1. FINAL EXAM
This is the final exam (hereinafter “Final Exam”) for the Northwestern University
School of Law and Kellogg School of Management course of “Corporations” - Winter
Quarter 2015 (BUSCOM-602K-SEC1 ) taught by Professor (Lecturer) Kevin J. P. O’Hara.
As you know, we have previously discussed in class the structure of the Final Exam, which is as
follows:
(1) Students selected their own teams to prepare and submit a response (hereinafter
“Response”) to the Final Exam. Each team is composed of no more than five
students, and each team was registered with the class Co-Secretaries, which is
reflected in a master spreadsheet.
(2) Each team is responsible for submitting a Response to the Final Exam. Responses
can come in the form of text (type-written double-spaced), PowerPoint, Prezi,
spreadsheets, etc., and/or a combination thereof. Notwithstanding the number of
students on a team, each team’s Response will be evaluated and graded using an
identical standard of review.
(3) Teams can review and use any materials, documents, the internet, etc., in preparing
their Response. As such, the Final Exam is totally “open book.” Be mindful to use
proper citations of materials, documents, etc., if and when necessary. However, it is
strictly prohibited to communicate in any manner with any persons outside of your
own team concerning the Final Exam until all teams have submitted their Responses.
(4) Each team has given me notice by way of the Class Co-Secretaries of the date and
time it wishes to begin the Final Exam. In strict accordance with that notice, I will

2. 2
distribute the Final Exam by way of email to the student email addresses submitted to
the Co-Secretaries. Because of time sensitivity, when you receive the Final Exam,
please confirm to me by email that your team has received it. Confirmation should be
sent to my email address, which is kjpoh32@yahoo.com. (My cell phone is 312-925-
8082.)
(5) The questions in the Final Exam are largely fictional and do not reflect real or actual
events or persons.
(6) The Final Exam consists of two parts. Parts One and Two are given different
weight in terms of my evaluation and grading; to wit: Part One is 15%; Part
Two is 85%. Roughly, this weighting corresponds to the percentage of time that
should be devoted to responding to the respective questions and reflects, in my view,
the relative complexity and length between and among the questions. That said, each
team shall, in its own discretion, allot the amount of time it deems necessary to
respond to each question.
(7) The Final Exam is a team exercise and, like with all teams, there will be a degree of
separation of responsibilities to create efficiencies. That said, teams may not “divide
and conquer” the questions among themselves. Instead, team members must work
and complete the entire Final Exam collaboratively and cohesively.
(8) Upon receipt of the Final Exam, each team will have no more than EXACTLY 72
HOURS to complete and return its Response to me by email in an Adobe Acrobat
(.pdf) document. **To repeat: your Response must be made within the 72-hour
period chosen by your team.** When submitting your Response to me by email
attachment, please copy your teammates on the “cc” line of the email. Upon

3. 3
receiving a Response from a team, I will confirm its timely “receipt” by email to the
team.
(9) There is no per se limit on the length of the Response as a whole, or on individual
responses to individual questions. However, as discussed in class, recognize who
your target audience is and be reasonable and balanced when determining length.
Length, in and of itself, does not necessarily correlate to a higher quality response.
Said differently, quantity is not necessarily quality.
(10) In drafting the Response, you may wish to make certain (reasonable) assumptions
and/or articulate processes for establishing further factual investigation or inquiry. If
you do, you should state your assumptions and/or processes clearly and the relevancy
and rational for doing so.
(11) As you know, my didactic method in class is to provide students with the
foundation, tools, and conceptual and inter-disciplinary wherewithal to evaluate and
solve novel and challenging problems within the corporate law subject matter.
Accordingly, like what goes on in the real world, you may find aspects of some
questions take you out of your “comfort zone” of substantive knowledge. The Final
Exam is consciously constructed to do just that. The real world outside of the
classroom is filled with novelty, complexity and subtlety, and solutions are not
always readily found in a text or horn book or a lecture notes. While preparing your
Response, rely on the foundation, tools, and processes cultivated throughout the
quarter.
(12) Do not forget your common sense. And, although the thrust of the class is
obviously corporate law, your Response may employ arguments based on business,

4. 4
finance, public policy, public relations, marketing, philosophy, logic, ethics or other
disciplines as long as they are relevant and add weight to your response.
Read the above instructions and below parts/questions thoroughly and carefully. Have
fun and good luck! My very best regards, Prof. Kevin
* * * * * * * * * * * * *
Part One
(15% Overall Weighting Split Roughly Evenly Among Individual Questions)
1. If a Delaware subchapter C company’s incorporation documents are not prepared
correctly, what is the status of the business? Is it a corporation or not, and why? If a Delaware
subchapter C company is properly incorporated, is it possible to reach the personal assets of the
shareholders? If so, how? Same questions but assume the company was attempting to
incorporate (or was incorporated) in a state that had adopted the Model Business Corporation Act
as its state law.
2. What is a limited liability company (LLC), and what are the advantages of this business
form? Disadvantages? Same question for a limited liability partnership (LLP)? Disadvantages?
3. Today, almost no significant business activity is conducted through general partnerships.
Why?
4. What are the federal and state taxation advantages and disadvantages of a general
partnership? Limited partnership? LLC? LLP?

