Question 1

What have been the three distinct methods that are used for the creation of small companies and corporations in Canada?

Accepted Answer

Letters patent, regi

Question 2

Discuss the principle of limited liability, why it arises in the law governing corporations, and its significance.

Accepted Answer

This is a relatively straightforward que

Question 3

After Bill Roles graduated from university, he incorporated Roles Enterprises Ltd. He put $10,000 into the corporation by way of a shareholder's loan and the corporation granted him a security interest in one of its two delivery trucks. You knew Bill at school, so when Roles Enterprises Ltd. needed computer supplies, Bill, on behalf of the corporation, contracted with you, the owner of a business selling computer supplies. As it turned out, Bill placed such orders with you almost every three weeks. Read each of the following separately and indicate which of the following is true.

Accepted Answer

A)  If Bill neglects to file annual returns for the corporation, Roles Enterprises Ltd. could cease to exist. 
B)  If an employee of Roles Enterprises Ltd. came to your store to pick up supplies and caused $900 damage by his negligent driving, you could sue the employee, Roles Enterprises Ltd., and Bill personally because the employee worked for Bill's corporation. 
C)  If Roles Enterprises Ltd. owed you $1500 for supplies when it was placed into bankruptcy by its creditors, Bill would be more likely to lose money he lent to the corporation than you would be. 
D)  If the corporation owed you money and Bill, the only shareholder in the corporation, was killed, you would look to Bill's estate for payment. 
E)  If Bill had inadvertently contracted with you before the corporation was in existence, the corporation would lose the ability to ratify that contract, and the contract would be considered void. 
A)  If Bill neglects to file annual returns for the corporation, Roles Enterprises Ltd. could cease to exist. 
B)  If an employee of Roles Enterprises Ltd. came to your store to pick up supplies and caused $900 damage by his negligent driving, you could sue the employee, Roles Enterprises Ltd., and Bill personally because the employee worked for Bill's corporation. 
C)  If Roles Enterprises Ltd. owed you $1500 for supplies when it was placed into bankruptcy by its creditors, Bill would be more likely to lose money he lent to the corporation than you would be. 
D)  If the corporation owed you money and Bill, the only shareholder in the corporation, was killed, you would look to Bill's estate for payment. 
E)  If Bill had inadvertently contracted with you before the corporation was in existence, the corporation would lose the ability to ratify that contract, and the contract would be considered void.

Question 4

Which two of the following are examples of breaches of fiduciary duty?

Accepted Answer

A)  The directors of the corporation, contrary to the request of the shareholders, refused to declare dividends. 
B)  A director of a corporation, as director, learned of a good deal and took advantage of it for himself before the corporation had the opportunity to do so. 
C)  A promoter of a corporation sold property to the corporation for three times what he paid for it after he made full disclosure of his interest to an independent board of directors, which voted for the purchase. 
D)  A shareholder started a business that competed directly with the business. 
E)  An employer charged his employees for parking after supplying it free for years. 
A)  The directors of the corporation, contrary to the request of the shareholders, refused to declare dividends. 
B)  A director of a corporation, as director, learned of a good deal and took advantage of it for himself before the corporation had the opportunity to do so. 
C)  A promoter of a corporation sold property to the corporation for three times what he paid for it after he made full disclosure of his interest to an independent board of directors, which voted for the purchase. 
D)  A shareholder started a business that competed directly with the business. 
E)  An employer charged his employees for parking after supplying it free for years.

Question 5

What duty to directors owe to creditors?

Accepted Answer

A director owes a duty of care

Question 6

With regard to the law of corporations, which of the following is true?

