directors of a corporation owe fiduciary duties of:

Accepted Answer

Care, loyalty, and good faith

Answer

Care and loyalty only

Answer

Care, loyalty, good faith, and full candor to shareholders

Answer

Loyalty and obedience only