Exam 11: Corporations

In which of the following relationships is a fiduciary duty owed?

A corporation is considered to be a separate legal entity from the shareholders who make it up.

Mr. Malik, an investment counsellor by training, sat on the board of directors of Talbot Enterprises Ltd., a broadly held corporation. During a meeting of the board, he advised the corporation to buy some condominiums given the present soft real estate market. Malik did not disclose that he owned shares in the corporation that owned the property, nor did he disclose that he would be entitled to a commission for every unit he helped sell. When the question was put to the board, he voted for it. Read each of the following statements separately and indicate which is true.

ABC Ltd. is a closely held corporation. Two of the shareholders serve as directors. As directors, they voted to issue themselves more shares to increase their voting control of the corporation. Which of the following provisions would aid the other shareholders?

Explain the power of a minority shareholder in decision-making situations.

One of the most common ways for small, closely held corporations to come to an end is for the principals to simply neglect to file the annual return.

In Salomon v. Salomon & Co., Mr. Salomon incorporated a business to which he loaned money, secured by a mortgage on the business assets. When the business failed, the creditors turned to Mr. Salomon, arguing that he should not be able to claim priority as a secured creditor and, in fact, should be responsible for the company's debts. What did the Court find?

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?

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?

Kent incorporated provincially. The corporation worked with small businesses in developing graphs and charts from their data for presentation to bankers, partners, shareholders, etc. If Kent, as promoter and agent of the company, had bought the necessary equipment from Ace Computers Ltd. prior to incorporation, which of the following would be true?

Art Raskle was an officer, director, and employee of a broadly held corporation. At a directors' meeting, he was surprised but pleased to learn that the corporation was discussing a resolution to contract with the firm of Fielding's Office Supply for $20,000 worth of office equipment. He and a businesswoman had recently bought that business, in which Raskle has a 45% interest. Raskle voted for the contract and the resolution passed without discussion by a vote of 6-0. Several months after completion of the purchase, the other directors learned of Raskle's interest in Fielding's Office Supply and called on him to account to the corporation for any profit made. Which of the following is true?

Explain the nature of the director's duties to the corporation.

Directors owe a fiduciary duty to the corporation.

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

Which of the following is true with regard to the characteristics of corporations?

Mr. Ace of Oink Inc., a closely held corporation, is one of three shareholders. After several years of considerable success, the corporation hit hard times. The other shareholders, Mr. Bane and Mr. Curr, in the best interests of the corporation, voted Mr. Ace out as a director and voted not to renew his employment contract. Upset by these events, Mr. Ace just wanted to sell his interest and leave the corporation. The other two shareholders, however, refused to buy his shares. Furthermore, when he attempted to sell his shares to his brother, who was interested in the corporation, they refused to register the brother as a member. Which of the following is true?

The corporation can also borrow funds, thereby accumulating

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

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

What is a share?