Question 1

Which of the following would a court most likely require in order to find there is no legal impediment to Marion proceeding to pursue a corporate opportunity declined by the corporation in which she holds a fiduciary position?

Accepted Answer

A court would most likely require a resolution enacted by the corporation's consenting shareholders and directors to find there is no legal impediment to Marion pursuing a corporate opportunity declined by the corporation. This ensures that both the directors and shareholders are aware of and agree to the decision, providing a clear and comprehensive consent that respects the fiduciary duties involved.

Question 2

Which of the following is a distinguishing feature of self-dealing contracts?

Accepted Answer

Self-dealing contracts give rise to conflict-of-interest situations because they involve a party who has a personal interest or relationship with the transaction, which can compromise their ability to act in the best interests of the corporation. Choices A, B, and C are not distinguishing features of self-dealing contracts.

Question 3

A court has examined evidence regarding how clearly an opportunity had been identified by a corporation and how close it was to acquiring the opportunity.What subject was the court seeking to determine?

Accepted Answer

The court is seeking to determine the nature of the corporate opportunity, specifically how clearly it was identified by the corporation and how close it was to acquiring it. This relates directly to the fiduciary duty of loyalty, which requires directors and officers to act in the best interests of the corporation and not seize opportunities for themselves. The other options may be relevant to fiduciary duty in general, but do not specifically pertain to this case.

Question 4

What common law decision provides the leading analysis of the principles underlying the corporate opportunity doctrine?

Accepted Answer

Canadian Aero Service Ltd. v. O’Malley is the leading case that provides an analysis of the corporate opportunity doctrine, establishing principles on fiduciary duties and conflicts of interest.

Question 5

Why is knowing whether directors have been purchasing shares of a corporation a fundamental right belonging to the shareholders of a corporation?

Accepted Answer

The answer of Why is knowing whether directors have been...

Question 6

The exercise of which of the following is required by a duty owed by directors or officers that compares them to a reasonably prudent person in comparable circumstances?

Accepted Answer

The exercise of diligence, skill, and care is required by a duty owed by directors or officers that compares them to a reasonably prudent person in comparable circumstances. The other options include additional elements or slightly different phrasing that do not accurately describe the specific duty mentioned in the question.

Question 7

Of the 1000 issued and outstanding common voting shares of Trunda Adventures Corp.,Isaac holds 501,Marielle holds 250,and Lorenzo holds the remaining 249.Which of the following rests only with Isaac based on this arrangement?

Accepted Answer

The right to control the company rests with the majority shareholder, which in this case is Isaac with 501 shares. He has more than 50% of the voting power and can therefore make decisions that Marielle and Lorenzo cannot oppose. The other options (A, B, and D) are available to all shareholders, regardless of how many shares they hold.

Question 8

What is the legal term for the corporate practice of paying the litigation expenses of officers and directors for lawsuits related to corporate affairs?

Accepted Answer

Indemnification is the legal term for covering the litigation expenses of officers and directors for lawsuits related to their corporate roles.

Question 9

A dispute has arisen among the various factions of shareholders over the proposed change of name of SunEnergy4U Inc.,a publicly traded company.What would a corporate lawyer believe to be important to each of the competing shareholder groups?

Accepted Answer

A corporate lawyer would likely believe that successfully soliciting proxy votes is important to each of the competing shareholder groups. This would allow each group to have a say in the proposed name change and potentially sway the outcome in their favor. The other options (applying the statutory oppression remedy, exercising automatic pre-emptive rights, and applying the shareholders' agreement) may not be directly relevant to the issue at hand.

Question 10

Which of the following is a distinguishing characteristic attributable to common shares?

Accepted Answer

Common shares typically include a right to vote, allowing shareholders to participate in corporate governance decisions.

Question 11

A court is satisfied with plaintiff counsel's efforts to establish that,based on the facts of the matter,the defendant corporation is the agent of its shareholders.In presenting this argument,what legal feat was plaintiff's counsel attempting to accomplish on his client's behalf?

Accepted Answer

By arguing that the defendant corporation is the agent of its shareholders, plaintiff's counsel is attempting to pierce the corporate veil. This legal term refers to the situation where a court disregards the legal separation between a corporation and its owners, and holds the owners personally liable for the corporation's actions. By piercing the corporate veil, the plaintiff could potentially hold the shareholders personally responsible for any damages or debts owed by the corporation.