Accepted Answer

A)  In many jurisdictions, pre-emptive rights entitle a shareholder to pass on their right to vote to someone else. 
B)  If a minority shareholder is treated unfairly, the appropriate relief to request is that the court lift the corporate veil. 
C)  Relief from oppression provisions allow a party who has contracted with the corporation to force the corporation to honour a contract it has signed in an irregular manner. 
D)  A director of a corporation could not be personally liable on a promissory note even if he just signed his own name as long as at the time he intended to sign on behalf of the corporation. 
E)  A creditor of a corporation could sue for some remedy if the directors of the corporation voted for a resolution to pay a dividend when the corporation was insolvent. 
A)  In many jurisdictions, pre-emptive rights entitle a shareholder to pass on their right to vote to someone else. 
B)  If a minority shareholder is treated unfairly, the appropriate relief to request is that the court lift the corporate veil. 
C)  Relief from oppression provisions allow a party who has contracted with the corporation to force the corporation to honour a contract it has signed in an irregular manner. 
D)  A director of a corporation could not be personally liable on a promissory note even if he just signed his own name as long as at the time he intended to sign on behalf of the corporation. 
E)  A creditor of a corporation could sue for some remedy if the directors of the corporation voted for a resolution to pay a dividend when the corporation was insolvent.

Question 7

Aunt Juliet wants to incorporate a small closely held corporation. Which of the following bits of advice, given to her by friends, is false?

Accepted Answer

A)  She can enter into a contract on behalf of the corporation even before incorporation and the corporation will automatically be bound when it is incorporated. 
B)  The incorporation document to be submitted in Ontario is the "Articles of Incorporation." 
C)  The incorporation documents to be submitted in B.C. are called the "Memorandum" and the "Articles." 
D)  In some jurisdictions in Canada, she could be personally responsible for a pre-incorporation contract. 
E)  She has the option of incorporating federally if she wants. 
A)  She can enter into a contract on behalf of the corporation even before incorporation and the corporation will automatically be bound when it is incorporated. 
B)  The incorporation document to be submitted in Ontario is the "Articles of Incorporation." 
C)  The incorporation documents to be submitted in B.C. are called the "Memorandum" and the "Articles." 
D)  In some jurisdictions in Canada, she could be personally responsible for a pre-incorporation contract. 
E)  She has the option of incorporating federally if she wants.

Question 8

The corporation typically makes a debt commitment to a ________, who then issues shares in the indebtedness to individual bondholders.

Accepted Answer

A)  creditor 
B)  trustee 
C)  shareholder 
D)  bondholder 
E)  tribunal 
A)  creditor 
B)  trustee 
C)  shareholder 
D)  bondholder 
E)  tribunal

Question 9

Which of the following attracts the dissent procedure, which can result in the corporation being forced to buy the shares of a shareholder at market value?

Accepted Answer

A)  When the directors have hidden behind the corporate structure to do a wrong sufficiently serious that the courts would have lifted the corporate veil. 
B)  If the directors of a non-reporting corporation fail to allot new shares proportionately to the members. 
C)  When the directors of the corporation fail to enforce a right, duty, or obligation owed to the corporation that could be enforced by the corporation. 
D)  When the directors conduct the affairs of the corporation in a manner oppressive to one or more of the members. 
E)  When major changes are made in the best interests of the corporation that will adversely affect one group of shareholders. 
A)  When the directors have hidden behind the corporate structure to do a wrong sufficiently serious that the courts would have lifted the corporate veil. 
B)  If the directors of a non-reporting corporation fail to allot new shares proportionately to the members. 
C)  When the directors of the corporation fail to enforce a right, duty, or obligation owed to the corporation that could be enforced by the corporation. 
D)  When the directors conduct the affairs of the corporation in a manner oppressive to one or more of the members. 
E)  When major changes are made in the best interests of the corporation that will adversely affect one group of shareholders.

Question 10

You have been asked by two fellow graduates to join them in incorporating a closely held corporation that would commence a consulting business. One was in your class, so you know him quite well, but the other is graduating from a different school. You have been discussing the law to review the protection it gives you. Read each of the following statements separately and indicate which is false.

