Question 1

"In modern business practice, the shareholders of a corporation own that corporation." Explain the accuracy of that statement.

Accepted Answer

A corporation is a separate legal person

Question 2

A director can be held responsible for unpaid taxes, wages, and environmental harm.

Accepted Answer

A) True 
 B)False

Question 3

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 4

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

Accepted Answer

As a separate legal person, it

Question 5

Explain under what circumstances a shareholder's right to sue against oppression arises.

Accepted Answer

Where the directors of the corporation m

Question 6

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

Accepted Answer

When a corporation is created

Question 7

What duty to directors owe to creditors?

Accepted Answer

A director owes a duty of care

Question 8

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 9

Explain what is meant by a preferred share.

Accepted Answer

A preferred share is one where special r

Question 10

Where preemptive rights exist, existing shareholders must be offered their proportionate share of any new allotment of shares before the shares are offered to anyone else.

Accepted Answer

A) True 
 B)False

Question 11

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)  If you have preemptive 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. 
B)  As a shareholder, you will have the right to vote for the officers of 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)  A shareholder's agreement allows shareholders and not officers to manage 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)  If you have preemptive 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. 
B)  As a shareholder, you will have the right to vote for the officers of 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)  A shareholder's agreement allows shareholders and not officers to manage 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 12

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

Accepted Answer

A)  A promoter of a corporation sold property to the corporation for four 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. 
B)  A partner in a firm learned of a business forced to sell some heavy equipment. Although the partnership could have used the equipment, he bought and sold it at a substantial profit before the partnership was given a chance to buy it. 
C)  The directors of the corporation, contrary to the request by the shareholders, refused to declare dividends. 
D)  A shareholder of ABC Ltd., a trucking corporation whose shares are listed on the Vancouver Stock Exchange, is working as an employee for ABC Ltd.'s competitor, Jonstone Trucking. 
E)  A shareholder of a corporation voted in favour of an acquisition by the corporation at the annual general meeting because he secretly had an interest in the corporation being purchased. 
A)  A promoter of a corporation sold property to the corporation for four 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. 
B)  A partner in a firm learned of a business forced to sell some heavy equipment. Although the partnership could have used the equipment, he bought and sold it at a substantial profit before the partnership was given a chance to buy it. 
C)  The directors of the corporation, contrary to the request by the shareholders, refused to declare dividends. 
D)  A shareholder of ABC Ltd., a trucking corporation whose shares are listed on the Vancouver Stock Exchange, is working as an employee for ABC Ltd.'s competitor, Jonstone Trucking. 
E)  A shareholder of a corporation voted in favour of an acquisition by the corporation at the annual general meeting because he secretly had an interest in the corporation being purchased.

Question 13

An agent owes a fiduciary duty to his principal; a director owes a fiduciary duty to the corporation; partners owe a fiduciary duty to the firm and to the other parties. Which of the following is not true with regard to one's fiduciary duty?

Accepted Answer

A)  A shareholder owning a business that secretly competes with the corporation is in breach of fiduciary duty. 
B)  An agent failing to disclose to his principal all information relating to the principal's business transaction would be a breach of his fiduciary duty. 
C)  A partner secretly competing with his own firm would be in breach of his fiduciary duty. 
D)  An agent would be in breach of his fiduciary duty if he let his interest conflict with his duty. 
E)  A fiduciary is in a position of trust and owes true loyalty to the person depending on him. 
A)  A shareholder owning a business that secretly competes with the corporation is in breach of fiduciary duty. 
B)  An agent failing to disclose to his principal all information relating to the principal's business transaction would be a breach of his fiduciary duty. 
C)  A partner secretly competing with his own firm would be in breach of his fiduciary duty. 
D)  An agent would be in breach of his fiduciary duty if he let his interest conflict with his duty. 
E)  A fiduciary is in a position of trust and owes true loyalty to the person depending on him.

Question 14

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

Question 15

Discuss the concept of promoters, their duties, and their role in the corporate form.

Accepted Answer

A promoter is a person who participates

Question 16

Discuss the process of incorporation in your jurisdiction, including practical tips for maximizing the
advantages offered by this form of business organization.

Accepted Answer

Students should begin by outlining the p

Question 17

Your friend Harry became wealthy through the tremendous success of a gadget he designed that allowed micro-chips to be produced without being touched by humans. He has been invited to sit on the board of directors of different corporations. He is aware of the increasing number of cases finding directors personally liable. He does not want to be connected with a corporation involved with any wrong-doing. He has hired you to prepare in-depth reports on five corporations. Your reports reveal the following. In which of these is there no legal wrong?

