Question 1

Canadian public companies with U.S.parents or Canadian companies traded on U.S.stock exchanges may be required to follow the high U.S.standard that pertain to directors of U.S.corporations.

Accepted Answer

Canadian public companies with U.S. parents or Canadian companies traded on U.S. stock exchanges are subject to the regulatory requirements of the Securities and Exchange Commission (SEC) and are required to follow the standards that pertain to directors of U.S. corporations under the Sarbanes-Oxley Act of 2002.

Question 2

If a purchaser wishes to purchase a "business" that is a corporation,the purchaser must purchase all the assets and all the liabilities of the corporation.

Accepted Answer

A purchaser can choose to buy only the assets of a corporation without assuming its liabilities, depending on the terms of the purchase agreement.

Question 3

In order for a director of a corporation to show that she can rely on the defence of due diligence,she must be knowledgeable of the prevailing environmental standards and must take clear action to prevent,report,review,and respond to danger.

Accepted Answer

The statement accurately describes the requirements for a director to rely on the defence of due diligence. They must be knowledgeable of environmental standards and take appropriate actions to prevent and respond to environmental risks.

Question 4

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

Accepted Answer

The answer of A third-party businessperson must be most careful...

Question 5

Business objects of a corporation are often found in unanimous shareholder agreements.

Accepted Answer

Business objects of a corporation can be found in unanimous shareholder agreements, which are legal agreements between shareholders that govern how the corporation is run and what its goals and objectives are. These agreements often outline the business objects of the corporation, which can include its mission statement, strategic plans, and objectives for growth and profitability.

Question 6

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 prohibits directors or officers of a corporation from taking advantage of opportunities that should belong to the corporation. This duty of loyalty is essential to protecting the interests of the corporation and its shareholders. If a director violates this duty by taking advantage of a corporate opportunity for personal gain, the corporation may pursue legal action against the director to recover any losses suffered. The other doctrines mentioned in the options are not directly relevant to a director's duty of loyalty.

Question 7

Which of the following is not an insider of a reporting issuer

Accepted Answer

The reporting issuer themselves, senior officers of subsidiary or parent firms, and directors of parent firms are all considered insiders. However, a shareholder owning 10 percent of voting rights in the reporting issuer is not considered an insider unless they also have access to material non-public information.

Question 8

A prospectus is required if the minimum investment amount is over $150,000 because of the large amount of money involved.

Accepted Answer

A prospectus is usually required for investments exceeding $150,000 to ensure that investors have access to all relevant information before investing such a large amount of money.

Question 9

To effectively purchase a "business" that is a corporation,one may either purchase the shares of the corporation or purchase its assets directly.

Accepted Answer

The two options for purchasing a corporation are to buy its shares or purchase its assets directly.

Question 10

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 and setting policy for the corporation. They are elected by the shareholders and have a fiduciary duty to act in the best interests of the corporation and its shareholders. The majority owner of preferred shares or common shares may have some influence, but ultimately it is the board of directors who have the greatest control over the corporation. The bond holders have limited control and mainly have a contractual relationship with the corporation.

Question 11

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

Accepted Answer

The indoor management rule, also known as the rule in Turquand's case, provides that a person dealing with a company is entitled to assume that the officers of the company have the authority to bind the company in their dealings, as long as the officers are acting within their apparent authority. The rule protects third parties who rely on the apparent authority of the officers without the need for further investigation or inquiry. Therefore, a person may rely on the acts of the officers of a corporation without inquiry by virtue of the indoor management rule. The other choices are not applicable in this scenario.

Question 12

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...

Question 13

The priorities of corporate security are usually

Accepted Answer

Corporate security refers to the ways in which a company secures funding or debt. Fixed charges (such as a mortgage) are given priority over floating charges (such as a general debenture) because they are secured by specific assets. Mortgage bonds are also given preference over debentures because they are backed by the actual property or assets. Therefore, the best choice is B, fixed charges in preference over floating charges and mortgage bonds in preference over debentures.

Question 14

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 legal action brought by a shareholder on behalf of the corporation against a director or officer for actions that have harmed the corporation. This differs from a personal action, where the shareholder sues for harm to their personal interests. In a derivative action, any damages or recovery go to the corporation, not the shareholder personally. This is the appropriate choice in the scenario where a director is believed to have acted improperly against the corporation's interests.

Question 15

The only way to effectively purchase a "business" (organized as a corporation)is to purchase all the shares of the corporation.

Accepted Answer

Purchasing a business can also be done by acquiring its assets rather than buying all its shares.

Question 16

In order for a director of a corporation to show that she can rely on the defence of due diligence,she must exercise only the duty of care of a reasonable person.

Accepted Answer

The director must exercise the duty of care of a reasonably prudent person in a similar position, which may require more than just the care of an average reasonable person, depending on the circumstances and the director's expertise.

Question 17

A "private issuer" is a corporation where the issuer's founding documents contain restrictions on transfer of its securities and whose shares are owned by not more than 50 persons.

Accepted Answer

A private issuer is defined as a corporation with restrictions on the transfer of securities and no more than 50 shareholders.

Question 18

Undisclosed profits gained by some directors of a corporation as a result of a commercial transaction with that corporation put those directors in breach of their fiduciary duty.

Accepted Answer

Directors have a fiduciary duty to act in the best interests of the corporation and must not take advantage of opportunities to profit at the expense of the corporation. Undisclosed profits gained by directors in a commercial transaction with the corporation would be a breach of this duty.

Question 19

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 best choice is for the shareholder to bring a derivative action, which is a lawsuit brought by the shareholder on behalf of the corporation against the directors for breach of their duty. This allows the shareholder to seek a remedy for their losses without needing the corporation to sue its own directors. The Canada Business Corporations Act does provide for derivative actions, but it is not a remedy in and of itself. Internal dispute settlement procedures may also be available, but they are not the only option and may not effectively address the shareholder's losses.

Question 20

If a purchaser purchases the shares of a "business" that is a corporation,the purchaser will end up with all the liabilities of that corporation.

Accepted Answer

When a purchaser buys shares of a corporation, they acquire ownership of the corporation, including its assets and liabilities.

Quiz 7: Corporation Law