Question 1

It is common practice in Canada and the United States to put a value on the share, making it a par-value share.

Accepted Answer

A) True 
 B)False

Question 2

Read each of the following separately. In which one of the following cases would the corporation not be bound by the contract made?

Accepted Answer

A)  Jones, without the knowledge or authorization of Corporation A, approached one of their suppliers claiming to be an employee of Corporation A. He selected several valuable watches and took them with him, putting the bill on Corporation A's account. No one in Corporation A had ever heard of Jones before. 
B)  Contrary to company policy, Gore, the purchasing agent for the corporation, contracted for supplies by using the green form instead of using the blue form. 
C)  Brian, a purchasing agent for the corporation for ten years, was fired for just cause. The next day, he visited suppliers as usual and contracted for the corporation as usual. They had not been told that he had been fired. 
D)  Kim, an agent for a small closely held corporation which sold Canadian art, had authority to purchase some photographs of Clayoquot Sound, but instead she bought several oil paintings of the sea. When they were sent to the store, they were sold immediately. 
E)  A salesperson working for a corporation operating a car dealership sold a car and took a trade-in without first getting approval of the manager as required in his employment contract.

Question 3

A share refers to a share interest in the indebtedness of a corporation, often used synonymously with debenture.

Accepted Answer

A) True 
 B)False

Question 4

Preferred shareholders usually get preference when dividends are declared but no vote.

Accepted Answer

A) True 
 B)False

Question 5

When a closely held corporation is involved, it is common to include no restrictions on the transfer or sale of the shares.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

The answer of Discuss the advantages and disadvantages of incorporation...

Question 7

There is one common method of creating corporations used across Canada.

Accepted Answer

A) True 
 B)False

Question 8

To what does "franchising" refer?

Accepted Answer

The answer of To what does "franchising" refer?...

Question 9

John and two friends incorporated a closely held corporation. Each bought an equal number of common shares in the corporation. Each became a director, an officer, and an authorized agent of the corporation. Which of the following is true?

Accepted Answer

A)  As director, each owes a fiduciary duty to the creditors of the corporation. 
B)  The corporation is more highly regulated and less free of government regulations and control than a broadly held corporation would be. 
C)  Each of them, as directors, owe a fiduciary duty to each of the others, as shareholders. 
D)  Since the corporation is a legal fiction, all of its activities must be carried out through principals. 
E)  If the affairs of the corporation are being conducted in a manner that is unfairly prejudicial to any one shareholder, that shareholder could seek relief from such oppression from the courts.

Question 10

Indicate the main disadvantages to incorporation.

Accepted Answer

The answer of Indicate the main disadvantages to incorporation....

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

Question 12

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?

Accepted Answer

A)  Because of statutory pre-emptive right provisions, if Ace wants out, the other shareholders must buy him out. 
B)  Mr. Ace could sue the corporation for breach of its fiduciary duty. 
C)  The court would "lift the corporate veil" because Mr. Bane and Mr. Curr were hiding behind the corporation to commit a fraud. 
D)  Mr. Ace can sell his shares to whomever he choses and the remaining shareholders must register the new owner. 
E)  Mr. Ace could have avoided such a dilemma through provisions of a unanimous shareholders' agreement.

Question 13

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

Accepted Answer

The answer of Explain under what circumstances a shareholder's right...

Question 14

Explain the standard of care that a director must live up to in carrying out his duty towards the corporation.

Accepted Answer

The answer of Explain the standard of care that a...

Question 15

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

Accepted Answer

The answer of Discuss the process of incorporation in your...

Question 16

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

Accepted Answer

The answer of Explain why agents are more important when...

Question 17

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?

Accepted Answer

A)  The shareholders could force the directors to start the action on the basis of their pre-emptive right. 
B)  If the company failed to commence 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 shareholder could proceed under the dissent procedure and force the corporation to pay them a fair market value for their shares. 
D)  A derivative action allows a shareholder to commence an action on behalf of the corporation. 
E)  The shareholders could sue the corporation for oppression.

Question 18

Explain the concept of a promoter.

Accepted Answer

The answer of Explain the concept of a promoter....

Question 19

The corporation can also borrow funds, thereby accumulating

Accepted Answer

A)  shares. 
B)  debt. 
C)  bonds. 
D)  assets. 
E)  trustees.

Question 20

What does it mean to be a broadly held corporation?

Accepted Answer

The answer of What does it mean to be a...

Exam 11: Corporations

It is common practice in Canada and the United States to put a value on the share, making it a par-value share.

Read each of the following separately. In which one of the following cases would the corporation not be bound by the contract made?

A share refers to a share interest in the indebtedness of a corporation, often used synonymously with debenture.

Preferred shareholders usually get preference when dividends are declared but no vote.

When a closely held corporation is involved, it is common to include no restrictions on the transfer or sale of the shares.

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

There is one common method of creating corporations used across Canada.

To what does "franchising" refer?

John and two friends incorporated a closely held corporation. Each bought an equal number of common shares in the corporation. Each became a director, an officer, and an authorized agent of the corporation. Which of the following is true?

Indicate the main disadvantages to incorporation.

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

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

Explain the standard of care that a director must live up to in carrying out his duty towards the corporation.

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

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

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?

Explain the concept of a promoter.

The corporation can also borrow funds, thereby accumulating

What does it mean to be a broadly held corporation?