Question 1

The board of directors of a corporation is charged with the management functions,including policy development,and is answerable directly to the shareholders,who may vote them out of office should they perform poorly.

Accepted Answer

The board of directors is responsible for overseeing the management of a corporation, including policy development, and is accountable to the shareholders, who have the power to remove them through voting if they are dissatisfied with their performance.

Question 2

Prior to incorporation,directors are required to hold an organizational meeting to complete the incorporation documents and make bylaws,which are the rules specifying the day to day operating procedures of a corporation.

Accepted Answer

The organizational meeting to complete incorporation documents and make bylaws occurs after the corporation has been legally formed (incorporated), not prior to incorporation.

Question 3

Which of the following is a feature of the legislation that regulates securities in Canada?

Accepted Answer

Each province and territory in Canada has its own distinct securities legislation, as securities regulation is primarily a provincial responsibility.

Question 4

Which term refers to the document that a corporation must publish when offering securities to the public?

Accepted Answer

A prospectus is a legal document that corporations must publish when offering securities to the public, providing details about the investment offering.

Question 5

Ownership of a share does not give the owner or holder any right to use the assets of the corporation or any right to directly control or manage the corporation.

Accepted Answer

Ownership of a share in a corporation gives the shareholder a claim to a portion of the corporation's profits and assets through dividends and stock appreciation, but it does not grant the right to use the corporation's assets directly or control its day-to-day operations. Control and management are typically exercised through voting for the board of directors, who then oversee the corporation's management.

Question 6

Shareholders do not have any power to manage the corporation.

Accepted Answer

Shareholders do not directly manage the corporation; instead, they elect a board of directors who then oversee and make major decisions for the corporation.

Question 7

A NUANS report is required to be submitted with the incorporating documents of a shelf company.

Accepted Answer

A NUANS report is typically required for new incorporations to ensure the proposed corporate name is unique and not too similar to existing ones, not for shelf companies which are already incorporated entities with their names established.

Question 8

A corporation that does not issue its shares to the general public is usually known as a widely held corporation.

Accepted Answer

A corporation that does not issue its shares to the general public is usually known as a closely held corporation, not a widely held corporation.

Question 9

What is meant by the term "secondary market" in terms of equity trading?

Accepted Answer

The secondary market refers to the buying and selling of securities that have already been issued and are being traded among investors, rather than being purchased directly from the issuing company.

Question 10

A closely held corporation typically has several classes of shares that it offers by invitation to the public.

Accepted Answer

A closely held corporation usually does not offer shares to the public and often has a small group of shareholders without multiple classes of shares.

Question 11

The primary purpose of the legislated requirement that a corporate name contain a legal element is to ensure the entity is distinctly identifiable for tax reporting purposes.

Accepted Answer

The primary purpose of including a legal element (such as Inc., LLC, Ltd., etc.) in a corporate name is to indicate that it is a legal entity separate from its owners, which has implications for liability, governance, and recognition under the law, rather than for tax reporting purposes specifically.

Question 12

If there is only one shareholder,it is not necessary to hold an annual shareholders' meeting.

Accepted Answer

Even if there is only one shareholder, an annual shareholders' meeting may still be required by law or the company's bylaws to ensure compliance with corporate governance standards.

Question 13

Marion,along with several others,lost substantial funds through an investment based on misrepresentations stated in a secondary market disclosure their broker recommended.The disgruntled group's lawyer advised that recent amendments to provincial securities legislation now provide a meaningful civil remedy and facilitate class actions.Which of the following exemplifies the type of amendment made to achieve these goals?

Accepted Answer

C) Removing proof of reliance and substituting deemed reliance by the investors simplifies the process for investors to pursue legal action in cases of misrepresentation, making it easier to facilitate class actions and provide a meaningful civil remedy. This amendment would directly address the challenges faced by Marion and others in proving individual reliance on the misrepresented information.

Question 14

Part of the process of organizing the newly incorporated entity involves the appointment of an auditor to hold office until the first annual meeting of the shareholders.

Accepted Answer

Incorporating a new entity often involves appointing an auditor to hold office until the first annual meeting of shareholders, as this helps ensure the company's financial statements are properly audited and in compliance with relevant laws and standards.

Question 15

Which of the following is one of the distinctions between shares and bonds?

Accepted Answer

Shares represent ownership in a company, giving shareholders a claim on part of the company's assets and earnings. Bonds, on the other hand, are a form of debt where the issuer owes the holders a debt and is obliged to pay them interest and to repay the principal at a later date, known as the maturity date.

Question 16

The fundamental repercussions of a corporation's possessing a separate and distinct legal identity bind the internal stakeholders,who are solely responsible for its debts and other liabilities.

Accepted Answer

A corporation's separate legal identity means that it is an independent entity responsible for its own debts and liabilities, not the internal stakeholders (such as shareholders), who generally have limited liability.

Question 17

All shares carry the right to vote for directors of the corporation.

Accepted Answer

Not all shares carry voting rights. Companies can issue different classes of shares, some of which may not have the right to vote on corporate matters, including the election of directors.

Question 18

An advantage of private corporation status is the potential for a lower rate of income tax.

Accepted Answer

Private corporations often benefit from lower income tax rates compared to individual rates, allowing for potentially more efficient tax planning and reinvestment opportunities.

Question 19

All Canadian jurisdictions follow a similar procedure for the creation of a corporation,and all require payment of the filing fee,payable to the Receiver General,to be made concurrent with the submission of the incorporating documents for registration.

Accepted Answer

While all Canadian jurisdictions require the payment of a filing fee for the creation of a corporation, the fees are not necessarily payable to the Receiver General. The payment details, including to whom the fee is payable, can vary by province or territory.

Question 20

In reality,the distinction between federal and provincial corporations is of little practical significance due to provincial laws that permit the operation of out of province corporations.

Accepted Answer

Provincial laws allow out-of-province corporations to operate within their jurisdiction, making the distinction between federal and provincial corporations less significant in practice.

Quiz 15: The Corporate Form: Organizational Matters