Question 1

The provincial agency that serves as watchdog on the issuance and trading of shares is known as ________.

Accepted Answer

the securi

Question 2

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 true.

Accepted Answer

A)  As a shareholder, you will have the right to vote for the officers of the corporation. 
B)  A shareholder's agreement allows shareholders and not officers to manage the corporation. 
C)  If you each take one-third of the first allotment of the shares, you will necessarily be a minority shareholder, and have no voting rights in electing the directors of the corporation. 
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 officers of the corporation. 
B)  A shareholder's agreement allows shareholders and not officers to manage the corporation. 
C)  If you each take one-third of the first allotment of the shares, you will necessarily be a minority shareholder, and have no voting rights in electing the directors of the corporation. 
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 3

Which of the following is an advantage of incorporation?

Accepted Answer

A)  Shareholders are liable for debts of the corporation. 
B)  There are no tax advantages as compared to a sole proprietorship. 
C)  Shareholders can veto decisions of directors. 
D)  Shares are easily transferred. 
E)  Shareholders owe a duty to the corporation. 
A)  Shareholders are liable for debts of the corporation. 
B)  There are no tax advantages as compared to a sole proprietorship. 
C)  Shareholders can veto decisions of directors. 
D)  Shares are easily transferred. 
E)  Shareholders owe a duty to the corporation.

Question 4

Explain the standard of care that a director must live up to in carrying out his duty towards the corporation.

Accepted Answer

He must exercise the care, dil

Question 5

A share refers to a share interest in the indebtedness of a corporation, often used synonymously with debenture.

Accepted Answer

A) True 
 B)False

Question 6

Indicate the main disadvantages to incorporation.

Accepted Answer

Disadvantages include the rela

Question 7

Shareholders in a closely held corporation can control the rights and responsibilities they have to each other by a unanimous shareholders' agreement.

Accepted Answer

A) True 
 B)False

Question 8

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 9

The directors held their last meeting on December 31 at 4:30 p.m., and it was conducted more like a party than a usual meeting. A director was negligent in signing a promissory note, which cost the corporation $15,000. Furthermore, the director was in breach of his fiduciary duty because the note was paid to a corporation in which he had an interest. Which of the following is true?

Accepted Answer

A)  The shareholders could force the director to pay the $15,000 to the corporation by insisting on their pre-emptive rights. 
B)  If the corporation failed to start an action through its authorized agents (e.g., its directors), no action could be taken because a corporation is merely a legal concept and must act through its authorized agents. 
C)  The proper plaintiffs in the action are the shareholders, under the relief from oppression provision. 
D)  A shareholder could commence an action on behalf of the corporation against the director if he gets the court's permission to do so. 
E)  The shareholders could dissent to this act and force the corporation to buy them out at fair market value. 
A)  The shareholders could force the director to pay the $15,000 to the corporation by insisting on their pre-emptive rights. 
B)  If the corporation failed to start an action through its authorized agents (e.g., its directors), no action could be taken because a corporation is merely a legal concept and must act through its authorized agents. 
C)  The proper plaintiffs in the action are the shareholders, under the relief from oppression provision. 
D)  A shareholder could commence an action on behalf of the corporation against the director if he gets the court's permission to do so. 
E)  The shareholders could dissent to this act and force the corporation to buy them out at fair market value.

Question 10

A debenture creates a creditor/debtor relationship.

Accepted Answer

A) True 
 B)False

Question 11

Which one of the following is an example of breach of fiduciary duty?

Accepted Answer

A)  The directors of the corporation refuse to give a pay raise to the employees although they had not received a pay raise for five years. 
B)  A director profited $120,000 from a contract between the corporation and a firm in which he had an interest after he made full disclosure of his interest to the board of directors and abstained from the vote on the contract. 
C)  An officer of the corporation learned of a business opportunity intended for the corporation and intercepted it for his own benefit. 
D)  The directors refused to declare a dividend, contrary to the request by its preferred shareholders. 
E)  A shareholder owning 2% of the outstanding shares started a business in direct competition with the corporation in which he held shares. 
A)  The directors of the corporation refuse to give a pay raise to the employees although they had not received a pay raise for five years. 
B)  A director profited $120,000 from a contract between the corporation and a firm in which he had an interest after he made full disclosure of his interest to the board of directors and abstained from the vote on the contract. 
C)  An officer of the corporation learned of a business opportunity intended for the corporation and intercepted it for his own benefit. 
D)  The directors refused to declare a dividend, contrary to the request by its preferred shareholders. 
E)  A shareholder owning 2% of the outstanding shares started a business in direct competition with the corporation in which he held shares.

Question 12

How can a corporation be brought to an end?

Accepted Answer

In most jurisdictions, if you

Question 13

Joe was the director of XYZ Corporation, and the corporation was experiencing some financial difficulties. The shareholders had received dividends over the years, and this year insisted that they be paid a similar dividend, despite the fact that the corporation did not have enough reserved funds to pay off its debts. Joe, along with the other directors, complied with this request, and a few months later, the corporation was unable to pay a required payment on a bank loan. What can the bank do in these circumstances?

Accepted Answer

The bank can sue Joe directly

Question 14

When shares are involved, even preferred shares, there is no legal obligation to pay dividends, but a failure to repay ________ constitutes a breach of the corporation's legal obligation.

