Question 1

In trying to protect corporate creditors,what is the solvency test?

Accepted Answer

The solvency test requires that the directors of a corporation become personally liable for any deficiency resulting from the payment of dividends when the firm is insolvent,that is,unable to meet its debts as they fall due,or where the realizable value of its assets has become less than its total liabilities.

Question 2

What standard of care and skill is usually imposed by the court on an accused corporation and its directors when the activities of the corporation were carried on negligently?

Accepted Answer

The "due diligence in carrying out their duties test" will apply,but this test has an ever-changing standard as technology changes and it also may be affected by the knowledge and expertise of the individuals involved.

Question 3

Briefly describe corporate loans to shareholders,directors and employees and the concerns behind considering restricting such loans from a tax perspective.

Accepted Answer

Although corporate law does not prohibit the corporation from lending money to shareholders,directors or officers,there are income rules that include the loan as income to borrowers.The concern behind considering restricting such loans,especially those that are interest free,is that they might amount to an indirect return of capital and might deprive the corporation of liquidity.

Question 4

Susie owns a small tool and die company.She has hired an occupational health and safety expert to assess the workplace on a monthly basis in order to identify potential dangers that could injure her employees.The expert reports back to her every month.Part of the reason Susie incurs the costs of hiring this expert is

Accepted Answer

A) to avoid any civil action brought by an injured worker. 
B) to prove that she took all reasonable steps in the circumstances should she ever be charged with an occupational health and safety offence after the injury of a worker. 
C) to prevent an attempt by any party to "pierce the veil" of the corporation and seek damages against her personally. 
D) to provide her with the basis to raise a "reasonable doubt" should she be charged with any regulatory offence. 
E) to avoid a conflict of interest. 
A) to avoid any civil action brought by an injured worker. 
B) to prove that she took all reasonable steps in the circumstances should she ever be charged with an occupational health and safety offence after the injury of a worker. 
C) to prevent an attempt by any party to "pierce the veil" of the corporation and seek damages against her personally. 
D) to provide her with the basis to raise a "reasonable doubt" should she be charged with any regulatory offence. 
E) to avoid a conflict of interest.

Question 5

John and George are the shareholders of a private provincial company,which has capital assets of $250 000.00.Lately,due to the recession,the company has not been doing well financially,but it is going to issue dividends of $50 000.00 each to John and George.A few days later the company declares bankruptcy.In this case the creditors of the company

Accepted Answer

A) can recover the value of the dividends from John and George as shareholders. 
B) can look to the assets of the company. 
C) can recover the value of the dividends from John and George as directors. 
D) can look to the assets of the company and receive the value of the dividends issued to John and George. 
E) all of the above 
A) can recover the value of the dividends from John and George as shareholders. 
B) can look to the assets of the company. 
C) can recover the value of the dividends from John and George as directors. 
D) can look to the assets of the company and receive the value of the dividends issued to John and George. 
E) all of the above

Question 6

Walter and Gordon are the shareholders of a small private Ontario company,which recently went bankrupt due to the world wide recession,owing $100 000.00 to its creditors.Unfortunately the company's assets are only $50 000.00.In this case,the amount available to satisfy the creditors of the company will be

Accepted Answer

A) $50 000.00 plus Gordon's assets only. 
B) $50 000.00 plus Walter's assets only. 
C) $50 000.00 plus the assets of both Walter and Gordon. 
D) $50 000.00 only. 
E) none of the above 
A) $50 000.00 plus Gordon's assets only. 
B) $50 000.00 plus Walter's assets only. 
C) $50 000.00 plus the assets of both Walter and Gordon. 
D) $50 000.00 only. 
E) none of the above

Question 7

When it is unlawful to declare dividends because of a deficiency in the capital fund and yet the shareholders want a quick pay-out,then

Accepted Answer

A) Revenue Canada can issue "not withstanding" tax credits. 
B) the corporation needs to earn enough profits to restore the deficiency. 
C) shareholders can lend money to the corporation and receive interest payments in return. 
D) the corporation can re-capitalize at a lower amount. 
E) wages can be paid to officers instead of dividends. 
A) Revenue Canada can issue "not withstanding" tax credits. 
B) the corporation needs to earn enough profits to restore the deficiency. 
C) shareholders can lend money to the corporation and receive interest payments in return. 
D) the corporation can re-capitalize at a lower amount. 
E) wages can be paid to officers instead of dividends.

