Question 1

Explain what is meant by pre-emptive rights.

Accepted Answer

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Question 2

Discuss and contrast the various methods of financing a corporation.Deal with the advantages and disadvantages of each.

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Question 3

Which of the following is true with regard to the characteristics of corporations?

Accepted Answer

A) The shareholders would be vicariously liable for any damage caused by a employee of the corporation carrying out his or her duties. 
B) The corporation is a separate legal person, but neither can sue nor be sued. 
C) Directors are responsible for the shareholders of the corporation. 
D) Shareholders are liable for the debts and other obligations of the corporation. 
E) A shareholder's liability is limited to the amount he or she paid for the shares.

Question 4

The rights associated with preferred shares are always the same, and there is no actual right to a dividend.

Accepted Answer

A) True 
 B)False

Question 5

In a franchise arrangement, describe the advantages offered in such a business structure to the franchisee.

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Question 6

Changes to the Criminal Code in response to the Westray mining disaster in Nova Scotia make partnerships and corporations more responsible for the negligence of their employees when the negligence results in injury or death.

Accepted Answer

A) True 
 B)False

Question 7

Explain what must be done to create a limited partnership.

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Question 8

Explain under what circumstances a shareholder will not be permitted to sell his shares.

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Question 9

A director can be held responsible for unpaid taxes, wages, and environmental harm.

Accepted Answer

A) True 
 B)False

Question 10

You have been asked by two fellow graduates to join them in incorporating a closely held corporation that would commence a consulting business.One was in your class, so you know him quite well, but the other is graduating from a different school.You have been discussing the law to review the protection it gives you.Read each of the following statements separately and indicate which is true.

Accepted Answer

A) If you have pre-emptive rights and the directors decide to issue a new allotment of shares, the corporation must offer you a portion of the new issue to allow you to keep your proportional share of the corporation. 
B) A shareholder's agreement allows shareholders and not officers to manage the corporation. 
C) As a shareholder, you will have the right to vote for the officers of the corporation. 
D) If you were voted out as a director by the others, who could show that it was in the best interest of the corporation, you could sell your shares to any interested buyer without interference from the other directors. 
E) If you each take one-third of the first allotment of the shares, you will necessarily be a minority shareholder, and have no voting rights in electing the directors of the corporation.

Question 11

Contrast the obligations and duties of directors and shareholders of a corporation.

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Question 12

A franchisee and franchisor are considered to be in a partnership with each other.

Accepted Answer

A) True 
 B)False

Question 13

Chuck, Howard, and Ben decide to start a business venture, developing and distributing educational software.For tax reasons, they do not incorporate.Each contributes $10 000, and Howard also contributes a truck and his programming expertise.They agree that all three will be actively involved in the day-to-day management of the business.To determine their rights and obligations, they enter into a one-page agreement that provides only that each of Chuck, Howard, and Ben will receive 33.3% of the profits but also states specifically they are not to be viewed as partners.Based on these facts, which of the following statements is true?

Accepted Answer

A) Chuck, Howard, and Ben will not be considered partners because of their express intention in their agreement. 
B) Chuck, Howard, and Ben will be considered partners in the eyes of the law, because they share profits and are involved in the management of the business. 
C) Chuck, Howard, and Ben will be considered partners, but someone claiming against the partnership will only be able to collect 33.3% from any one partner because of the agreement. 
D) Chuck, Howard, and Ben are not partners because they do not share profits in proportion to their capital contributions. 
E) Chuck, Howard, and Ben are not partners because to be partners they must be professionals, such as dentists, lawyers, or doctors.

Question 14

In 2011, Rambolin incorporated Rambolin Industries Ltd.and became its sole shareholder.He loaned the corporation $10 000 and took a chattel mortgage from the corporation as security for repayment of the loan.He became director, president, and secretary of the corporation.The corporation prospered.Last year, you began supplying the corporation with office supplies.You were paid at the end of each month for supplies delivered during that month.For the last six months, however, you have not been paid.You learn that other suppliers also have not been paid because sales have dropped drastically, apparently due to Rambolin's nasty temper caused by ill health.Which of the following is true?

Accepted Answer

A) If this corporation were placed into bankruptcy, Rambolin would be in a better position than you for receiving proceeds realized from the sale of the assets of the corporation. 
B) Shareholders have a statutory obligation to manage the corporation, so Rambolin, as shareholder, must exercise care in that task. 
C) You could take an action under the pre-emptive right provisions under the relevant legislation. 
D) If you decided to sue for the debt, you could sue Rambolin because he is the sole shareholder and his nasty temper caused all of the trouble. 
E) If Rambolin dies, his corporation would automatically die too, and there wouldn't be any person to sue.

Question 15

"In modern business practice, the shareholders of a corporation own that corporation." Explain the accuracy of this statement.

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Question 16

Discuss appropriate measures that a business might take to prevent and detect corporate fraud.

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Question 17

The Partnership Act provides that no major decisions can be made that affect the nature of the business itself without unanimous agreement of the partners.Provide three examples of major decisions.

Accepted Answer

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Question 18

Which of the following is considered to be a separate legal person in law?

Accepted Answer

A) A corporation 
B) A sole proprietorship 
C) An agency 
D) A partnership 
E) A professional practice

Question 19

Which of the following statements is correct with respect to regulation of the purchase, sale, and promotion of securities in Canada?

Accepted Answer

A) The federal government has no involvement in this area. 
B) This is a provincial responsibility but all provinces have the same provisions. 
C) Because of the location of the Toronto Stock Exchange, the Ontario Securities Commission oversees these matters for all of Canada. 
D) Canada has a federal securities regulator responsible for this. 
E) This is primarily a provincial responsibility.

Question 20

Adams was approached by a Mr.McCarthy of XYZ Co., who requested that Adams pay $10 000 to extinguish a debt owed by the partnership of Adams and Jefferson.Adams denied the partnership and the liability.In asserting his claim, McCarthy cited the following facts, all of which he could prove.Which of these facts is the strongest evidence of the existence of a partnership?

Accepted Answer

A) Adams and Jefferson co-owned property. 
B) Adams and Jefferson shared gross returns from a business. 
C) Adams and Jefferson worked together for a non-profit charity. 
D) Adams received a commission from Jefferson based on the sale price of the goods sold by Adams for Jefferson. 
E) Adams and Jefferson shared the profits from a business.

Exam 7: Methods of Carrying on Business

Explain what is meant by pre-emptive rights.

Discuss and contrast the various methods of financing a corporation.Deal with the advantages and disadvantages of each.

Which of the following is true with regard to the characteristics of corporations?

The rights associated with preferred shares are always the same, and there is no actual right to a dividend.

In a franchise arrangement, describe the advantages offered in such a business structure to the franchisee.

Changes to the Criminal Code in response to the Westray mining disaster in Nova Scotia make partnerships and corporations more responsible for the negligence of their employees when the negligence results in injury or death.

Explain what must be done to create a limited partnership.

Explain under what circumstances a shareholder will not be permitted to sell his shares.

A director can be held responsible for unpaid taxes, wages, and environmental harm.

Contrast the obligations and duties of directors and shareholders of a corporation.

A franchisee and franchisor are considered to be in a partnership with each other.

"In modern business practice, the shareholders of a corporation own that corporation." Explain the accuracy of this statement.

Discuss appropriate measures that a business might take to prevent and detect corporate fraud.

The Partnership Act provides that no major decisions can be made that affect the nature of the business itself without unanimous agreement of the partners.Provide three examples of major decisions.

Which of the following is considered to be a separate legal person in law?

Which of the following statements is correct with respect to regulation of the purchase, sale, and promotion of securities in Canada?