Accepted Answer

A)  debts 
B)  assets 
C)  bondholders 
D)  shareholders 
E)  par-value shares 
A)  debts 
B)  assets 
C)  bondholders 
D)  shareholders 
E)  par-value shares

Question 15

Andrea agreed to form a corporation with two friends, but lay awake last night rethinking her decision. They agreed that they all wanted to be directors and officers and that they all would have signing authority with the bank from whom the corporation is borrowing the money. Nevertheless, she began to review her assumptions. Which of the following is true?

Accepted Answer

A)  When she signs the promissory note at the bank on behalf of the corporation, she can just sign her own name; she will not be personally liable as long as she intended to sign on behalf of the corporation. 
B)  As a major shareholder, she would be elected as a director every year even without such a provision in the shareholders' agreement. 
C)  She would be able to ask the court for relief from oppression if she disliked a decision passed by the majority of the directors. 
D)  As a shareholder, she is free to compete with the company even if she is a director as well. 
E)  She would be able to bring an action on behalf of the company if one of the directors breached his fiduciary duty to the corporation and the other directors refused to do anything about it. 
A)  When she signs the promissory note at the bank on behalf of the corporation, she can just sign her own name; she will not be personally liable as long as she intended to sign on behalf of the corporation. 
B)  As a major shareholder, she would be elected as a director every year even without such a provision in the shareholders' agreement. 
C)  She would be able to ask the court for relief from oppression if she disliked a decision passed by the majority of the directors. 
D)  As a shareholder, she is free to compete with the company even if she is a director as well. 
E)  She would be able to bring an action on behalf of the company if one of the directors breached his fiduciary duty to the corporation and the other directors refused to do anything about it.

Question 16

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 17

If a corporation had been wronged by negligent and fraudulent acts of one of its directors and consequently suffered a $45,000 loss, and the board of directors would not take any action on behalf of the corporation against the wrongdoer, which of the following is true?

Accepted Answer

A)  The shareholders could force the directors to start the action on the basis of their pre-emptive right. 
B)  If the company failed to commence an action through its authorized agents (e.g., its directors), no action could be taken, because a corporation is merely a legal concept and must act through its authorized agents. 
C)  The shareholder could proceed under the dissent procedure and force the corporation to pay them a fair market value for their shares. 
D)  A derivative action allows a shareholder to commence an action on behalf of the corporation. 
E)  The shareholders could sue the corporation for oppression. 
A)  The shareholders could force the directors to start the action on the basis of their pre-emptive right. 
B)  If the company failed to commence an action through its authorized agents (e.g., its directors), no action could be taken, because a corporation is merely a legal concept and must act through its authorized agents. 
C)  The shareholder could proceed under the dissent procedure and force the corporation to pay them a fair market value for their shares. 
D)  A derivative action allows a shareholder to commence an action on behalf of the corporation. 
E)  The shareholders could sue the corporation for oppression.

Question 18

Indicate three advantages to incorporation.

Accepted Answer

Advantages include limited liability, re

Question 19

Smith, director of ABC Ltd., intercepted a corporate opportunity for his own benefit and thereby caused the corporation to miss a $45,000 profit. A shareholder urged the board of directors to take action against him. The other directors, all close friends of Smith from school days, did not take any action against him, although they did voice their dissatisfaction with his move. Which of the following provisions would aid the shareholder?

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 20

How is incorporation effected in a registration jurisdiction?

Accepted Answer

Memorandum of association and

The provincial agency that serves as watchdog on the issuance and trading of shares is known as ________.

Which of the following is an advantage of incorporation?

Explain the standard of care that a director must live up to in carrying out his duty towards the corporation.

A share refers to a share interest in the indebtedness of a corporation, often used synonymously with debenture.

Indicate the main disadvantages to incorporation.

Shareholders in a closely held corporation can control the rights and responsibilities they have to each other by a unanimous shareholders' agreement.

A debenture creates a creditor/debtor relationship.

Which one of the following is an example of breach of fiduciary duty?

How can a corporation be brought to an end?

When shares are involved, even preferred shares, there is no legal obligation to pay dividends, but a failure to repay ________ constitutes a breach of the corporation's legal obligation.

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?

If a corporation had been wronged by negligent and fraudulent acts of one of its directors and consequently suffered a $45,000 loss, and the board of directors would not take any action on behalf of the corporation against the wrongdoer, which of the following is true?

Indicate three advantages to incorporation.

How is incorporation effected in a registration jurisdiction?

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

The provincial agency that serves as watchdog on the issuance and trading of shares is known as ________.

Which of the following is an advantage of incorporation?

Explain the standard of care that a director must live up to in carrying out his duty towards the corporation.

A share refers to a share interest in the indebtedness of a corporation, often used synonymously with debenture.

Indicate the main disadvantages to incorporation.

Shareholders in a closely held corporation can control the rights and responsibilities they have to each other by a unanimous shareholders' agreement.

A debenture creates a creditor/debtor relationship.

Which one of the following is an example of breach of fiduciary duty?

How can a corporation be brought to an end?

When shares are involved, even preferred shares, there is no legal obligation to pay dividends, but a failure to repay ________ constitutes a breach of the corporation's legal obligation.

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?

If a corporation had been wronged by negligent and fraudulent acts of one of its directors and consequently suffered a $45,000 loss, and the board of directors would not take any action on behalf of the corporation against the wrongdoer, which of the following is true?

Indicate three advantages to incorporation.

How is incorporation effected in a registration jurisdiction?

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