Accepted Answer

A)  As a shareholder, you will have the right to vote for the directors, who in turn will choose the officers. 
B)  A shareholder's agreement would lessen any misunderstandings about rights and obligations. 
C)  If you each take one-third of the first allotment of the shares, you will necessarily be a minority shareholder. 
D)  If you have pre-emptive rights and the directors decide to issue a new allotment of shares, the corporation must offer you a portion of the new issue to allow you to keep your proportional share of the corporation. 
E)  If you were voted out as a director by the others, who could show that it was in the best interests of the corporation, you could always sell your shares to any interested buyer without interference from the other directors. 
A)  As a shareholder, you will have the right to vote for the directors, who in turn will choose the officers. 
B)  A shareholder's agreement would lessen any misunderstandings about rights and obligations. 
C)  If you each take one-third of the first allotment of the shares, you will necessarily be a minority shareholder. 
D)  If you have pre-emptive rights and the directors decide to issue a new allotment of shares, the corporation must offer you a portion of the new issue to allow you to keep your proportional share of the corporation. 
E)  If you were voted out as a director by the others, who could show that it was in the best interests of the corporation, you could always sell your shares to any interested buyer without interference from the other directors.

Question 11

Jack Kihn incorporated and put $20,000 into the corporation by way of a shareholder's loan and took back a Security Agreement on the corporation's equipment. The corporation created decorative boxes. An employee of the company delivered some boxes to a customer who complained about the colour used. The employee became so angry that he shoved the customer, who fell into a glass display case, causing $30,000 damage to the customer and the case. On these facts, which of the following is false?

Accepted Answer

A)  The employee is liable for the tort of battery. 
B)  The employee is liable for his tort and his employer is also liable. 
C)  Kihn himself is vicariously liable for the damage caused by the employee. 
D)  If the corporation went bankrupt, Kihn himself would be a secured creditor. 
E)  Although Kihn is the sole shareholder of the corporation, he is not responsible for company debts. 
A)  The employee is liable for the tort of battery. 
B)  The employee is liable for his tort and his employer is also liable. 
C)  Kihn himself is vicariously liable for the damage caused by the employee. 
D)  If the corporation went bankrupt, Kihn himself would be a secured creditor. 
E)  Although Kihn is the sole shareholder of the corporation, he is not responsible for company debts.

Question 12

Which of the following statements about pre-incorporation contracts is false?

Accepted Answer

A)  Promoters will often purchase property on behalf of a corporation prior to incorporation and then have the corporation ratify after incorporation has taken place. 
B)  Ratification of pre-incorporation contracts is invalid at common law, since the corporation did not exist at the time the contract was made. 
C)  Many jurisdictions have made legislative changes permitting later-incorporated corporations to ratify pre-incorporation contracts. 
D)  If a corporation does not ratify a pre-incorporation contract, or if a pre-incorporation contract is signed in a jurisdiction which does not permit ratification, the promoter remains solely liable for any losses. 
E)  Promoters cannot be held liable for losses due to the doctrine of corporate myth. 
A)  Promoters will often purchase property on behalf of a corporation prior to incorporation and then have the corporation ratify after incorporation has taken place. 
B)  Ratification of pre-incorporation contracts is invalid at common law, since the corporation did not exist at the time the contract was made. 
C)  Many jurisdictions have made legislative changes permitting later-incorporated corporations to ratify pre-incorporation contracts. 
D)  If a corporation does not ratify a pre-incorporation contract, or if a pre-incorporation contract is signed in a jurisdiction which does not permit ratification, the promoter remains solely liable for any losses. 
E)  Promoters cannot be held liable for losses due to the doctrine of corporate myth.

Question 13

A broadly held corporation has fewer restrictions on it than a closely held corporation.

Accepted Answer

A) True 
 B)False

Question 14

Three classmates incorporated about a week after graduation. The authorized capital was 500,000 common no-par-value shares. Each took one share and each was a director. If the directors decide to issue more shares from the treasury to raise more capital, which of the following provisions ensures that they keep their proportionate holdings?

