Question 1

As you have seen in previous chapters,these days it is common in sophisticated contracts to have provisions requiring mandatory mediation or binding arbitration to resolve disputes arising between the parties.As between the majority and minority shareholders of a corporation,who do you think would favour one form of dispute resolution over the other?

Accepted Answer

The answer of As you have seen in previous chapters,these...

Question 2

Which is more preferable: a simple shareholder agreement or a unanimous shareholder agreement? Why?

Accepted Answer

The answer of Which is more preferable: a simple shareholder...

Question 3

A director who fails to act in the best interests of a company is liable in damages to the shareholders.

Accepted Answer

A) True 
 B)False

Question 4

Can a shareholder agreement protect a minority shareholder from oppressive acts of the majority shareholders and,if so,how?

Accepted Answer

The answer of Can a shareholder agreement protect a minority...

Question 5

Which of the following best describes the appraisal remedy?

Accepted Answer

A) the right of the court to grant relief to shareholders who are victims of oppressively unfair actions 
B) the right of an auditor to have access to all the corporation's information 
C) the right of a minority shareholder to apply to the court for a liquidation order 
D) the right of a dissenting shareholder to have his or her shares bought out by the corporation 
E) the right of shareholders to appoint an auditor

Question 6

Claude will be a minority shareholder in a new corporation.All interested parties are now in a meeting to draft the incorporating documents.To protect his rights as a minority shareholder,Claude wants certain provisions included in a well-drafted shareholder's agreement.Which of the following provisions is unnecessary and won't be included in such an agreement?

Accepted Answer

A) the right to participate in management 
B) the unanimous approval of all shareholders 
C) the right to a fair price for her share interest 
D) the right to employment 
E) for the agreement to be included inside the charter

Question 7

Explain how a proxy is used.

Accepted Answer

The answer of Explain how a proxy is used....

Question 8

Generally speaking,the common shares of a minority shareholder will be ordered to be purchased at fair market value by the remaining shareholders who have been found guilty of oppressing him or her.

Accepted Answer

A) True 
 B)False

Question 9

What are pre-emptive rights?

Accepted Answer

A) rights to buy as many shares as are available 
B) rights to send in a proxy statement for any meeting 
C) rights to retain one's proportionate holdings in a firm 
D) rights to vote out any director without cause 
E) rights to vote cumulatively or in blocks

Question 10

A shareholder who is not a director can operate a business that competes with the business of the company in which she or he is a shareholder.

Accepted Answer

A) True 
 B)False

Question 11

A proceeding brought by one or more shareholders in the name of the corporation in respect of a wrong done to the corporation is referred to as

Accepted Answer

A) an oppression action. 
B) a winding-up action. 
C) a derivative action. 
D) an appraisal action. 
E) a negligence action.

Question 12

Martin is a newly elected director of the Alliance Corporation.After being told of what would be expected of him,he is not sure he wants the position.However,upon investigating,he finds out that the only thing he will be liable for is

Accepted Answer

A) employee wages if the corporation becomes insolvent. 
B) to attend all regularly scheduled board of director meetings. 
C) to exercise a high standard of care,diligence,and skill. 
D) to act with the professional standards of a director. 
E) to study items on the agenda before each director's meeting.

Question 13

The CEO of a corporation is

Accepted Answer

A) chosen from the board of directors. 
B) appointed or hired by the board of directors. 
C) hired by the president. 
D) in charge of the board meetings. 
E) elected by the shareholders.

Question 14

Use the fact situation in Q1 to answer the related question that follows. Assume that at the time A,B,and C were making their decision,C also had an interest in Gladstone Inc. ,which he did not disclose to A and B,but that C chose not to take part in the vote.Also assume that when Multi Corp went bankrupt,a receiver was appointed,who sued A,B,and C on behalf of the company.In this case,the receiver will

Accepted Answer

A) succeed against A and B,regardless of whether they were diligent and used the established degree of care. 
B) not succeed against A,B,and C because when A and B voted,they were diligent and used the established degree of care. 
C) not succeed against A,B,and C because there was no breach of fiduciary duty to Multi Corp Ltd. 
D) succeed against C for failure to disclose his interest in Gladstone Inc. 
E) succeed against A,B,and C because directors are jointly and severally liable.

Question 15

Sometimes almost all the directors of a company have interests in a contract.They should

Accepted Answer

A) present the contract to the management for a decision. 
B) vote as a total board of directors. 
C) present the contract to a general meeting of shareholders for their ratification after full disclosure has been made. 
D) gather the remaining independent directors and form a quorum. 
E) vote as a corporate committee of the whole.

Question 16

Directors are responsible for the day-to-day operation of a company's business.

Accepted Answer

A) True 
 B)False

Question 17

Joseph is director of Marttel Inc.The company is thinking about buying some land in which Joseph is part owner.At the board of directors meeting where this is discussed and voted on,Joseph should

Accepted Answer

A) reveal,discuss,and vote on the matter since this is his fiduciary duty. 
B) explain fully of his interests in the land,then vote his conscience. 
C) abstain from voting on the matter since this is a potential conflict of interests. 
D) be silent and refrain from voting on this matter. 
E) graciously be absent from the meeting.

Question 18

Jack is a director of Metallica,a construction corporation.During the course of his work as director of the corporation,Jack learns that the government is about to ask for tenders for the construction of a highway.If Jack resigns from his position as director and then sets up a new corporation that successfully bids for the government contract,he will not be in breach of his duty as a director.

Accepted Answer

A) True 
 B)False

Question 19

A director or officer of a public trading company who uses private information about the company to purchase shares of the company to make a profit is an insider trader.

Accepted Answer

A) True 
 B)False

Question 20

In a small private provincial company where the shareholders are also the directors and officers,does corporate governance really matter?

Accepted Answer

The answer of In a small private provincial company where...

Exam 26: Corporate Governance: the Internal Affairs of Corporations

Which is more preferable: a simple shareholder agreement or a unanimous shareholder agreement? Why?

A director who fails to act in the best interests of a company is liable in damages to the shareholders.

Can a shareholder agreement protect a minority shareholder from oppressive acts of the majority shareholders and,if so,how?

Which of the following best describes the appraisal remedy?

Explain how a proxy is used.

Generally speaking,the common shares of a minority shareholder will be ordered to be purchased at fair market value by the remaining shareholders who have been found guilty of oppressing him or her.

What are pre-emptive rights?

A shareholder who is not a director can operate a business that competes with the business of the company in which she or he is a shareholder.

A proceeding brought by one or more shareholders in the name of the corporation in respect of a wrong done to the corporation is referred to as

Martin is a newly elected director of the Alliance Corporation.After being told of what would be expected of him,he is not sure he wants the position.However,upon investigating,he finds out that the only thing he will be liable for is

The CEO of a corporation is

Sometimes almost all the directors of a company have interests in a contract.They should

Directors are responsible for the day-to-day operation of a company's business.

Joseph is director of Marttel Inc.The company is thinking about buying some land in which Joseph is part owner.At the board of directors meeting where this is discussed and voted on,Joseph should

A director or officer of a public trading company who uses private information about the company to purchase shares of the company to make a profit is an insider trader.

In a small private provincial company where the shareholders are also the directors and officers,does corporate governance really matter?