Question 8

When it comes to damage of the environment,any person who actually commits an offence is personally liable

Accepted Answer

A) provided he or she was not acting within the scope of his authorized activities. 
B) if there was no direct participation in the offence. 
C) even if a senior officer ordered him to perform. 
D) provided he or she had no knowledge of the offence. 
E) provided he or she had no significant role in controlling what happened. 
A) provided he or she was not acting within the scope of his authorized activities. 
B) if there was no direct participation in the offence. 
C) even if a senior officer ordered him to perform. 
D) provided he or she had no knowledge of the offence. 
E) provided he or she had no significant role in controlling what happened.

Question 9

Consumer protection is a matter

Accepted Answer

A) of federal jurisdiction only as set out in the Competition Act. 
B) that can only be addressed by a court order in a civil action. 
C) of provincial jurisdiction,and all provinces have legislation limiting unfair business practices. 
D) that regulates conduct among competitors and improper marketing and advertising strategies. 
E) regulated by criminal law pursuant to the Criminal Code of Canada. 
A) of federal jurisdiction only as set out in the Competition Act. 
B) that can only be addressed by a court order in a civil action. 
C) of provincial jurisdiction,and all provinces have legislation limiting unfair business practices. 
D) that regulates conduct among competitors and improper marketing and advertising strategies. 
E) regulated by criminal law pursuant to the Criminal Code of Canada.

Question 10

How serious is Canada about taking steps to reduce greenhouse emissions?

Accepted Answer

Although Canada ratified the Kyoto Proto

Question 11

In Canada,the jurisdiction over the securities industry is

Accepted Answer

A) divided between federal and provincial governments. 
B) with the federal Parliament. 
C) substantially within provincial jurisdiction. 
D) with the federal Securities and Exchange Commission. 
E) with each of Canada's four stock exchanges. 
A) divided between federal and provincial governments. 
B) with the federal Parliament. 
C) substantially within provincial jurisdiction. 
D) with the federal Securities and Exchange Commission. 
E) with each of Canada's four stock exchanges.

Question 12

A and B carry on business as a general partnership,which recently went bankrupt.In the event that the partnership assets are insufficient to pay off the creditors of the partnership

Accepted Answer

A) both A's and B's personal assets will be seized. 
B) neither A's nor B's personal assets will be seized. 
C) only B's personal assets will be seized. 
D) only A's personal assets will be seized. 
E) none of the above 
A) both A's and B's personal assets will be seized. 
B) neither A's nor B's personal assets will be seized. 
C) only B's personal assets will be seized. 
D) only A's personal assets will be seized. 
E) none of the above

Question 13

Bill and four friends are driving to the movies.The vehicle Bill is driving is travelling 21 km per hour over the speed limit.Terry is one of the passengers in the back seat.He intentionally throws an empty bottle at a pedestrian who is walking on a nearby sidewalk.She is struck with the bottle and injured.The police pull the car over and charge Bill and Terry with separate offences.The classification of the offences with which they are charged is as follows

Accepted Answer

A) absolute liability and mens rea. 
B) strict liability and mens rea. 
C) mens rea and absolute liability. 
D) strict liability and absolute liability. 
E) not listed above. 
A) absolute liability and mens rea. 
B) strict liability and mens rea. 
C) mens rea and absolute liability. 
D) strict liability and absolute liability. 
E) not listed above.

Question 14

Explain the general purpose of securities legislation in Canada.How are these purposes achieved?

Accepted Answer

The general purpose of securities legisl

Question 15

Several years back Dean Pigeon with two friends invested $300 000 equity capital into a new corporation.As it turns out,they have more capital in the business than they can profitably use.Will the CBCA allow them to take out the excess capital?

