Re: {LW1 Summer} Quiz #5

[Fofana Fatoumata]

Hi Elena I am taking CM1 and will be taking MA1 next, did you want to pass me your MA1 or if anyone else ca

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From: Lori Roberts <lrobe...@hotmail.com>;
To: <lw1-s...@googlegroups.com>; <richman...@gmail.com>;
Subject: RE: {LW1 Summer} Quiz #5
Sent: Tue, Nov 6, 2012 10:54:14 PM

Sounds like a great idea. I'm also taking FA2 next! Lori Sent from Samsung Mobile Elena Tcherkassky <elenatch...@hotmail.com> wrote:  Hello Everyone! I was taking MA1 at fall session and next planning to take FA2. If someone interested to exchange assigments and quizes results please let me know. We had a great group studing together LW1, let's continue helping each other. Please let me know. Whishing everybody Good Luck on the exam!   From: elenatch...@hotmail.com To: lw1-s...@googlegroups.com Subject: Re: {LW1 Summer} Quiz #5 Date: Mon, 13 Aug 2012 22:02:56 -0400 Thank you everyone for your help and support!!!! Good luck on the exam!!!! From: gursewak sidhu Sent: Monday, August 13, 2012 7:21 PM To: lw1-s...@googlegroups.com Subject: RE: {LW1 Summer} Quiz #5 Thanks everyone who post quiz #5.  It is very helpful. From: deck...@bellaliant.net To: lw1-s...@googlegroups.com Subject: RE: {LW1 Summer} Quiz #5 Date: Mon, 13 Aug 2012 18:55:40 -0300 Hi All – here are my answers Good luck all   ·         Question 1 0.5 out of 0.5 points Which one of the following attracts the dissent procedure, which can result in the company being forced to buy the shares of a shareholder at market value? Answer Selected Answer: When a decision by the majority of the shareholders will create major changes that will adversely affect one group of shareholders Correct Answer: When a decision by the majority of the shareholders will create major changes that will adversely affect one group of shareholders Answer Feedback: You are correct! If a decision by the majority of the shareholders has a negative impact on the minority shareholders, the dissenting shareholders can, with the approval of the courts, force the majority to purchase their shares at a fair price. (Topic 10.7) Source: Ruth Yates, Business Law in Canada: Test Item File, 6th edition (Prentice Hall, 2002), Question 13, page 493. ISBN: 0-13-088202-X ·         Question 2 0.5 out of 0.5 points Which of the following is true about the so-called or illusory benefits of a corporation? Answer Selected Answer: Shareholders may become personally liable for the corporation’s debts if they provide a personal guarantee. Correct Answer: Shareholders may become personally liable for the corporation’s debts if they provide a personal guarantee. Answer Feedback: You are correct! Lenders want security for the funds advanced to the corporation and often will not be satisfied with the corporation’s promise of repayment because they do not have confidence in the corporation’s ability to meet its obligations. (Topic 10.2) ·         Question 3 0 out of 0.5 points One of the fundamental aspects of corporate law is that the shareholders in a business have limited liability. What is required for a shareholder to become liable to creditors of the corporation? Answer Selected Answer: Shareholders can never become liable to creditors. Correct Answer: Lifting of the corporate veil to identify an individual who controls the corporation, used that control to commit a fraud, and caused the plaintiff’s injury through this misconduct. Answer Feedback: Incorrect. Under very limited circumstances, shareholders can become liable to creditors. The correct answer is, when the courts lift the corporate veil, they expose individual shareholders to liability. For this to happen, three specific conditions must be met: an individual must control the corporation, that control must have been exercised to commit a fraud, and the misconduct must be the cause of the plaintiff’s injury. (Topic 10.3) ·         Question 4 0.5 out of 0.5 points Failed Co. has gone bankrupt. It owes some unpaid wages to its employees. It paid out a dividend just before declaring itself bankrupt. It also owes some money to ABC Credit. It has also breached some environmental laws. Which of the following is true? Answer Selected Answer: The directors are liable for the unpaid wages and for the amounts paid out as dividends, and potentially liable for breach of the environmental laws. Correct Answer: The directors are liable for the unpaid wages and for the amounts paid out as dividends, and potentially liable for breach of the environmental laws. Answer Feedback: You are correct! The directors are liable for the unpaid wages (up to $2,000 for each employee) and for the amounts paid out as dividends when the corporation was insolvent, and potentially liable for breach of the environmental laws. (Topic 10.5) ·         Question 5 0.5 out of 0.5 points What is the standard of care that a director owes to the corporation? Answer Selected Answer: A director is liable for harm caused in the exercise of his or her duties if his or her behaviour does not meet the standard of a reasonably prudent person. Correct Answer: A director is liable for harm caused in the exercise of his or her duties if his or her behaviour does not meet the standard of a reasonably prudent person. Answer Feedback: You are correct! A director is liable for harm caused in the exercise of his or her duties if his or her behaviour falls below the standard of a reasonably prudent person. (Topic 10.5) ·         Question 6 0.5 out of 0.5 points Wolfgang is a dog breeder and the owner of Canine Co. He is also a director of Guard Co. which provides guard-dog services to various corporations. Guard Co. wants a steady and reliable supply of dogs for training and negotiates with various kennels. It also negotiates with Canine Co. Which of the following is true? Answer Selected Answer: Wolfgang cannot vote as a director of Guard Co. on the proposed contract with Canine Co. Correct Answer: Wolfgang cannot vote as a director of Guard Co. on the proposed contract with Canine Co. Answer Feedback: You are correct! A director has a fiduciary duty to the corporation and must disclose to the corporation that he or she stands to benefit from a contract with the corporation, and is not allowed to vote. (Topic 10.5) ·         Question 7 0.5 out of 0.5 points Forget