Exam 27: The Nature of a Corporation and Its Formation

Jim incorporated his small business so that he would obtain limited liability on company indebtedness. But when he applied for a bank loan, the bank insisted that he give a personal guarantee the loan made to the corporation. Has the incorporating of the business helped Jim as far as limiting his business liability?

The "charter" an unsuitable instrument for reflecting special arrangements and side agreements between shareholders? Explain.

Mario Black has, along with two others, formed a corporation to market specialized computer software. Each partner initially purchased ten common shares at $10 apiece-giving the corporation $300 in capital. The company requires an additional $25,000 to operate. Describe three different ways the corporation could acquire that $25,000 and give a brief reason why you would recommend or not recommend each of the ways.

Several years back while Tom was still in school, he mowed the lawn of widow Jerome's large estate. Since she could not pay Tommy in cash, she gave him 100 bearer bonds of the Delray Corp. Tommy believes he will be able to cash in on these bonds because he

The classic case that established the existence of the corporation as a separate legal entity is

The Magic Corporation is preparing to sell an issue of debenture bonds. The bond investors are insisting on getting further legal protection. They will, most likely, require a restrictive clause placing a ceiling on

If you are a small, local, one- person business, can you incorporate under the federal CBCA (Canada Business Corporations Act)? Explain.

Regarding corporations, which statement follows the principle of limited liability?

In addition to the Articles of Incorporation, a corporation needs detailed operating rules. These operating rules that are important enough for director's approval yet not contained in the Charter are called

Explain the concept of the preferred shareholder.

The ultra vires doctrine applies in most provinces in Canada.

Milton Brown is a business consultant and obtained confidential information about a publicly traded corporation which, if made public, would cause the stock to rise dramatically. Milton formed a private corporation with himself as the sole shareholder and director and had that corporation purchase stock in the publicly traded corporation. When the news which Milton was aware of became public the price of the publicly traded shares increased dramatically and the corporation Milton has formed sold its shareholdings at a substantial profit. Milton is subsequently charged with insider trading, that is, using confidential information for his own personal gain. His defense is that the gain was made by his corporation and not by himself and his corporation is a separate legal entity. Will Milton's defense be successful? Give the legal basis for your answer.

Which of the following is not a distinguishing feature of closely held corporations?

To incorporate under the Canada Business Corporations Act is most suitable for

Six years ago Michael incorporated his small business in Alberta. Now, in order to do business in Ontario, Michael must

The case that established the principle of the separate legal personality of the corporation is the High Trees Case.