Accepted Answer

A)  Pre-emptive right provision 
B)  Indoor-management rule 
C)  Derivative-action provision 
D)  Dissent procedure 
E)  Relief-from-oppression provision 
A)  Pre-emptive right provision 
B)  Indoor-management rule 
C)  Derivative-action provision 
D)  Dissent procedure 
E)  Relief-from-oppression provision

Question 15

Where a corporation borrows money, only the corporation is responsible for that debt, not the shareholders.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following situations would allow a shareholder to sue on behalf of the corporation?

Accepted Answer

A)  If four of the five directors, in the best interests of the corporation, voted against the fifth as director, voted to end the employment contract of the fifth, and voted not to buy his shares. 
B)  If the corporation had been wronged (lost $30,000) by the negligent and fraudulent acts of one of its directors, but the corporation refused to make any action against the wrongdoer. 
C)  If the shareholders refused to enter into a shareholder's agreement. 
D)  If the directors took an action that unfairly prejudiced a shareholder. 
E)  If the directors issued shares without offering any of the new issue to the present shareholders. 
A)  If four of the five directors, in the best interests of the corporation, voted against the fifth as director, voted to end the employment contract of the fifth, and voted not to buy his shares. 
B)  If the corporation had been wronged (lost $30,000) by the negligent and fraudulent acts of one of its directors, but the corporation refused to make any action against the wrongdoer. 
C)  If the shareholders refused to enter into a shareholder's agreement. 
D)  If the directors took an action that unfairly prejudiced a shareholder. 
E)  If the directors issued shares without offering any of the new issue to the present shareholders.

Question 17

Four years ago, Ben Ratzi incorporated a corporation and became the sole shareholder, director, and officer. He lent the corporation $10,000 and took a General Security Agreement from the corporation as security for repayment of the loan. The corporation prospered. Last year, your brother began supplying the corporation with office supplies. He was paid at the end of each month for supplies delivered during that month. For the last six months, however, he has not been paid. He learned that other suppliers had not been paid either because sales dropped drastically, apparently due to Ratzi's harsh management style, which upset the entire staff. Which of the following is true?

Accepted Answer

A)  If your brother decided to sue for the debt, he could sue Ratzi because he was the sole shareholder and his management style caused all the trouble. 
B)  Your brother could take an action under statutory "relief from oppression" provisions. 
C)  If Ratzi dies, his corporation would automatically die too, and there wouldn't be any person to sue. 
D)  If this corporation were placed into bankruptcy, Ratzi would be in a better position than your brother for receiving proceeds realized from the sale of the assets of the corporation. 
E)  Your brother has no claim against the corporation because it has limited liability. 
A)  If your brother decided to sue for the debt, he could sue Ratzi because he was the sole shareholder and his management style caused all the trouble. 
B)  Your brother could take an action under statutory "relief from oppression" provisions. 
C)  If Ratzi dies, his corporation would automatically die too, and there wouldn't be any person to sue. 
D)  If this corporation were placed into bankruptcy, Ratzi would be in a better position than your brother for receiving proceeds realized from the sale of the assets of the corporation. 
E)  Your brother has no claim against the corporation because it has limited liability.

Question 18

A person who participates in the initial setting up of a corporation or who assists the corporation in making a public share offering is known in law as

Accepted Answer

A)  a shareholder. 
B)  an initiator. 
C)  a promoter. 
D)  a founder. 
E)  a preferred shareholder. 
A)  a shareholder. 
B)  an initiator. 
C)  a promoter. 
D)  a founder. 
E)  a preferred shareholder.

Question 19

What are preferred shares?

Accepted Answer

Shares giving the shareholder

Question 20

John Hollin was an officer, director, and employee of a large broadly held corporation. At a directors' meeting, he learned that the corporation was voting on a resolution to buy a piece of property from Sam Keanu for $100,000. It happened that Hollin was one of three co-owners of that property. Hollin voted for the purchase and the resolution passed without discussion by a vote of 5-0. Several months after completion of the purchase, the other directors learned of Hollin's ownership and called on him to account to the corporation for any profit made. Which of the following is false?

