Exam 11: Corporations

If there is only one class of shares, they will be common shares.

When lending money to a closely held corporation, what will a bank usually insist on from the major shareholders or other principals?

Indicate three advantages to incorporation.

Indicate two examples where a director can be personally liable for the debts of the corporation.

Directors can be responsible for unpaid taxes, payroll deductions, damage to the environment and for not complying with either consumer protection or human rights legislation. Courts have found directors liable, using an objective test, for not exercising due diligence or a reasonable degree of care and skill. Comment on whether you think this imposes too much responsibility on directors and whether it dilutes the concept of a separate legal entity.

Explain the nature of the "corporate myth."

How is incorporation effected in a registration jurisdiction?

A prospectus is an internal document detailing the expected performance of a corporation.

A debenture is likely to be secured.

Indicate three significant results of a corporation being classed as a separate legal personality.

Which of the following is a fiduciary relationship?

What is a share?

Who is the party responsible for ensuring that financial statements for an organization are properly done?

Shareholders do not owe a duty to the corporation.

If dividends are not paid, preferred shares usually convert to voting shares.

Mark wants to incorporate. Which one of the following statements is correct with regard to incorporating in Nova Scotia?

Where pre-emptive rights exist, existing shareholders must be offered their proportionate share of any new allotment of shares before the shares are offered to anyone else.

Shareholders in a closely held corporation are entitled to sell their shares to whomever they want without restriction.

Discuss the concept of promoters, their duties, and their role in the corporate form.

A shareholder has an obligation not to compete with the corporation.