Exam 26: Corporate Governance: the Internal Affairs of Corporations

A shareholder who is being pushed out of a company by the other shareholders because they hold a majority of common shares can always use the remedy of a derivative action.

The only "document of record" the company need NOT allow access to by the shareholders is

A director will be criminally liable where she or he

To ensure the accuracy of financial statements,business corporation legislation provides for the appointment of an independent ____________ by the shareholders.

Regarding financial rights,shareholders have a right to

Use the fact situation in Q13 to answer the related question that follows. Assume that A and B have a unanimous shareholder agreement,which provides that for the time being the accountant of the corporation shall have the deciding vote in the event of a deadlock between the shareholders.If the accountant votes with A against B,

When a director has a duty to acquire property for the corporation and instead acquires it for herself,she has

Dan is a director of a corporation,and without disclosing his conflict of interest,he entered into a contract to supply the corporation with widgets.The contract was made in the name of his mother so that the corporation would not know that Dan was involved.Pat is a minority shareholder in the corporation,has found out about the conflict,and intends to bring a derivative action against Dan.Explain what a derivative action is.Why is a derivative action appropriate in the circumstances? What must Pat show in order to bring a derivative action? What remedy might a court award?

Explain why most corporations issue pre-emptive rights on their new issues of stock when pre-emptive rights are generally not recognized by courts in Canada.

Use this fact situation to answer the related questions that follow. A,B,and C are directors of Multi Corp Ltd. ,a private provincial corporation that is presently negotiating the purchase of another company,Gladstone Inc. ,whose business should compliment the business of Multi Corp Ltd.Based on a report arising from a review of the books,records,and financial statement of Gladstone Inc.by Multi Corp's accountants,A,B,and C have every reason to believe that the acquisition of Gladstone Inc.will benefit Multi Corp Ltd.and increase its yearly profits substantially.As a result,A,B,and C vote to go ahead with the purchase by Multi Corp Ltd.of Gladstone Inc.However,after the purchase,it is found that the books and records of Gladstone Inc.had been fraudulently manipulated and that it was really in poor financial health.When this information is discovered,the value of Multi Corp Ltd.'s shares falls dramatically and Multi Corp Ltd.is forced into bankruptcy.Needless to say,the shareholders of Multi Corp Ltd.blame A,B,and C for their losses and commence an action against them for damages equal to the lost value of their shares. In this case,the shareholders will likely argue that A,B,and C

A director who refuses to disclose his interest in another company at a directors meeting where the purchase of the other business is being voted on has committed a breach of trust.

The winding up (dissolution)of a corporation can be required by a court in order to rescue a

John,the controlling shareholder of a large national company,elected Allan,Edward,and Mary as its directors.John has just heard of a venture that may or may not be beneficial to the company,but using his power as controlling shareholder,wants to go ahead with it and tells the three directors to approve it,which they do.It then turns out that the venture does more harm than good to the company.In this case,

The Delphi Corp.owns 60 percent of Lynden Sand & Gravel Inc.Delphi,with its voting power,elected all three directors on Lynden's board.Then the board decided to sell one of Lynden's gravel reserves to Delphi at only half its value.As a minority shareholder in the Lynden corporation,how have you been affected by this transaction?

Use the fact situation in Q1 to answer the related question that follows. In this situation,assuming that Multi Corp Ltd.brought the lawsuit,at common law,the best argument that A,B,and C would have is that

What is the difference between the business of a corporation and the affairs of a corporation?

Use this fact situation to answer the related questions that follow. Jane is the director of a private national company and has a number of friends who are the directors or officers of other large private national companies.One weekend,Jane and her family are invited to a barbecue at the home of Jane's good friend Edmund,who casually tells Jane as her friend that his company is about to sell a number of franchises and that anyone can pick them up relatively cheap. In the situation above,if Jane decides to buy one or more of the franchises and the company finds out what she has done and sues her,it will probably argue that

Explain the concepts of debt and equity capital.

Use the fact situation in Q13 to answer the related question that follows. Assume that A and B have a unanimous shareholder agreement,which provides that at any time,a shareholder can serve a notice on the other shareholder to buy the other's shares for fair market value.If A and B could not resolve their impasse,then

If a corporation is profitable,directors must declare a dividend to holders of common shares according to their proportionate shareholding.