Accepted Answer

A) Yes,it will,provided the corporation can satisfy the court that the capital is truly unutilized. 
B) Yes,it will,provided the corporation has no creditors. 
C) No,it will not,since the excess is not accumulated retained earnings. 
D) Yes,it will,as long as the corporation can satisfy both parts of the solvency test. 
E) No,it will not,because a "capital fund" is not available to shareholders. 
A) Yes,it will,provided the corporation can satisfy the court that the capital is truly unutilized. 
B) Yes,it will,provided the corporation has no creditors. 
C) No,it will not,since the excess is not accumulated retained earnings. 
D) Yes,it will,as long as the corporation can satisfy both parts of the solvency test. 
E) No,it will not,because a "capital fund" is not available to shareholders.

Question 16

Offences under such statutes as the Canada Environmental Protection Act are criminal offences.

Accepted Answer

A) True 
 B)False

Question 17

The failure of a company to ensure that its employees are well trained for the job they do and to ensure that their workplace is safe is an offence under occupational health and safety legislation.

Accepted Answer

A) True 
 B)False

Question 18

Why has provincial and federal legislation removed the requirement of mens rea for regulatory offences?

Accepted Answer

This burden is extremely difficult to me

Question 19

A parks his car in a no-parking zone and A gets a ticket.In this case,A has committed

Accepted Answer

A) an absolute liability offence. 
B) a mens rea offence. 
C) a criminal offence. 
D) no offence. 
E) a strict liability offence. 
A) an absolute liability offence. 
B) a mens rea offence. 
C) a criminal offence. 
D) no offence. 
E) a strict liability offence.

Question 20

Where a corporation is held liable in tort,it is almost invariably on account of a negligent or wrongful act committed directly by the corporation.

Accepted Answer

A) True 
 B)False

Exam 27: Corporate Governance: External Responsibilities

In trying to protect corporate creditors,what is the solvency test?

What standard of care and skill is usually imposed by the court on an accused corporation and its directors when the activities of the corporation were carried on negligently?

Briefly describe corporate loans to shareholders,directors and employees and the concerns behind considering restricting such loans from a tax perspective.

When it is unlawful to declare dividends because of a deficiency in the capital fund and yet the shareholders want a quick pay-out,then

When it comes to damage of the environment,any person who actually commits an offence is personally liable

Consumer protection is a matter

How serious is Canada about taking steps to reduce greenhouse emissions?

In Canada,the jurisdiction over the securities industry is

A and B carry on business as a general partnership,which recently went bankrupt.In the event that the partnership assets are insufficient to pay off the creditors of the partnership

Explain the general purpose of securities legislation in Canada.How are these purposes achieved?

Several years back Dean Pigeon with two friends invested $300 000 equity capital into a new corporation.As it turns out,they have more capital in the business than they can profitably use.Will the CBCA allow them to take out the excess capital?

Offences under such statutes as the Canada Environmental Protection Act are criminal offences.

The failure of a company to ensure that its employees are well trained for the job they do and to ensure that their workplace is safe is an offence under occupational health and safety legislation.

Why has provincial and federal legislation removed the requirement of mens rea for regulatory offences?

A parks his car in a no-parking zone and A gets a ticket.In this case,A has committed

Where a corporation is held liable in tort,it is almost invariably on account of a negligent or wrongful act committed directly by the corporation.

Law, society, and Business

The Machinery of Justice

Government Regulation of Business

The Law of Torts

Professional Liability: the Legal Challenges

Formation of a Contract: Offer and Acceptance

Formation of a Contract: Consideration and Intention

Formation of a Contract: Capacity to Contract and Legality of Object

Grounds Upon Which a Contract May Be Set Aside: Mistake and Misrepresentation

Writing and Interpretation

Privity of Contract and the Assignment of Contractual Rights

The Discharge of Contracts

Breach of Contract and Its Remedies

Sale of Goods and Consumer Contracts

Bailment and Leasing

Insurance and Guarantee

Agency and Franchising

The Contract of Employment

Negotiable Instruments

Intellectual Property

Interests in Land and Their Transfer

Landlord and Tenant

Mortgages of Land and Real Estate Transactions

Sole Proprietorships and Partnerships

The Nature of a Corporation and Its Formation

Corporate Governance: the Internal Affairs of Corporations

Secured Transactions

Creditors Rights

International Business Transactions

Electronic Commerce

Privacy

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