Question 1

The greatest control over the acts of a corporation may be exercised by

Accepted Answer

The board of directors is responsible for making major decisions for a corporation and has the greatest control over its acts. While shareholders have a vote in certain matters, the board holds significant power in terms of setting corporate policies, appointing executives, and making strategic decisions. Preferred shareholders may have certain rights, but they typically do not have the same voting power as common shareholders. Bond holders also have limited power and influence over a corporation's day-to-day operations.

Question 2

A third-party businessperson must be most careful when dealing with

Accepted Answer

B

Question 3

What does the business judgment rule mean?

Accepted Answer

E

Question 4

If a shareholder believes that he or she suffered loss as a result of a failure of the directors to do their duty,

Accepted Answer

The shareholder must bring a derivative action. This allows the shareholder to sue on behalf of the corporation, as the harm suffered is to the corporation as a whole rather than just the individual shareholder. The action is brought against the directors, who are alleged to have breached their duty to the corporation.

Question 5

Under corporation law, a person elected by the shareholders of a corporation to manage its affairs is known as a

Accepted Answer

A director is a person elected by the shareholders of a corporation to manage its affairs. Shareholders own a portion of the corporation, officers are appointed by the board of directors to run the day-to-day operations, partners are individuals who co-own a business, and the CEO is a specific officer position responsible for leading the corporation.

Question 6

Braun was a director of Cable Shipping Ltd., a corporation which leased a large wharf from Valdez. Braun gave instructions to the person in charge of the wharf that the S.S. Cambridge would be using the wharf to unload its cargo. The S.S. Cambridge damaged the wharf on its arrival, and the wharf owner brought an action against Cable Shipping Ltd. for repairs. If Cable Shipping Ltd. was the ship owner, it would be liable for the damage.

Accepted Answer

As the entity responsible for the operation and activities at the wharf, including the decision to allow the S.S. Cambridge to use the facility, Cable Shipping Ltd. would be liable for damages caused by the ship if they were the ship owner, under principles of vicarious liability and responsibility for the actions of the entities under their control or direction.

Question 7

A corporation may exempt itself from audit only if

Accepted Answer

A corporation may exempt itself from audit only if all the shareholders agree. This is outlined under the Companies Act, which allows for a small or dormant company to be exempt from audit if certain conditions are met, one of which being the agreement of all shareholders.

Question 8

The Quebec Charter of the French Language (Articles 63 and 64) requires corporations to utilize the French version of their name within the province. Translations may be offered

Accepted Answer

The Quebec Charter of the French Language requires corporations to utilize the French version of their name within the province, but translations may be offered in a less predominant typeface. This means that the French version of the name should be the most prominent and easily identifiable, while any translations can be in smaller or less bold typeface.

Question 9

Directors have a personal liability for all of the following except

Accepted Answer

Directors do have personal liability for losses from a corporate ultra vires act, failure to make filings under corporate legislation, employee wages outstanding on bankruptcy, and dividends that impair the corporate capital. Therefore, none of the responses are correct.

Question 10

Where a shareholder believes that a director has acted improperly as against the interests of the corporation, he or she will commence

Accepted Answer

A derivative action is a lawsuit brought by a shareholder on behalf of the corporation, typically against a director or officer alleged to have violated their duties to the corporation. This allows the shareholder to hold the director accountable for any harm incurred by the corporation due to the director's actions. Rectification actions seek to correct errors in a legal document or contract; dissolution actions seek to dissolve the corporation entirely; prejudicial relief actions seek to prevent further harm to the corporation caused by a particular shareholder; and ultra vires declaration actions challenge actions taken by the corporation that are beyond its legal authority.

Question 11

ABC company is insolvent. It has two employees to which it owes $7,000 in wages for the last month, owes Canada Revenue Agency $15,000 and the Bank of Winnipeg $20,000. Jill is the sole director. What is her personal liability

Accepted Answer

The answer of ABC company is insolvent. It has two...

Question 12

Where a director's acts are in violation of his duty of loyalty to the corporation, the most likely principle to be applied is the

Accepted Answer

The doctrine of corporate opportunity holds that a director or officer breaches his duty of loyalty to the corporation if he takes personal advantage of an opportunity that rightfully belongs to the corporation. This doctrine is most relevant when a director divert corporate resources or use corporate information to benefit himself or his affiliates.

Question 13

Susan, Alice and Wanda are shareholders in Flip Flop and Fly, a children's yoga store. Each own 33% of the shares. Susan and Alice have decided they no longer want to work with Wanda. They sell all of the corporate assets to Bendy Girl Ltd. Does Wanda have any rights?

Accepted Answer

The answer of Susan, Alice and Wanda are shareholders in...

Question 14

A person may rely on the acts of the officers of a corporation without inquiry by virtue of

Accepted Answer

The indoor management rule is a principle of company law which states that persons dealing with a company having satisfied themselves that the proposed transaction is not in its nature inconsistent with the memorandum of association and articles of association, will not be affected by irregularities that may occur with regard to the internal management of the company. This means that a person can rely on the acts of officers of the corporation without inquiry, as long as they have made reasonable efforts to ensure that the proposed transaction is consistent with the rules of the company.

Question 15

The priorities of corporate security are usually

Accepted Answer

The correct priority for corporate security typically places fixed charges over floating charges because fixed charges are secured by specific assets, making them safer for lenders. Mortgage bonds, which are secured by real property, generally have preference over debentures, which are unsecured.

Question 16

ABC Oil Company Ltd. owns 40 oil wells, 4 have potential environmental liability resulting from contamination. DEF Oil Company Ltd. wants to acquire ABC. Should it purchase assets or shares?

Accepted Answer

The answer of ABC Oil Company Ltd. owns 40 oil...

Question 17

Braun was a director of Cable Shipping Ltd., a corporation which leased a large wharf from Valdez. Braun gave instructions to the person in charge of the wharf that the S.S. Cambridge would be using the wharf to unload its cargo. The S.S. Cambridge damaged the wharf on its arrival, and the wharf owner brought an action against Cable Shipping Ltd. for repairs. Braun would be personally liable to Valdez for the damage, because he gave permission for the corporation's ship to use the wharf.

Accepted Answer

The answer of Braun was a director of Cable Shipping...

Question 18

Why is the U.S. Sarbanes-Oxley Act a factor in Canadian business?

Accepted Answer

The Sarbanes-Oxley Act affects Canadian businesses because it applies to U.S. firms with Canadian subsidiaries, Canadian firms trading in U.S. markets, and those subject to U.S. reporting requirements.

Question 19

Ali and Tom are both shareholders in ABC Electrical Ltd. Ali has 51% of the shares and Tom has 49%. Ali is offered $100,000 to sell his shares to DEF Electrical Ltd. Tom is not offered anything for his shares. Does Tom have any rights?

Accepted Answer

Tom may have contractual rights under a shareholders' agreement, which could include provisions regarding the sale of shares and the rights of minority shareholders. Additionally, Tom may have statutory rights under the oppression remedy, which allows minority shareholders to seek relief from oppressive or unfair treatment by the majority shareholders. In this case, Ali's sale of his shares for a substantial amount without offering anything to Tom could be considered oppressive. Therefore, Tom may have both contractual and statutory rights in this situation.

Question 20

Those persons legally responsible for the execution of management of a corporation are

Accepted Answer

The answer of Those persons legally responsible for the execution...

Quiz 17: Corporation Law