Exam 12: Corporations

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.

What are "preferred shares"?

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?

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

The promoter of a corporation, called Seymour Holdings Ltd., contracted for $4,000 worth of office furniture "on behalf of Seymour Holdings Ltd.," prior to incorporation. After incorporation, the new directors want to ensure that the corporation is bound. They will be able to do so if

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

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

Discuss and contrast the various methods of financing a corporation. Deal with the advantages and disadvantages of each.

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 chattel mortgage of one of its two delivery trucks as security. You knew Bill at school; therefore, 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.

To whom does the director owe the duty to be careful?

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.

Directors owe a fiduciary duty to the shareholders.

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

When a personal guarantee has been signed by a shareholder, the creditor can demand payment from that shareholder despite the separate legal entity nature of the corporation.

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?

The separate existence of a corporation is said to be a legal myth. Discuss the development of this myth and its value in our society today.

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

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?

Directors owe a fiduciary duty to the public.

Explain why agents are more important when dealing with corporations than they are with partnerships or sole proprietorships.