Accepted Answer

A)  Hollin owed a fiduciary duty to the corporation and breached that duty by his actions. 
B)  If the directors failed to take action, the shareholders could have brought an action on behalf of the corporation against Hollin. 
C)  Hollin must account for any profit made because he failed to disclose his interest and voted on the question. 
D)  The shareholders could proceed under the dissent procedure and force the corporation to buy them out. 
E)  Hollin should have disclosed his interest and refrained from voting or otherwise influencing the decision. 
A)  Hollin owed a fiduciary duty to the corporation and breached that duty by his actions. 
B)  If the directors failed to take action, the shareholders could have brought an action on behalf of the corporation against Hollin. 
C)  Hollin must account for any profit made because he failed to disclose his interest and voted on the question. 
D)  The shareholders could proceed under the dissent procedure and force the corporation to buy them out. 
E)  Hollin should have disclosed his interest and refrained from voting or otherwise influencing the decision.

What have been the three distinct methods that are used for the creation of small companies and corporations in Canada?

Discuss the principle of limited liability, why it arises in the law governing corporations, and its significance.

Which two of the following are examples of breaches of fiduciary duty?

What duty to directors owe to creditors?

With regard to the law of corporations, which of the following is true?

Aunt Juliet wants to incorporate a small closely held corporation. Which of the following bits of advice, given to her by friends, is false?

The corporation typically makes a debt commitment to a ________, who then issues shares in the indebtedness to individual bondholders.

Which of the following attracts the dissent procedure, which can result in the corporation being forced to buy the shares of a shareholder at market value?

Which of the following statements about pre-incorporation contracts is false?

A broadly held corporation has fewer restrictions on it than a closely held corporation.

Where a corporation borrows money, only the corporation is responsible for that debt, not the shareholders.

Which of the following situations would allow a shareholder to sue on behalf of the corporation?

A person who participates in the initial setting up of a corporation or who assists the corporation in making a public share offering is known in law as

What are preferred shares?

Managing Your Legal Affairs

Introduction to the Legal System

The Resolution of Disputes: the Courts and Alternatives to Litigation

Intentional Torts and Torts Impacting Business

Negligence, Professional Liability, and Insurance

The Elements of a Contract: Consensus and Consideration

The Elements of a Contract: Capacity, Legality, and Intention

Factors Affecting the Contractual Relationship

The End of the Contractual Relationship

Agency and Partnership

Employment

Intellectual Property

Real and Personal Property and Protection of the Environment

Priority of Creditors

Sales and Consumer Protection

Filters

Exam 11: Corporations

What have been the three distinct methods that are used for the creation of small companies and corporations in Canada?

Discuss the principle of limited liability, why it arises in the law governing corporations, and its significance.

Which two of the following are examples of breaches of fiduciary duty?

What duty to directors owe to creditors?

With regard to the law of corporations, which of the following is true?

Aunt Juliet wants to incorporate a small closely held corporation. Which of the following bits of advice, given to her by friends, is false?

The corporation typically makes a debt commitment to a ________, who then issues shares in the indebtedness to individual bondholders.

Which of the following attracts the dissent procedure, which can result in the corporation being forced to buy the shares of a shareholder at market value?

Which of the following statements about pre-incorporation contracts is false?

A broadly held corporation has fewer restrictions on it than a closely held corporation.

Where a corporation borrows money, only the corporation is responsible for that debt, not the shareholders.

Which of the following situations would allow a shareholder to sue on behalf of the corporation?

A person who participates in the initial setting up of a corporation or who assists the corporation in making a public share offering is known in law as

What are preferred shares?

Managing Your Legal Affairs

Introduction to the Legal System

The Resolution of Disputes: the Courts and Alternatives to Litigation

Intentional Torts and Torts Impacting Business

Negligence, Professional Liability, and Insurance

The Elements of a Contract: Consensus and Consideration

The Elements of a Contract: Capacity, Legality, and Intention

Factors Affecting the Contractual Relationship

The End of the Contractual Relationship

Agency and Partnership

Employment

Intellectual Property

Real and Personal Property and Protection of the Environment

Priority of Creditors

Sales and Consumer Protection

Filters