Exam 27: Corporate Governance: External Responsibilities

Explain how directors and senior officers can be held liable when the corporation commits a criminal offence.

Explain why the insolvency and maintenance of capital tests are important when it comes to corporations.

Walter and Gordon are the shareholders of a small private Ontario company,which recently went bankrupt due to the world wide recession,owing $100 000.00 to its creditors.Unfortunately the company's assets are only $50 000.00.In this case,the amount available to satisfy the creditors of the company will be

John is employed by a large private company that manufactures top-quality bicycles.John's duties are to test the bicycles after they have been assembled.During one such test the brakes on the bicycle being tested fail,causing John to lose control and scrape the side of George's brand new car.In this case,George can sue

Several years back Dean Pigeon with two friends invested $300 000 equity capital into a new corporation.As it turns out,they have more capital in the business than they can profitably use.Will the CBCA allow them to take out the excess capital?

In spite of the fact that a corporation does not meet the solvency test,it can

Use the fact situation in Q9 to answer the related question that follows. Assume that in the week after the contract was entered into,Albert's new company told the retail store that it was adopting the contract made with Albert.In this case,in bringing a lawsuit,the retail store will consider that

Use this fact situation to answer the related questions that follow. John is an engineer in a large,public car manufacturing company that recently released a new line of cars in which the gasoline tanks were installed just in front of the rear bumper.John was aware that tests of the new cars indicated that in a high-speed rear-end collision the gas tanks would explode.John sent a memo to his supervisor about this and the supervisor forwarded the memo to upper management,including the directors and the CEO of the company,who had a study done to determine how may claims the company was likely to have against it resulting from this defect and comparing it to the cost of recalling all of the new cars and fixing the defect.The study concluded that the cost of paying the claims would be substantially less than the cost of recalling all of the cars and fixing them.As a result,the CEO with the board of directors decided not to fix the defect.In the first year of sales of the new line of cars,there were 12 occasions where occupants of the car were seriously injured by exploding gas tanks in rear-end collisions. In this case,in theory and based on current law,most likely

The failure of a company to ensure that its employees are well trained for the job they do and to ensure that their workplace is safe is an offence under occupational health and safety legislation.

How serious is Canada about taking steps to reduce greenhouse emissions?

Regarding ratification of pre-incorporation contracts,how has the CBCA resolved the problem presented by common law?

Under criminal law,corporations are subject to be punished.Punishment can take place by

Bill and four friends are driving to the movies.The vehicle Bill is driving is travelling 21 km per hour over the speed limit.Terry is one of the passengers in the back seat.He intentionally throws an empty bottle at a pedestrian who is walking on a nearby sidewalk.She is struck with the bottle and injured.The police pull the car over and charge Bill and Terry with separate offences.The classification of the offences with which they are charged is as follows a)absolute liability and mens rea. b)strict liability and mens rea. c)mens rea and absolute liability. d)strict liability and absolute liability. e)Not listed above.

What condition(s)must be met before a corporation may purchase its own shares?

Use the fact situation in Q1 to answer the related question that follows. Based on the Enron situation,a question arises as to how inflated financial reporting occurs.To better understand this,consider that large public corporations retain top-tier accounting firms who are well aware of established standards for proper completion of financial statements and reports.If this is the case,and the accountants for such corporations inflate financial statements and reports,should not these accountants also be held liable for misleading the public?

Ward Bond was the sole director of Able Contractors and Hauling Ltd.The corporation entered into a contract to dig up and remove a below-ground storage tank that contained a residue of pesticides.The corporation dug up the tank and placed it on a flatbed truck for transportation to an approved disposal facility.While the tank was being transported,it started to rain.The driver called Ward to ask what he should do,because he had no tarpaulin to cover the tank.Ward knew that a tarpaulin would be useful but the cost would be several thousand dollars ,so Ward instructed the driver to park the truck until the rain had stopped.The driver did so in a restaurant parking lot and the rain washed out the pesticide residue from the tank.It leaked onto the parking lot below the truck.The driver noticed this and called Ward to find out what to do and Ward told him to leave immediately and go to the disposal facility.The pesticide residue was ultimately discovered and led to a clean-up at a cost of $35 000.What potential liability is there as a result of this situation? Who do you think will be liable,and what is the nature of their liability?

Directors may become personally liable to the corporation for deficiencies if,when they pay out dividends,the corporation cannot meet

No knowledge of the law is a good defence to an absolute liability offence.

Pat is one of 16 owners of Camstick Ltd.This corporation has been fined $30 000 for polluting the town's water supply.Pat is on the board and now finds himself charged and being convicted on the same matter.The judge finds that Pat personally knew and did nothing about the polluting.Not only that,but he has no remorse concerning the incident.The judge is now giving him,under the Environmental Protection Act,the maximum prison term of

Use the fact situation in Q5 to answer the related question that follows. Assume that before Edward entered into the contract with the supplier,the president of Edward's company invited Edward to a lunch with the supplier and after a few drinks stated that Edward was also in charge of company sales.Also assume that later in the day and back at his office,the president reminded Edward that he had nothing to do with sales for the company.In this case,