Accepted Answer

A)  1999872 Canada Ltd.: A minority shareholder joined with a group that protested the corporation's involvement in a logging operation and tried to prevent the planned logging. 
B)  123456 Canada Ltd.: In a closely held corporation with four members, each owning 25% of the outstanding shares, the two members who served as directors voted to issue more shares, which they sold directly to themselves to give them voting control of the corporation, despite a provision providing for preemptive rights in a shareholders agreement. 
C)  3721956 Canada Ltd.: The majority of the directors voted on a measure that was not in the best interest of the corporation, but that would financially weaken the position of a shareholder whom they personally disliked. 
D)  167354 Canada Ltd.: A director who learned of a business opportunity while serving on the board of directors intercepted the opportunity for himself before the company could act on it. 
E)  12376252 Canada Ltd.: In this broadly held computer software corporation, a director, without the knowledge or consent of the board of directors, started a competing business that he ran from his home. 
A)  1999872 Canada Ltd.: A minority shareholder joined with a group that protested the corporation's involvement in a logging operation and tried to prevent the planned logging. 
B)  123456 Canada Ltd.: In a closely held corporation with four members, each owning 25% of the outstanding shares, the two members who served as directors voted to issue more shares, which they sold directly to themselves to give them voting control of the corporation, despite a provision providing for preemptive rights in a shareholders agreement. 
C)  3721956 Canada Ltd.: The majority of the directors voted on a measure that was not in the best interest of the corporation, but that would financially weaken the position of a shareholder whom they personally disliked. 
D)  167354 Canada Ltd.: A director who learned of a business opportunity while serving on the board of directors intercepted the opportunity for himself before the company could act on it. 
E)  12376252 Canada Ltd.: In this broadly held computer software corporation, a director, without the knowledge or consent of the board of directors, started a competing business that he ran from his home.

Question 18

Mark wants to incorporate. Which one of the following statements is correct with regard to incorporating in Nova Scotia?

Accepted Answer

A)  These are "letters patent" jurisdictions. 
B)  The documents to be sent to the registrar of companies are called the "memorandum" and the "articles." 
C)  You can't incorporate a closely held company in these jurisdictions. 
D)  The "objects" of the company must be set out in the charter document so that the shareholders understand the limits on the capacity of the corporation. 
E)  Articles of incorporation is the document used to incorporate the company. 
A)  These are "letters patent" jurisdictions. 
B)  The documents to be sent to the registrar of companies are called the "memorandum" and the "articles." 
C)  You can't incorporate a closely held company in these jurisdictions. 
D)  The "objects" of the company must be set out in the charter document so that the shareholders understand the limits on the capacity of the corporation. 
E)  Articles of incorporation is the document used to incorporate the company.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Indicate the main disadvantages to incorporation.

Accepted Answer

Relatively weak posi

"In modern business practice, the shareholders of a corporation own that corporation." Explain the accuracy of that statement.

A director can be held responsible for unpaid taxes, wages, and environmental harm.

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

Explain under what circumstances a shareholder's right to sue against oppression arises.

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

What duty to directors owe to creditors?

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.

Explain what is meant by a preferred share.

Where preemptive rights exist, existing shareholders must be offered their proportionate share of any new allotment of shares before the shares are offered to anyone else.

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

An agent owes a fiduciary duty to his principal; a director owes a fiduciary duty to the corporation; partners owe a fiduciary duty to the firm and to the other parties. Which of the following is not true with regard to one's fiduciary duty?

Discuss the concept of promoters, their duties, and their role in the corporate form.

Discuss the process of incorporation in your jurisdiction, including practical tips for maximizing the advantages offered by this form of business organization.

Mark wants to incorporate. Which one of the following statements is correct with regard to incorporating in Nova Scotia?

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

Indicate the main disadvantages to incorporation.

Managing Your Legal Affairs

Introduction to the Legal System

The Resolution of Disputes the Courts and Alternatives to Litigation

Intentional Torts

Negligence, Professional Liability, and Insurance Law

Formation of Contracts

Formation of Contracts Continued

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

"In modern business practice, the shareholders of a corporation own that corporation." Explain the accuracy of that statement.

A director can be held responsible for unpaid taxes, wages, and environmental harm.

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

Explain under what circumstances a shareholder's right to sue against oppression arises.

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

What duty to directors owe to creditors?

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.

Explain what is meant by a preferred share.

Where preemptive rights exist, existing shareholders must be offered their proportionate share of any new allotment of shares before the shares are offered to anyone else.

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

An agent owes a fiduciary duty to his principal; a director owes a fiduciary duty to the corporation; partners owe a fiduciary duty to the firm and to the other parties. Which of the following is not true with regard to one's fiduciary duty?

Discuss the concept of promoters, their duties, and their role in the corporate form.

Discuss the process of incorporation in your jurisdiction, including practical tips for maximizing the advantages offered by this form of business organization.

Mark wants to incorporate. Which one of the following statements is correct with regard to incorporating in Nova Scotia?

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

Indicate the main disadvantages to incorporation.

Managing Your Legal Affairs

Introduction to the Legal System

The Resolution of Disputes the Courts and Alternatives to Litigation

Intentional Torts

Negligence, Professional Liability, and Insurance Law

Formation of Contracts

Formation of Contracts Continued

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