Commercial Law, 2011 Bar — Question 51

MULTIPLE CHOICE

X Corp., whose business purpose is to manufacture and sell vehicles, invested its funds in Y Corp., an investment firm, through a resolution of its Board of Directors. The investment grew tremendously on account of Y Corp.’s excellent business judgment. But a minority stockholder in X Corp. assails the investment as ultra vires. Is he right and, if so, what is the status of the investment? A) Yes, it is an ultra vires act of the corporation itself but voidable only, subject to stockholders’ ratification. B) Yes, it is an ultra vires act of its Board of Directors and thus void. C) Yes, it is an ultra vires act of its Board of Directors but voidable only, subject to stockholders’ ratication. D) Yes, it is an ultra vires act of the corporation itself and, consequently, void.

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