Question 1

A receivership involves creditors applying to the court to have a receiver appointed to control the business and property of the debtor for their benefit.

Accepted Answer

This statement accurately describes what a receivership is.

Question 2

Any Canadian corporation with outstanding issues of bonds may avail itself of the Companies' Creditors Arrangement Act, rather than make an assignment in bankruptcy under the Bankruptcy and Insolvency Act.

Accepted Answer

The statement is true. Canadian corporations can choose to use the Companies' Creditors Arrangement Act instead of the Bankruptcy and Insolvency Act to deal with outstanding bond issues.

Question 3

Preferred creditors, secured creditors, and unsecured creditors are three basic classes of creditors in a bankruptcy procedure. What is their priority in the proceeding?

Accepted Answer

In bankruptcy proceedings, secured creditors have the highest priority because their claims are backed by specific assets. Preferred creditors, such as employees owed wages, come next. Unsecured creditors have the lowest priority as their claims are not backed by specific assets.

Question 4

Where an act of bankruptcy has occurred under the Bankruptcy and Insolvency Act, who may file a petition for a receiving order?

Accepted Answer

Any creditor may file a petition for a receiving order if an act of bankruptcy has occurred under the Bankruptcy and Insolvency Act. The debtor cannot file for their own receiving order.

Question 5

Which of the following is not a provincial or federally registered financial institution?

Accepted Answer

Money Mart is a payday loan and cheque cashing company, not a registered financial institution. The other options are either provincial or federally registered banks or credit unions.

Question 6

If a court discharges the debtor from bankruptcy without conditions, the creditors may object and request that conditions be imposed.

Accepted Answer

Creditors have the right to object and request conditions to be imposed on the discharge of the debtor from bankruptcy.

Question 7

In which of the following is a chattel given as security by a debtor to a creditor?

Accepted Answer

The answer of In which of the following is a...

Question 8

Which of the following statements is false?

Accepted Answer

Bankruptcy is governed by federal law, specifically the Bankruptcy and Insolvency Act in Canada, not provincial law. Inspectors may be appointed by creditors, but the overarching jurisdiction is federal.

Question 9

You want your new company to move toward cashless transactions. You know that this method has grown enormously in Canada and you feel confident that it will work for you. Which of the following statements is false with respect to cashless transactions?

Accepted Answer

Credit cards are not protected by the Bills of Exchange Act; this act primarily concerns instruments like cheques and drafts, not credit card transactions.

Question 10

Which of the following is not part of the process necessary to create a security interest under the Personal Property Security Act?

Accepted Answer

The debtor does not register the security transaction; it is typically the secured party who registers the security interest to perfect it.

Question 11

Which of the following statements is false?

Accepted Answer

A guarantor does not agree to pay along with the debtor but agrees to pay on behalf of the debtor if the debtor defaults. This is a key distinction in the role of a guarantor.

Question 12

If the court discharges the debtor from bankruptcy without conditions, the creditors must accept the discharge.

Accepted Answer

The answer of If the court discharges the debtor from...

Question 13

Which of the following are not negotiable instruments?

Accepted Answer

A bill of sale is a document that shows the transfer of ownership of goods from one person to another. It is not a negotiable instrument as it cannot be transferred from one person to another by mere delivery. On the other hand, cheques, promissory notes, and certified cheques are all negotiable instruments.

Question 14

Which of the following is not an example of debt financing?

Accepted Answer

Selling preferred shares pursuant to a loan agreement is not an example of debt financing; it is an example of equity financing. Debt financing involves borrowing money that must be repaid, while equity financing involves selling a stake in the company.

Question 15

When a debtor voluntarily gives his property over to a trustee in bankruptcy, this is referred to as a(n)

Accepted Answer

When a debtor voluntarily gives his property over to a trustee in bankruptcy, it is called an assignment into bankruptcy. An act of bankruptcy is a specific action or behavior by a debtor that can trigger involuntary bankruptcy proceedings, while fraudulent preference and fraudulent conveyance refer to actions taken by a debtor to hide or transfer assets in order to avoid creditors.

Question 16

If on bankruptcy the bankrupt's cash account rests at zero, even secured creditors will receive nothing.

Accepted Answer

If the bankrupt's cash account is at zero, there are no funds available to distribute to creditors, even secured creditors.

Question 17

Which of the following is an example of equity financing?

Accepted Answer

Selling preferred shares is an example of equity financing because it involves selling ownership in the company (shares) to investors in exchange for capital. The investors become partial owners of the company and have a claim on its profits and assets. The other options listed involve borrowing money or selling personal property, which are forms of debt financing.

Quiz 11: Banking, Creditors Rights, and Bankruptcy

A receivership involves creditors applying to the court to have a receiver appointed to control the business and property of the debtor for their benefit.

Any Canadian corporation with outstanding issues of bonds may avail itself of the Companies' Creditors Arrangement Act, rather than make an assignment in bankruptcy under the Bankruptcy and Insolvency Act.

Preferred creditors, secured creditors, and unsecured creditors are three basic classes of creditors in a bankruptcy procedure. What is their priority in the proceeding?

Where an act of bankruptcy has occurred under the Bankruptcy and Insolvency Act, who may file a petition for a receiving order?

Which of the following is not a provincial or federally registered financial institution?

If a court discharges the debtor from bankruptcy without conditions, the creditors may object and request that conditions be imposed.

In which of the following is a chattel given as security by a debtor to a creditor?

Which of the following statements is false?

You want your new company to move toward cashless transactions. You know that this method has grown enormously in Canada and you feel confident that it will work for you. Which of the following statements is false with respect to cashless transactions?

Which of the following is not part of the process necessary to create a security interest under the Personal Property Security Act?

Which of the following statements is false?

If the court discharges the debtor from bankruptcy without conditions, the creditors must accept the discharge.

Which of the following are not negotiable instruments?

Which of the following is not an example of debt financing?

When a debtor voluntarily gives his property over to a trustee in bankruptcy, this is referred to as a(n)

If on bankruptcy the bankrupt's cash account rests at zero, even secured creditors will receive nothing.

Which of the following is an example of equity financing?