5. 5
5. Should a limited liability company designate its status (“LLC”) in its name? If so, why?
Do other forms of business organizations (e.g., LLP, general partnership, limited partnership)
have to designate their status in their names? If so, why?
6. Is it true that the Board of Managers in an LLC, when setting employee compensation,
can do so without retaining and relying on an outside and independent compensation expert?
Why?
7. Is it true that if a company declares dividends to its common shareholders, but then fails
to pay them, those shareholders would have a claim against the company for the unpaid
dividends? Why?
8. Is it true that if directors are sued for being “careless,” the business judgment rule applies,
but if they are sued for being “conflicted,” the entire fairness test applies? Why?
9. Is there a business judgment rule in agency and partnership law? If so, compare and
contrast with the business judgment rule that applies to corporations.
10. If two parties decide to go into business together, what are the key planning decisions that
they should make, concerning such matters as choice of form and their relationships to one
another?
11. What are the principal actions that an agent, a partner, and a corporate officer,
respectively, should take to avoid duty of loyalty violations?
12. In purchasing a piece of real estate for client, a real estate agent is held to the objective
standard of ordinary care for a reasonable real estate agent. Is a director of a corporation held to
the same objective, ordinary standard of care? Why or why not?

6. 6
13. What steps should a company take to limit its legal exposure to the actions and
consequences of a salesperson, whose entire compensation is calculated and paid according to
commissions on sales?
* * * * * * * * * * * * *
Part Two
(85% Overall Weighting Split Roughly Evenly Among Individual Questions)
1. You are in-house company counsel for Ankev LLC, formed in Delaware. The company
was formed several years ago and has been using that name while operating its business. The
company, however, did not trade mark or service mark the name. It has become known to you
that a competitor has recently formed a new company with the name “Ankev 2.0 LLP” and
started operating under that name. It too has not registered a trademark or servicemark. Ankev
LLC believes that customers in your marketplace are confused by the services offered by Ankev
2.0 LLP, and that it is hurting business. The CEO has asked you to advise her on what can be
done to remedy the confusion?
2. You are in-house counsel for Seamas LLC, which was formed in Delaware. The Board
of Managers has requested that you advise them in connection with its desire to re-establish and
re-constitute its Audit Committee. Currently, the Audit Committee has little formality and is
populated by the current CFO of the company, who is a very accomplished financier, and the
non-executive Chairman of the Board of Managers. The non-executive Chairman was, until two
years, a salaried executive of Seamas LLC. The Board of Managers wants to appoint to the

7. 7
committee one of its largest members because she has “a lot of skin in the game.” This member
also is an important supplier of goods to the company. The Board of Managers has also
suggested the appointment of the ex-wife of the Chairman, who in her own right is a highly
qualified auditor, and who maintains a solid working relationship with the Chairman.
Furthermore, Seamas LLC has a number of operating wholly-owned subsidiary companies and
the Board of Managers does not want to establish Audit Committees for each of the subsidiaries,
but only one committee to satisfy the need for all of the operating subs. Please make
recommendations to the Board of Managers and the basis for your recommendations.
3. Grasshopper Inc. is a public corporation (registered under the federal securities laws and
regulations), listed on the NYSE, and incorporated in the State of Delaware. Grasshopper’s
Board of Directors has delegated to its Audit Committee the responsibility to consider potential
acquisition targets on a regular basis. (The Audit Committee charter for Grasshopper, Inc. is
essentially identical to the one for ITG, Inc., a NYSE-listed company.) Ms. Grasshopper is the
founder, CEO, and Chairman of Grasshopper, Inc.
One potential acquisition candidate identified by the Audit Committee is Butterfly
Corporation. Ms. Grasshopper is personally interested in buying Butterfly Corporation, and she
has fully informed the Audit Committee of said desire and requested permission to proceed with
the acquisition. You serve as in-house legal counsel (employed by Grasshopper Corporation) for
the Audit Committee. Note that the Code of Business Conduct and Ethics, and the Business
Governance Guidelines of Grasshopper, Inc., are essentially identical to the ones for ITG, Inc.
(A) The Audit Committee is scheduled to meet and review and decide on the potential Butterfly
Corporation acquisition target. The Committee Chairman asks you to advise them at their

8. 8
meeting on the business, legal or other issues/concerns regarding any of the above. What is your
advice? (B) If the Audit Committee decides not to pursue an acquisition of Butterfly
Corporation, what would you advise them to do in connection with Ms. Grasshopper’s
stated desire to personally acquire Butterfly Corporation?
4. Sasha makes delicious toffee from a homemade recipe and would like to commercialize
her culinary talent by going into business for herself. In order to do so, she will need capital to
get started. Her parents want to help her get the business up and going. They agree to invest in
her business; however, they don’t want to be involved in any part of the business, they are just
trying to help her out. Sasha hires a law firm to advise her on how to organize the business. You
are the attorney who gets tasked with this assignment: (A) What business form would best suit
the needs of Sasha, and why? (B) Assume you are now the attorney for her parents; would your
advice be any different from the advice given Sasha in (A)?
5. A friend of yours from college asks you to advise him in connection with his desire to
sell a small family manufacturing business that he now owns and operates. He wants your
advice on what the sale price for the business should be and based on what factors and data
points. The business owns about $200,000 worth of equipment at a manufacturing site where the
company has a 5-year lease in place. The company also has consummated several large
customer contracts. (A) What is a fair sales price? How would you go about determining a fair
sales price? (B) Assume you are advising a potential buyer of the manufacturing business.
Would your advice be different on the manner of determining an offer price? (C) Assume your
friend co-owns the business with three other investors, though your friend exclusively operates
and makes nearly all the business decisions. Does this assumption impact the process for
determining a fair sales price?

