Question 1

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.

Accepted Answer

A) True 
 B)False

Question 2

Ethan got together with a number of friends who all sat on the Board of Directors of a corporation.They personally disliked Stephen,a minority shareholder with a bad attitude.A new proposal was being put to the Board.While they knew that this was not a measure that was in the best interests of the corporation,they also knew it would seriously weaken Stephen's financial position.Accordingly,they voted in favour of it.Which of the following is true?

Accepted Answer

A)  The directors have breached their fiduciary duty to act in the best interests of the shareholders. 
B)  The directors have breached their fiduciary duty to act in the best interests of the corporation. 
C)  The directors have acted inappropriately, but because Stephen is a minority shareholder, their conduct is not actionable. 
D)  The directors have discretion to act how they see fit, even if it is not generally viewed as professional. 
E)  The directors have breached the Canadian Code of Professional Conduct. 
A)  The directors have breached their fiduciary duty to act in the best interests of the shareholders. 
B)  The directors have breached their fiduciary duty to act in the best interests of the corporation. 
C)  The directors have acted inappropriately, but because Stephen is a minority shareholder, their conduct is not actionable. 
D)  The directors have discretion to act how they see fit, even if it is not generally viewed as professional. 
E)  The directors have breached the Canadian Code of Professional Conduct.

Question 3

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

Accepted Answer

1.Limited liability

Question 4

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 percent 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 percent of the outstanding shares started a business in direct competition with the corporation in which he held shares.

Question 5

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?

Accepted Answer

A)  relief-from-oppression provisions 
B)  pre-emptive right provisions 
C)  derivative-action provisions 
D)  dissent procedure 
E)  indoor-management rule 
A)  relief-from-oppression provisions 
B)  pre-emptive right provisions 
C)  derivative-action provisions 
D)  dissent procedure 
E)  indoor-management rule

Question 6

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?

Accepted Answer

A)  At common law, pre-incorporation contracts are binding on the corporation, but only from the moment the corporation comes into existence. 
B)  Many jurisdictions have recently enacted statutory provisions preventing a corporation from ratifying pre-incorporation contracts. 
C)  Kent may have been able to protect himself by including a provision in the contract with Ace exempting him from personal liability. 
D)  A corporation is legally bound to ratify all contracts made prior to incorporation, but only if those contracts were made with the intention that the corporation be bound. 
E)  Kent's liability on the contract would be limited to his investment in the corporation. 
A)  At common law, pre-incorporation contracts are binding on the corporation, but only from the moment the corporation comes into existence. 
B)  Many jurisdictions have recently enacted statutory provisions preventing a corporation from ratifying pre-incorporation contracts. 
C)  Kent may have been able to protect himself by including a provision in the contract with Ace exempting him from personal liability. 
D)  A corporation is legally bound to ratify all contracts made prior to incorporation, but only if those contracts were made with the intention that the corporation be bound. 
E)  Kent's liability on the contract would be limited to his investment in the corporation.

Question 7

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 8

What is the significance of a corporation being classed as a separate legal entity?

Accepted Answer

As a separate legal person,it

Question 9

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 10

Indicate the main disadvantages to incorporation.

Accepted Answer

Relatively weak posi

Question 11

Usually,a ___________ will bear a promise to pay a specific dividend each year.

Accepted Answer

A)  bond 
B)  par-value share 
C)  preferred share 
D)  debt 
E)  bearer bond 
A)  bond 
B)  par-value share 
C)  preferred share 
D)  debt 
E)  bearer bond

Question 12

Which of the following is not an advantage of incorporation?

Accepted Answer

A)  Shareholders are not liable for debts of the corporation. 
B)  There may be tax advantages. 
C)  Shareholders can veto decisions of directors. 
D)  Shares are easily transferred. 
E)  Shareholders owe no duty to the corporation. 
A)  Shareholders are not liable for debts of the corporation. 
B)  There may be tax advantages. 
C)  Shareholders can veto decisions of directors. 
D)  Shares are easily transferred. 
E)  Shareholders owe no duty to the corporation.

Question 13

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 14

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

Accepted Answer

A) True 
 B)False

Question 15

Shareholders have a right to bring an action against the directors on behalf of the company when the directors fail in their duty to the corporation.

