MN Bar Business Organizations and Corporations 1 — Questions and Answers
Question 1: Under the Minnesota Business Corporation Act (Minn. Stat. Ch. 302A), the duty of care owed by a director requires the director to act:
- In a manner that maximizes shareholder profits
- In good faith and in a manner reasonably believed to be in the best interests of the corporation (Correct answer)
- With the same care as a certified public accountant
- Only upon advice of legal counsel
Correct answer: In good faith and in a manner reasonably believed to be in the best interests of the corporation
Under Minn. Stat. § 302A.251, directors must act in good faith, in a manner they reasonably believe to be in the corporation's best interests, and with the care of a person in a like position.
Question 2: Under Minnesota law, the business judgment rule protects corporate directors from liability for business decisions when:
- The decision results in profit for the corporation
- The director acted in good faith, was informed, and had no conflicting interest (Correct answer)
- The decision was unanimously approved by the board
- Shareholders ratified the decision after the fact
Correct answer: The director acted in good faith, was informed, and had no conflicting interest
The Minnesota business judgment rule protects directors who acted in good faith, on an informed basis, and without personal conflict, even if the decision turns out poorly.
Question 3: Under Minnesota corporate law, when may a court pierce the corporate veil and hold shareholders personally liable?
- Whenever a corporation is unable to pay its debts
- When the corporate form is used as a facade for fraud or injustice and there is unity of interest between the corporation and shareholder (Correct answer)
- When the corporation has fewer than 10 shareholders
- When shareholders fail to attend annual meetings
Correct answer: When the corporate form is used as a facade for fraud or injustice and there is unity of interest between the corporation and shareholder
Minnesota courts pierce the corporate veil when the corporate form is used to perpetrate fraud or achieve injustice, and there is such unity of interest that the corporation is merely an alter ego of the shareholder.
Question 4: Under the Minnesota Revised Uniform Limited Liability Company Act, members of an LLC are generally:
- Personally liable for all LLC debts
- Not personally liable for LLC debts beyond their capital contribution (Correct answer)
- Subject to liability based on their percentage ownership
- Only protected if they are passive investors
Correct answer: Not personally liable for LLC debts beyond their capital contribution
Under Minn. Stat. Ch. 322C, LLC members enjoy limited liability and are not personally liable for the debts and obligations of the LLC solely by reason of being a member.
Question 5: Under Minnesota partnership law, in a general partnership, each partner is liable for partnership debts:
- Only up to their capital contribution
- Jointly and severally (Correct answer)
- Only if they were involved in creating the debt
- Only up to 50% of the total debt
Correct answer: Jointly and severally
Under Minn. Stat. § 323A.0306, partners in a general partnership are jointly and severally liable for all obligations of the partnership.
Question 6: Under Minnesota law, a corporation's articles of incorporation must be filed with:
- The county recorder in the county of the principal office
- The Minnesota Secretary of State (Correct answer)
- The Minnesota Department of Commerce
- The district court in the county of incorporation
Correct answer: The Minnesota Secretary of State
Under Minn. Stat. § 302A.115, articles of incorporation must be filed with the Minnesota Secretary of State to form a corporation.
MN Bar Business Organizations and Corporations 1
Under the Minnesota Business Corporation Act (Minn.
Stat.
Ch. 302A), the duty of care owed by a director requires the director to act: