Exam 22: Legal Rules for Corporate Governance

Because the duty of care requires that directors and officers exercise the care that a reasonably prudent person would exercise in comparable circumstances,the standard is a subjective one.So long as people are honest and do their best,it does not matter how incompetent they are.

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(True/False)

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Question 1

Correct Answer:

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False

Jelena and Patrick are starting a retail sporting goods business.They have incorporated a corporation to carry on the business.Jelena has 60 of the 100 issued common shares and Patrick has 40.They have decided that each should be a director and all decisions relating to the business should require the consent of both of them.Which of the following is a reason that Jelena and Patrick should NOT have a shareholders' agreement? They need to agree

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(Multiple Choice)

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Question 2

Correct Answer:

Verified

Shazad is the manager of a bookstore that is one of a chain owned by Tebsco Markets Inc.Shazad advertised a special low price for Harry Potter books as a way of getting people to come to the store.Shazad knew at the time that he had no Harry Potter books.Advertising in this manner is an offence under the Competition Act.Shazad was convicted,and Tebsco was too on the basis that Shazad was a senior officer of the corporation in relation to its operation of his bookstore.Is there anything that Tebsco could do to avoid this liability in the future?

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(Essay)

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Question 3

Correct Answer:

Verified

Criminal liability attaches to corporations whenever someone who is a senior officer of the corporation commits a crime.Internal policies designed to prevent crimes by employees will not protect Tebsco in the event that a crime is committed notwithstanding the policies.This was one of the holdings in R v Waterloo Mercury Sales Ltd (1974)49 DLR (3d)131 (Alta Dist Ct).The only way Tebsco could avoid liability is by putting in place procedures to try to make sure that managers like Shazad do not commit offences.Strategies might include:
- education programs for staff on what kinds of advertising is permitted,
- a requirement for all advertising to be reviewed by the head office and,perhaps,the legal department,and
- regular spot checks in stores.

Sarah is a director of Family Educational Testing Services Inc,a corporation incorporated under the Canada Business Corporations Act.She also carries on her own business of finding educational testers and psychometrists needed by testing services businesses.The other members of the board want to hire Sarah to find five testers for the corporation.Which statement best describes the legal rules that would apply to Sarah undertaking such work?

(Multiple Choice)

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Question 4

The oppression remedy is not just a shareholder remedy.It creates a standard of behaviour for management that is different from the fiduciary duty and duty of care,and one that is potentially more important for shareholders because it can be enforced by shareholders directly.Do you agree with this description of the oppression remedy?

(Essay)

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Question 5

Acme Inc recently came into existence.Owen is the only officer,Dieter is a director,and Seppo is a shareholder.Which of the following statements is most likely TRUE?

(Multiple Choice)

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Question 6

Yasir is a director and the operations manager of Flavell Rubbish Disposal Ltd.All of the financial aspects of the business are the responsibility of John,another director.Yasir heard from one of his employees that a representative from the corporation's bank was in John's office yesterday and there was a lot of shouting.Yasir asked John about it.John said that the corporation was behind in its loan payments,but that Yasir doesn't need to worry about it.John tells him that a big customer will be paying its account soon and that money will be used to bring the loan up to date.Which statement most accurately describes Yasir's legal position?

(Multiple Choice)

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Question 7

In practice,it is generally easier for shareholders in public corporations to exercise their legal rights because management is required to send them much more information regarding matters to be dealt with at shareholder meetings than they are required to send to shareholders in smaller corporations.

(True/False)

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Question 8

Which of the following statements best describes the "business judgment rule"?

(Multiple Choice)

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Question 9

Which of the following statements is TRUE? An annual meeting is

(Multiple Choice)

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Question 10

Angela and Lou are starting a flower store business to be carried on by a corporation.Angela has substantial personal assets and will be getting 90 percent of the shares of the corporation.Lou has little money and will be getting 10 percent of the shares.A fair way to resolve disputes would be to enter into a shareholder's agreement which provides for a "shotgun buy-sell."

