Question 1

A real estate agent, by virtue of his fiduciary duty to his principal, is not allowed to buy the property being sold by his principal without full disclosure to and consent from his principal. The real estate agent does not want to disclose that he is the buyer of the property, so he forms a corporation and takes an offer to his principal from the corporation. Based on these facts, which of the following is true if the principal finds out the corporation/buyer is owned by the real estate agent and objects to the contract?

Accepted Answer

A)  The court would enforce the contract because the corporation is a separate legal entity in the eyes of the law. 
B)  The court would enforce the contract because this is not a direct breach of the agent's fiduciary duty. 
C)  The court would not enforce the contract and would "lift the corporate veil." 
D)  The court would dissolve the corporation. 
E)  The court would enforce the contract, but the principal would be able to claim any profits from the agent when he took them out of the corporation.

Question 2

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

Question 3

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

Question 4

Which of the following is an advantage of incorporation?

Accepted Answer

A)  Shareholders are liable for debts of the corporation. 
B)  There are no tax advantages as compared to a sole proprietorship. 
C)  Shareholders can veto decisions of directors. 
D)  Shares are easily transferred. 
E)  Shareholders owe a duty to the corporation.

Question 5

How can a corporation be brought to an end?

Accepted Answer

The answer of How can a corporation be brought to...

Question 6

Which of the following is true with regard to the characteristics of corporations?

Accepted Answer

A)  The corporation is a separate legal person, but can neither sue nor be sued. 
B)  Directors are responsible for the shareholders of the corporation. 
C)  Shareholders are liable for the debts and other obligations of the corporation. 
D)  A shareholder's liability is limited to the amount he or she paid for the shares. 
E)  The shareholders would be vicariously liable for any damage caused by an employee of the corporation carrying out his or her duties.

Question 7

Punam was the director of a broadly held corporation that made educational software. Without the knowledge or consent of the board of directors, Punam started a competing business that she ran from home. Which of the following is true?

Accepted Answer

A)  Punam has breached a fiduciary duty owed to the corporation. 
B)  Punam is only a director, so she owes no special duty to the corporation. 
C)  Punam can compete with the business, as long as she doesn't use confidential documents belonging to the corporation. 
D)  Punam owes the shareholders of the corporation a fiduciary duty, so they could sue her if they suffer a loss. 
E)  Whether or not Punam can compete with the business depends on whether her written contract prohibits it.

Question 8

A securities commission is

Accepted Answer

A)  a provincial agency that serves as watchdog on the issuance and trading of shares. 
B)  a collateral right to debt. 
C)  a fee or percentage allowed to a shareholder in a share transaction. 
D)  an authorization to exchange confidential information. 
E)  a permission to transfer shares in a closely held company.

Question 9

In Peoples Department Stores Inc. et al. v. Wise et al., the Supreme Court of Canada had to clarify to whom a director owes its duties. What did the Court hold?

Accepted Answer

A)  A fiduciary duty is owed only to the corporation, while a duty of care can also be owed to 3other stakeholders. 
B)  A duty of care is owed only to the company, while a fiduciary duty can also be owed to other stakeholders. 
C)  A fiduciary duty is owed to the company and to other stakeholders. 
D)  A fiduciary duty is owed only to creditors, while a duty of care can also be owed to other stakeholders. 
E)  A duty of care is owed only to creditors, while a fiduciary duty can also be owed to other stakeholders.

Question 10

A corporation does not die but may be dissolved.

Accepted Answer

A) True 
 B)False

Exam 11: Corporations