HI Bar - Hawaii Bar Business Associations Questions and Answers

Question 1

A solo entrepreneur forms a corporation, 'Island Ventures, Inc.', in Hawaii for a high-risk business.
The entrepreneur is the sole shareholder, director, and officer.
They frequently use the corporate bank account to pay for personal expenses, fail to hold any director or shareholder meetings, and contribute only $100 in initial capital despite the business needing significantly more.
When Island Ventures, Inc. is unable to pay a $50,000 debt to a supplier, what legal doctrine might the supplier successfully use to hold the entrepreneur personally liable for the corporate debt?

Accepted Answer

Piercing the corporate veil

Answer

The business judgment rule

Answer

The doctrine of ultra vires

Answer

The doctrine of respondeat superior

Question 2

Two friends, Leilani and Pono, form a general partnership-at-will to operate a surf shop in Haleiwa. They do not have a written partnership agreement. After a successful year, Leilani decides she wants to move to the mainland and informs Pono that she is leaving the partnership effective immediately. Under the Hawaii Uniform Partnership Act (HRS Chapter 425), what is the immediate legal consequence of Leilani's notification to Pono?

Accepted Answer

The partnership is automatically dissolved.

Answer

Leilani has breached the partnership agreement and is liable for damages.

Answer

Pono has the right to buy out Leilani's interest at a 25% discount.

Answer

The partnership continues, but Leilani is now considered a dissociated partner with no management rights.

Question 3

The board of directors of a publicly-traded Hawaii corporation approved a major acquisition of another company after commissioning and reviewing financial reports, market analyses from outside experts, and holding several lengthy meetings. Six months later, due to an unforeseen global market collapse, the acquired company's value plummets, causing a significant loss to the corporation. A shareholder files a derivative suit against the directors, alleging a breach of the duty of care. What is the directors' most potent defense?

Accepted Answer

The business judgment rule

Answer

The doctrine of limited liability

Answer

Shareholder ratification

Answer

The corporate opportunity doctrine

Question 4

A shareholder of a large Hawaii-based agricultural corporation believes the CEO and other top executives are paying themselves excessive, unwarranted bonuses, thereby wasting corporate assets and harming the company. The shareholder wishes to file a lawsuit on behalf of the corporation to recover these funds. Which of the following is a mandatory prerequisite for the shareholder before commencing this shareholder derivative action under Hawaii law?

Accepted Answer

Make a written demand on the board of directors to take suitable action.

Answer

Obtain the support of at least 10% of the other shareholders.

Answer

Post a bond sufficient to cover the corporation's potential legal expenses.

Answer

File a complaint with the Hawaii Department of Commerce and Consumer Affairs.

Question 5

Which of the following statements most accurately describes the personal liability of a member of a properly formed Hawaii Limited Liability Company (LLC) for a business debt owed by the LLC?

Accepted Answer

A member is generally not personally liable for the debts and obligations of the LLC.

Answer

A member's liability is unlimited, similar to a sole proprietor.

Answer

A member is personally liable for the LLC's debts, but only up to the amount of their capital contribution.

Answer

A member is only personally liable for the LLC's debts if they actively participate in the management of the company.

Question 6

Kalani and David are partners in a general partnership that buys and sells rare art. Kalani learns that a rare painting by a famous local artist is for sale, an opportunity that falls squarely within the partnership's business. Without informing David, Kalani purchases the painting with his own money and then resells it for a substantial personal profit. Kalani's actions are a breach of which fiduciary duty?

Accepted Answer

The duty of loyalty

Answer

The duty of care

Answer

The duty to inform

Answer

The duty of good faith and fair dealing