Accepted Answer

A) True 
 B)False

Question 16

Directors owe a fiduciary duty to the public.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Explain why a corporation is referred to as a legal fiction.

Accepted Answer

When a corporation is created

Question 19

Discuss the advantages and disadvantages of incorporation as a method of carrying on business as compared to sole proprietorship and partnership.

Accepted Answer

The main problem with partnership and so

Question 20

In 2011,Rambolin incorporated Rambolin Industries Ltd.and became its sole shareholder.He lent the corporation $10 000 and took a chattel mortgage from the corporation as security for repayment of the loan.He became director,president,and secretary of the corporation.The corporation prospered.Last year,you began supplying the corporation with office supplies.You were paid at the end of each month for supplies delivered during that month.For the last six months,however,you have not been paid.You learn that other suppliers have not been paid either because sales had dropped drastically,apparently due to Rambolin's nasty temper caused by ill health.Which of the following is true?

Accepted Answer

A)  If you decided to sue for the debt, you could sue Rambolin because he is the sole shareholder and his nasty temper caused all the trouble. 
B)  You could take an action under the pre-emptive right provisions under the relevant legislation. 
C)  If Rambolin dies, his corporation would automatically die too, and there wouldn't be any person to sue. 
D)  If this corporation were placed into bankruptcy, Rambolin would be in a better position than you for receiving proceeds realized from the sale of the assets of the corporation. 
E)  Shareholders have a statutory obligation to manage the corporation, so Rambolin, as shareholder, must exercise care in that task. 
A)  If you decided to sue for the debt, you could sue Rambolin because he is the sole shareholder and his nasty temper caused all the trouble. 
B)  You could take an action under the pre-emptive right provisions under the relevant legislation. 
C)  If Rambolin dies, his corporation would automatically die too, and there wouldn't be any person to sue. 
D)  If this corporation were placed into bankruptcy, Rambolin would be in a better position than you for receiving proceeds realized from the sale of the assets of the corporation. 
E)  Shareholders have a statutory obligation to manage the corporation, so Rambolin, as shareholder, must exercise care in that task.

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.

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

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

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?

What is the significance of a corporation being classed as a separate legal entity?

Indicate the main disadvantages to incorporation.

Usually,a ___________ will bear a promise to pay a specific dividend each year.

Which of the following is not an advantage of incorporation?

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

Shareholders have a right to bring an action against the directors on behalf of the company when the directors fail in their duty to the corporation.

Directors owe a fiduciary duty to the public.

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

Explain why a corporation is referred to as a legal fiction.

Discuss the advantages and disadvantages of incorporation as a method of carrying on business as compared to sole proprietorship and partnership.

Managing Your Legal Affairs

Introduction to the Legal System

The Resolution of Disputesthe Courts and Alternatives to Litigation

Intentional Torts and Torts Impacting Business

Negligence, Professional Liability, and Insurance

The Elements of a Contractconsensus and Consideration

The Elements of a Contract capacity, Legality, and Intention

Factors Affecting the Contractual Relationship

The End of the Contractual Relationship

Employment

Agency and Partnership

Real, Personal, and Intellectual Property

Information Technology and the Internet

Sales and Consumer Protection

Priority of Creditors

Filters

Exam 12: Corporations

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.

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

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

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?

What is the significance of a corporation being classed as a separate legal entity?

Indicate the main disadvantages to incorporation.

Usually,a ___________ will bear a promise to pay a specific dividend each year.

Which of the following is not an advantage of incorporation?

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

Shareholders have a right to bring an action against the directors on behalf of the company when the directors fail in their duty to the corporation.

Directors owe a fiduciary duty to the public.

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

Explain why a corporation is referred to as a legal fiction.

Discuss the advantages and disadvantages of incorporation as a method of carrying on business as compared to sole proprietorship and partnership.

Managing Your Legal Affairs

Introduction to the Legal System

The Resolution of Disputesthe Courts and Alternatives to Litigation

Intentional Torts and Torts Impacting Business

Negligence, Professional Liability, and Insurance

The Elements of a Contractconsensus and Consideration

The Elements of a Contract capacity, Legality, and Intention

Factors Affecting the Contractual Relationship

The End of the Contractual Relationship

Employment

Agency and Partnership

Real, Personal, and Intellectual Property

Information Technology and the Internet

Sales and Consumer Protection

Priority of Creditors

Filters