(True/False)

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Question 11

A strict liability offence is

(Multiple Choice)

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Question 12

Forest is the majority shareholder in ForCo Inc,a corporation carrying on a business of providing investment advice.She is also a director of DevCo,a corporation incorporated under the Canada Business Corporations Act engaged in real estate development.Is there a legal problem if ForCo provides advice on regular commercial terms to DevCo? How can Forest make sure that no problems arise in connection with her corporation doing business with DevCo?

(Essay)

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Question 13

Roxanne is a minority shareholder in Sumner Inc.She is very unhappy with the way that the company is being operated.She therefore intends to express her disapproval and advocate changes at the next annual meeting.She will also be encouraging the other 50 shareholders of Sumner to vote against management's proposals.Which of the following statements is TRUE?

(Multiple Choice)

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Question 14

Identify and briefly explain the significance of Canadian Air Services Ltd v O'Malley (Case Brief 22.1).

(Essay)

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Question 15

George wants to get out of his investment in Silver Chair Furniture Inc,a corporation incorporated under the Canada Business Corporations Act.He holds 50 percent of the shares and is fed up with dealing with William,who holds the remaining 50 percent of the shares and will not listen to him.They cannot agree on how the corporation should be run.William is the sole director and officer of the corporation.George has asked William to buy him out or have the corporation buy his shares,but neither William nor the corporation has any money.George is prohibited from selling to a third party under a shareholder agreement he signed with William.Can George have the corporation wound up?

(Multiple Choice)

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Question 16

Robyn and his eight friends bought shares in company XYZ.Since it was their first time investing in a company,they became minority shareholders and did not closely follow the actions of that company.Three months later,they each received a letter stating the company planned to eliminate all minority shareholders as of that day.Robyn believes they are entitled to some form of remedy for XYZ's actions.Which of the following is the best course of action for Robyn and his friends?

(Multiple Choice)

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Question 17

Elroy was the controlling shareholder and sole director of Maxi-Screen Ltd,which carries on a film production business.His wife,Ann,is a minority shareholder.The corporation was incorporated in 1995 and has paid a substantial dividend each year to its shareholders.In 2009,Ann and Elroy separated.Elroy did not declare a dividend even though the business was more profitable than ever because he did not want to share the profits with Ann.Which of the following statements best reflects Ann's legal position?

(Multiple Choice)

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Question 18

What does the fiduciary duty require of directors and officers?

(Essay)

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Question 19

Byron was the director and president of a construction company.At an annual meeting,the construction company's biggest shareholder,Sask-Wheat,voted to elect some new directors because they were unsatisfied with the construction company revenue.Knowing the election would almost inevitably result in favor of Sask-Wheat,the construction company's lawyers advised Byron to rule their votes invalid,which he did.However,in subsequent court hearings,the votes were ruled to be valid.Byron claimed indemnification from the construction company for his legal costs.Which of the following is most likely false?

(Multiple Choice)

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Question 20

Showing 1 - 20 of 78

Because the duty of care requires that directors and officers exercise the care that a reasonably prudent person would exercise in comparable circumstances,the standard is a subjective one.So long as people are honest and do their best,it does not matter how incompetent they are.

Acme Inc recently came into existence.Owen is the only officer,Dieter is a director,and Seppo is a shareholder.Which of the following statements is most likely TRUE?

Which of the following statements best describes the "business judgment rule"?

Which of the following statements is TRUE? An annual meeting is

A strict liability offence is

Identify and briefly explain the significance of Canadian Air Services Ltd v O'Malley (Case Brief 22.1).

What does the fiduciary duty require of directors and officers?

Risk Management and Sources of Law

Litigation and Alternative Dispute Resolution

Introduction to Torts

Intentional Torts

Miscellaneous Torts Affecting Business

Negligence

The Nature and Creation of Contracts

Consideration and Privity

Representations and Terms

Contractual Defects

Discharge and Breach

Contractual Remedies

Special Contracts: Sale of Goods

Special Contracts: Negotiable Instruments

Real Property: Interests and Leases

Real Property: Sales and Mortgages

Personal Property: Bailment and Insurance

Intellectual Property

Electronic Commerce

Agency and Other Methods of Carrying on Business

Basic Forms of Business Organizations

Secured Transactions

Dealing With Bankruptcy and Insolvency

Government Regulation of Business

Individual Employment

Organized Labour

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