Question 1

The first directors of a corporation hold office until the first meeting of the board of directors.

Accepted Answer

The first directors of a corporation typically hold office until the first annual meeting of shareholders, not just the first meeting of the board of directors.

Question 2

The first directors of a corporation hold office until the first meeting of the shareholders of the corporation.

Accepted Answer

This is in accordance with most state and federal laws governing corporations. At the first meeting of the shareholders, a board of directors will be elected to serve until the next annual meeting of the corporation's shareholders.

Question 3

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

Accepted Answer

Profitable corporations are not required to declare dividends to holders of common shares. The decision to declare a dividend is up to the discretion of the board of directors. They may choose to reinvest profits into the company, pay down debt, or hold onto cash reserves instead of distributing dividends.

Question 4

Regarding financial rights, shareholders have a right to

Accepted Answer

Shareholders have the right to receive dividends when declared by the corporation. Dividends are not guaranteed and depend on the financial health of the company and the decision of the board of directors. While different classes of shareholders may have different preferences in the event of the company's liquidation, once dividends are declared, they are typically paid to all shareholders equally. Shareholders do not have a right to discriminate in the payment of dividends or to expect capital appreciation as a result of retained earnings.

Question 5

The decision- making function of the corporation is undertaken by the directors of the corporation.

Accepted Answer

The directors are responsible for making decisions for the corporation, including setting policies and goals, allocating resources, and making major business decisions.

Question 6

Claude will be a minority shareholder in a new corporation. All interested parties are now in a meeting to draft the incorporating documents. To protect his rights as a minority shareholder, Claude wants certain provisions included in a well drafted shareholder's agreement. Which of the following provisions is unnecessary and won't be included in such an agreement?

Accepted Answer

The answer of Claude will be a minority shareholder in...

Question 7

One of the duties owed by directors to the corporation is that a director must not take an opportunity belonging to the corporation.

Accepted Answer

This duty is known as the duty of loyalty, and it requires directors to act in the best interests of the corporation and to avoid taking opportunities that rightfully belong to the corporation. This duty is designed to prevent directors from using their position for personal gain at the expense of the corporation.

Question 8

If a corporation is insolvent, directors can be held strictly liable to employees of the corporation for a certain amount of unpaid wages.

Accepted Answer

This is true. Directors can be held personally liable for unpaid wages owed to employees if the corporation is insolvent. This is known as "directors' liability for unpaid wages."

Question 9

Which of the following statements is INCORRECT?

Accepted Answer

Shareholders of a corporation can vote for the election of directors not only in person at the shareholders' meeting but also by proxy or absentee ballot.

Question 10

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, 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 to unfairly benefit himself or a related party. This is known as insider trading and is illegal. Jack would also be creating a conflict of interest by bidding for the government contract while still serving as a director of Metallica.

Question 11

Unlike some U.S. courts, Canadian courts have consistently held that a controlling shareholder owes to act for the benefit of the corporation and to act for the benefit of the shareholders.

Accepted Answer

The answer of Unlike some U.S. courts, Canadian courts have...

Question 12

There is no legal distinction between the business and affairs of the corporation.

Accepted Answer

Corporations are separate legal entities from their owners, meaning there is a legal distinction between the business and personal affairs of the corporation.

Question 13

The decision- making function of the corporation is undertaken by the officers of the corporation.

Accepted Answer

The decision-making function of a corporation is primarily undertaken by the board of directors, while officers execute the decisions and manage day-to-day operations.

Question 14

The is quickly becoming the most widely used shareholder remedy in Canada.

Accepted Answer

The oppression remedy is increasingly being used as the most widely used shareholder remedy in Canada. This remedy allows a shareholder to seek relief from the court when the affairs of the corporation are being conducted in a manner that is oppressive or unfairly prejudicial to their interests. It has proven to be an effective tool for shareholders to hold boards and management accountable for their actions.

Question 15

What are pre- emptive rights?

Accepted Answer

Pre-emptive rights refer to the rights of existing shareholders to maintain their proportionate ownership in a company by having the first opportunity to purchase new shares when they are issued. This is done to prevent dilution of ownership and maintain control. Therefore, the correct answer is D) rights to retain their proportionate holdings in a firm. Choices A, B, C, and E are unrelated to pre-emptive rights.

Question 16

The winding up (the dissolution) of a corporation can be required by a court in order to rescue a

Accepted Answer

A court may order the winding up of a corporation to rescue a locked-in shareholder who cannot sell their shares and is unable to exit the corporation, ensuring fairness and protection of their investment.

Question 17

The only "document of record" the company need NOT allow access to by the shareholders is

Accepted Answer

As per the Companies Act, the shareholders have the right to inspect and obtain copies of various records such as register of directors, company charter, special resolutions, and register of transfers of shares. However, the minute books of board of directors' meetings are exempted from this and the company is not obligated to provide access to them. This is because board meetings often involve confidential discussions and decisions that should not be shared with shareholders or the public.

Question 18

The most important disclosure by a corporation is its financial statements. To assist in the analysis and evaluation of the annual financial statement the statutes provide for the appointment by the shareholders of

Accepted Answer

The appointment of an independent auditor is required by statutes to assist in the analysis and evaluation of the corporation's financial statements. The auditor ensures that the financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and presents an opinion on their accuracy and fairness. This is a crucial step in maintaining transparency and trust with shareholders and other stakeholders. The other choices listed are not typically involved in the audit process.

Question 19

Which of the following best describes the appraisal remedy?

Accepted Answer

The appraisal remedy refers to the right of a dissenting shareholder to have his or her shares bought out by the corporation at a fair market value determined by the court. This remedy is available in certain situations, such as when the corporation is involved in a merger or consolidation, and the shareholder dissents from the transaction. It allows the dissenting shareholder to receive fair compensation for their shares and exit the company.

Question 20

Which of the following is NOT a statutory safeguard when considering disclosure?

Accepted Answer

Pre-emptive rights are not relevant to disclosure as they refer to the rights of shareholders to maintain their ownership percentage in the company by being given the opportunity to buy new shares before they are offered to others. The other options listed are all statutory safeguards that can affect disclosure.

Quiz 28: The Internal Affairs of Corporations