9. 9
6. Rowan LLC is a Delaware company where two PhD co-founders (who are also the co-
managing members) formed a biotechnology business. The company is developing a potential
cure for the common cold, which if successful, would be a blockbuster drug with huge revenue
and profit opportunities. The two co-founders recognize they need to raise capital to finance the
drug approval process and for the ultimate manufacture and distribution of the drug. The co-
founders approach Mr. Andrews to provide capital through a private placement. As part of the
transaction, Mr. Andrews would also be invited onto the company Board of Managers and also
enter into a contractual consulting arrangement with the company, given his vast experience in
the pharmaceutical business. Mr. Andrews retains you to advise him on the following issues:
(A) He is concerned that the company’s affairs are being handled in a relatively informal manner
and not a lot is “getting papered up.” What would you suggest to address/cure his concerns? (B)
He asks you to list and summarize the fiduciary duties of Board the Managers. He also asks you
to summarize the fiduciary duties of the company officers. Finally, he asks you to summarize
the fiduciary duties of and among the company members, if any. (C) He understands that the
company directors occasionally use company assets in connection with both company business
and personal purposes unrelated to the company’s business. He asks you to explain to him
whether these transactions are prohibited? (D) For questions (A), (B) and (C) immediately
above, assume the LLC were formed in a state that had adopted the Uniform Limited Liability
Company Act (2006) as that state’s law. Does that impact or change your responses to (A), (B)
and (C), and why?
7. Three years ago, Finnbar , an investment banker, used Meave, a real estate broker, to help
him purchase his home from Mariah, a real estate developer. Last year, Finnbar, again using
Meave as his broker, purchased a bigger home from Mariah. This year, Meave enters into a new

10. 10
contract with Mariah to purchase an even bigger house for Finnbar, which she signs (as she had
on the prior two occasions): “Meave, on behalf of Finnbar.” (A) Will Mariah be able to enforce
the contract against Finnbar? Why or why not? (B) Assume that Maeve is Mariah’s sister and is
a co-owner in Mariah’s real estate development business, but Maeve did not disclose this to
Finnbar thinking it was not important. Do these assumed facts alter your response to (A)? (C)
Will Mariah be able to enforce the contract against Finnbar where Meave had signed on the third
occasion as just “Meave,” as she had done on the two previous contracts? (D) Assume the final
transaction is consummated like the two earlier ones, but Finnbar refuses to pay a 2 percent
commission to Meave as he had done on the two earlier transactions. Does Maeve have a legal
right to the 2 percent commission on the third transaction?
8. Twitter, Inc. is publicly traded on the New York Stock Exchange. Assume that it enters
into a financially significant contract with the Central Intelligence Agency (CIA) of the U.S.
Government to allow the CIA to monitor Twitter users and their accounts, and to gather “other
important intelligence.” This is one of the largest contracts Twitter has ever entered into, though
it is an oral contract, not a written one. The Audit Committee of Twitter meets the day after the
company and the CIA “shook hands” consummating the contract to discuss whether the
company should publicly disclose the contract. They will report their decision to the full Board
of Directors, which meets the following day. The CIA has asked Twitter not to make public
disclosure of the existence of the contract for national security reasons, but it is definitive that
there are no federal or state statutes that create any type of “national security” exception to
required public company disclosure under the federal securities laws and regulations. You are
asked to advise the Audit Committee and the Board of Directors on whether or not the company
should disclose the oral contract? Why?

11. 11
9. Do promoters/incorporators of a Delaware company have the same or similar legal
flexibility regarding company governance and economic terms of ownership under the Delaware
General Corporation Law (through bylaws, various classes of shares, etc.) as they would when
forming a Delaware LLC under the Delaware Limited Liability Company Act? Why or why
not?
10. Today it is a historical fact that Steve Jobs, the visionary founder and CEO of Apple
Corporation, was extremely ill for a long period of time prior to it being known to the public or
prior to Apple publicly disclosing that information. Should Apple have disclosed that
information earlier to the public and, if so, when and by what means? Apple obviously elected
not to do so.
11. General Motors Corporation (GM) very recently announced that it had reached a
settlement with activist investors (shareholders) lead by Harry Wilson to avoid the potential for a
proxy battle, among other things. If you had been a director on the board of GM, what type of
board and information process would you have wanted in place in order to satisfy your fiduciary
obligations and to make your decision on this issue?
+++++++++++++END OF FINAL EXAM+++++++++++++