Question 1

A director who fails to act in the best interests of a company is liable in damages to the shareholders.

Accepted Answer

A director who fails to act in the best interests of a company is typically liable to the company itself, not directly to the shareholders, as directors owe their duties to the company.

Question 2

Canadian courts have consistently held that a majority shareholder owes ________ to act for the welfare of the corporation.

Accepted Answer

Canadian courts have consistently held that a majority shareholder owes no positive duty to act for the welfare of the corporation, as their primary obligation is to their own interests, not the corporation's.

Question 3

A shareholder agreement to which a majority of shareholders are parties is referred to as a unanimous shareholder agreement.

Accepted Answer

A unanimous shareholder agreement requires the agreement of all shareholders, not just a majority.

Question 4

Originally,courts did not consider insider trading as harmful to the corporation and so it did not consider it a breach of the fiduciary duty owed to the corporation.

Accepted Answer

Insider trading was not considered harmful to the corporation and thus not a breach of fiduciary duty in the early days of the stock market. It was only later that courts began to recognize the harm caused to other investors and the integrity of the market.

Question 5

A director or officer of a public trading company who uses private information about the company to purchase shares of the company to make a profit is an insider trader.

Accepted Answer

Insider trading refers to the act of using non-public information to buy or sell securities for personal gain. A director or officer of a public trading company who trades based on private information is considered an insider trader.

Question 6

In a small private provincial company where the shareholders are also the directors and officers,does corporate governance really matter?

Accepted Answer

The answer of In a small private provincial company where...

Question 7

A shareholder who is not a director can operate a business that competes with the business of the company in which she or he is a shareholder.

Accepted Answer

As a shareholder, one only owns a portion of the company and does not have any obligations or restrictions on running a business that competes with the company. However, if the shareholder is also a director, there may be conflicts of interest and legal obligations to consider.

Question 8

Directors are appointed by the officers of the corporation.

Accepted Answer

Directors are elected by the shareholders of the corporation, not appointed by the officers.

Question 9

Jack is a director of Metallica,a construction corporation.During the course of his work as director of the corporation,Jack learns that the government is about to ask for tenders for the construction of a highway.If Jack resigns from his position as director and then sets up a new corporation that successfully bids for the government contract,he will not be in breach of his duty as a director.

Accepted Answer

Jack would be in breach of his duty as a director if he uses information obtained through his position for personal gain, even if he resigns before the bid is made. This is a conflict of interest, and directors have a duty to act in the best interest of the corporation they serve.

Question 10

A shareholder who is being pushed out of a company by the other shareholders because they hold a majority of common shares can always use the remedy of a derivative action.

Accepted Answer

A derivative action is a lawsuit brought by a shareholder on behalf of the corporation against a third party, often for breaches of fiduciary duty. It does not directly address disputes between shareholders or the issue of being pushed out by majority shareholders.

Question 11

When a director has a duty to acquire property for the corporation and instead acquires it for herself,she has

Accepted Answer

When a director acquires property meant for the corporation for herself, she has interfered with an opportunity meant for the corporation. As a result, the act constitutes a breach of duty as the director has acted against the interests of the corporation.

Question 12

Notwithstanding legislation designed to impose duties on directors,why do you think that large corporations get away with breaches of duties and even fraud at the level of the directors and controlling shareholders,if any?

Accepted Answer

The answer of Notwithstanding legislation designed to impose duties on...

Question 13

Generally speaking,the common shares of a minority shareholder will be ordered to be purchased at fair market value by the remaining shareholders who have been found guilty of oppressing him or her.

Accepted Answer

This is known as a buyout order, which is a common remedy in oppression cases where the court orders the majority shareholders to buy back the shares of the minority shareholder at fair market value.

Question 14

Can a shareholder agreement protect a minority shareholder from oppressive acts of the majority shareholders and,if so,how?

Accepted Answer

The answer of Can a shareholder agreement protect a minority...

Question 15

An agreement between two or more shareholders that is distinct from the corporation's charters and by-laws is referred to as a shareholder agreement.

Accepted Answer

A shareholder agreement is a separate agreement made between two or more shareholders, which outlines how the shareholders will interact with each other and with the corporation. It is not part of the corporation's by-laws or charters.

Question 16

Directors are responsible for the day-to-day operation of a company's business.

Accepted Answer

While directors do have a significant role in the overall management and direction of a company, it is the executive officers and managers who are typically responsible for the day-to-day operations.

Question 17

Where a controlling group of majority shareholders propose fundamental changes to the corporation,a dissenting shareholder need not go along with the change.She may elect instead to have her shares bought out by the corporation at a fair price.This is referred to as

Accepted Answer

The scenario described is indicative of the appraisal remedy, which allows a dissenting shareholder to have their shares bought out by the corporation at a fair price in the event of a proposed fundamental change to the corporation. Options A and B refer to other types of remedies available to shareholders, while option C relates to a scenario in which all shareholders must agree to a proposed change. Option E refers to a shareholder's right to purchase newly issued shares before they are offered to the public, and is not relevant to this scenario.

Question 18

A director who refuses to disclose his interest in another company at a directors meeting where the purchase of the other business is being voted on has committed a breach of trust.

Accepted Answer

The answer of A director who refuses to disclose his...

Question 19

If a corporation is profitable,directors must declare a dividend to holders of common shares according to their proportionate shareholding.

Accepted Answer

Directors have the discretion to decide whether or not to declare a dividend, even if the corporation is profitable. They may choose to retain earnings for reinvestment in the company or other reasons.

Question 20

When a corporation has suffered an injury,the corporation may sue the wrongdoers to recover its losses.However,if the directors themselves are the wrongdoers,they are not likely to authorize the commencement of any action against themselves.The common law recognizes the right of a minority shareholder to start an action on behalf of the corporation,and this is referred to as

Accepted Answer

The common law recognizes the right of a minority shareholder to start an action on behalf of the corporation, which is referred to as a derivative action. This allows the corporation to recover losses caused by the wrongdoing of directors or officers who themselves may not authorize an action against themselves. The other options mentioned (appraisal action, winding up action, insider action, and locked-in action) are not relevant to this scenario.

Quiz 26: Corporate Governance: the Internal Affairs of Corporations