Question 12

Under what circumstances would a court "lift the corporate veil"?

Accepted Answer

The court may "lift the corporate veil" when the corporation is a "mere facade" concealing the true facts. This typically happens in situations where the corporation is being used as a shield to perpetrate fraud or illegality, or to avoid certain legal obligations. The number of shareholders or whether the corporation's shares are traded on the stock exchange is not relevant. The commission of a criminal offense by a corporation may result in legal consequences, but it does not necessarily entail lifting the corporate veil.

Question 13

What evidence would strongly support a judge's examination of facts and matters giving rise to a question of whether an individual is in breach of a fiduciary duty with respect to an alleged misappropriation of a corporate opportunity?

Accepted Answer

The quantum of knowledge possessed and the factors influencing it are crucial in determining if a breach of fiduciary duty occurred. This includes whether the individual had knowledge of the corporate opportunity and if they used that knowledge for personal gain. The other options may be relevant factors, but alone, they do not provide strong evidence of a breach of fiduciary duty.

Question 14

Why is it important that the Supreme Court of Canada has set law in place allowing creditors to pursue an action based on the obvious and more open-ended duty of care?

Accepted Answer

The answer of Why is it important that the Supreme...

Question 15

Isabella and Emily both attended a recent seminar for directors regarding corporate governance.The seminar focused on the recent departure of certain courts from the traditional shielding of directors from personal liability where their actions were taken in furtherance of their duties to the company and their conduct was justifiable.What type of liability are Emily and Isabella concerned with?

Accepted Answer

The focus of the seminar was on the departure of courts from the traditional shielding of directors from personal liability where their actions were taken in furtherance of their duties to the company and their conduct was justifiable. This suggests that Emily and Isabella are concerned with liability in tort, which involves civil wrongs or injuries caused to another person or their property. Liability in contract relates to breach of contract, statutory offence liability involves breaking laws or regulations set out by the government, and criminal offence liability involves breaking criminal laws.

Question 16

Three directors of a courier business who became aware of a business opportunity resigned and formed their own corporation in order to take advantage of the opportunity.The opportunity turned out to be very lucrative.Which of the following remedies is a court most likely to order in this situation?

Accepted Answer

The court is most likely to order an accounting of profits to be given back to the original courier business, as the three directors used their position to gain an unfair advantage and breach their fiduciary duty to their former employer. This remedy would force them to forfeit the profits gained from the business opportunity back to the original employer. Specific performance and mandamus would not be appropriate remedies in this situation, as the directors have already resigned and formed their own corporation. Lifting of the corporate veil would not be necessary in this case, as the actions of the directors were already in violation of their fiduciary duty, regardless of the corporate structure.

Question 17

Ingel is a director in MIV Inc.,a large,successful software development company.He entered into a contract involving the sale of software he developed to MIV Inc.In law,this is a self-dealing contract.Why is it enforceable?

Accepted Answer

Self-dealing contracts are not inherently unenforceable, but there are certain steps that must be taken to ensure fairness and transparency. One of these steps is providing a written disclosure of the conflict of interest and abstaining from voting on the deal. In this case, Ingel likely followed these steps, making the contract enforceable. Choices A, B, and D are not relevant or accurate explanations for the enforceability of the contract.

Question 18

In BCE v.1976 Debenture Holders,(2008)SCC 69,the court opined that the directors need to treat affected stakeholders fairly,commensurate with the corporation's duties as a responsible corporate citizen.Which of the following is a valid criticism of the Supreme Court's ruling in this matter?

Accepted Answer

The criticism is that the ruling does not provide detailed guidance on what constitutes a corporation's duties as a responsible corporate citizen, leaving ambiguity in its application.

Question 19

In Peoples Department Stores v.Wise (2004),244 DLR (4th)564 (S.C.C.),the court noted that it may be legitimate for directors to consider inter alia the interests of shareholders,employees,suppliers,creditors,consumers,governments,and the environment.How does this ruling affect the fiduciary duty owed by directors to act in the best interests of the corporation?

Accepted Answer

The answer of In Peoples Department Stores v.Wise (2004),244 DLR...

Question 20

Which of the following is NOT normally a source of personal liability for a director of a corporation?

Accepted Answer

Directors are generally not personally liable for contracts entered into by the corporation, as these are obligations of the corporation itself, not the individual directors.

Quiz 16: The Corporate Form: Operational Matters