Me Not Co. is a nursery business. The majority shareholders decide to sell the inventory and not to replace it. What remedy is available to the minority shareholders? Answer Selected Answer: File a dissent Correct Answer: File a dissent Answer Feedback: You are correct! If a decision by the majority of the shareholders has a negative impact on the minority shareholders, the dissenting shareholders can, with the approval of the courts, force the majority to purchase their shares at a fair price. (Topic 10.7) ·         Question 8 0.5 out of 0.5 points Which one of the following is true with regard to the rights of shareholders? Answer Selected Answer: Shareholders have the right to request a court-appointed inspector to examine the auditing process. Correct Answer: Shareholders have the right to request a court-appointed inspector to examine the auditing process. Answer Feedback: You are correct! Upon application, the courts may appoint an inspector if a prima facie case establishes the probability of serious mismanagement. (Topic 10.6) ·         Question 9 0.5 out of 0.5 points What information do shareholders have the right to obtain? Answer Selected Answer: Documents of incorporation, lists of all shareholders, lists of officers and directors, and audited financial statements Correct Answer: Documents of incorporation, lists of all shareholders, lists of officers and directors, and audited financial statements Answer Feedback: You are correct! Shareholders have a right to obtain certain information: documents of incorporation, lists of all shareholders, lists of officers and directors, and audited financial statements. (Topic 10.6) ·         Question 10 0.5 out of 0.5 points Which of the following statements most accurately describes the difference between a broadly held and a closely held corporation? Answer Selected Answer: A broadly held corporation issues shares to the general public and a closely held corporation does not. Correct Answer: A broadly held corporation issues shares to the general public and a closely held corporation does not. Answer Feedback: You are correct! Broadly held corporations issue their shares to the general public and are normally listed on a stock exchange. (Topic 10.2) ·         Question 11 0.5 out of 0.5 points Which of the following statements best describes the liabilities of the sole shareholder in a closely held corporation? Answer Selected Answer: The sole shareholder has no personal liability for the contractual obligations entered into by the corporation. Correct Answer: The sole shareholder has no personal liability for the contractual obligations entered into by the corporation. Answer Feedback: You are correct! The sole shareholder in a closely held corporation has no personal liability for the contractual obligations entered into by the corporation. (Topic 10.2) ·         Question 12 0.5 out of 0.5 points How can the relief from oppression remedy best be described? Answer Selected Answer: The right of a shareholder to have the court appoint a receiver to take control of the company or to provide for its dissolution if it feels that the shareholder’s complaint is justified. Correct Answer: The right of a shareholder to have the court appoint a receiver to take control of the company or to provide for its dissolution if it feels that the shareholder’s complaint is justified. Answer Feedback: You are correct! The relief from oppression remedy gives a shareholder the right to go to court when, for example, the directors arrange for the sale of shares just to weaken the voting position of a particular shareholder, or fire an employee-shareholder to force the sale of the shares. The court may appoint a receiver to take control of the company or to provide for its dissolution if it feels that the shareholder’s complaint is justified. (Topic 10.7)     From: lw1-s...@googlegroups.com [mailto:lw1-s...@googlegroups.com] On Behalf Of Dee S Sent: Monday, August 13, 2012 3:57 PM To: lw1-s...@googlegroups.com Subject: RE: {LW1 Summer} Quiz #5   Here is mine. Good luck everyone!   Question 1 0.5 out of 0.5 points   Which of the following statements correctly describes the effect of the indoor management rule on corporate behaviour? Answer Selected Answer: According to the indoor management rule, a corporation cannot claim that it has not followed its own rules and procedures and avoid responsibility for the actions of its officers. Correct Answer: According to the indoor management rule, a corporation cannot claim that it has not followed its own rules and procedures and avoid responsibility for the actions of its officers. Answer Feedback: You are correct! According to the indoor management rule, a corporation cannot claim that it has not followed its own rules and procedures and thus avoid responsibility for the actions of its agents. As long as the agent is acting within the scope of its apparent authority and the third party has no notice of any irregularity, there is no need for the third party to enquire further if the authority appears to be in order. (Topic 10.4)   ·  Question 2 0.5 out of 0.5 points What is the difference between a broadly-held corporation and a closely-held corporation? Answer Selected Answer: There are no restrictions on the transfer of shares of a broadly-held corporation, while there are restrictions on the transfer of shares of a closely-held corporation. Correct Answer: There are no restrictions on the transfer of shares of a broadly-held corporation, while there are restrictions on the transfer of shares of a closely-held corporation. Answer Feedback: You are correct! There are no restrictions on the transfer of shares of a broadly-held corporation while there are restrictions on the transfer of shares of a closely-held corporation. (Topic 10.2) ·  Question 3 0.5 out of 0.5 points What is meant when shareholders have pre-emptive rights? Answer Selected Answer: Rights to retain their proportionate holdings in a corporation Correct Answer: Rights to retain their proportionate holdings in a corporation Answer Feedback: You are correct! Pre-emptive rights mean that shareholders have the right to retain their proportionate holdings in a corporation. (Topic 10.6) ·  Question 4 0.5 out of 0.5 points What is the standard of care that a director owes to the corporation? Answer Selected Answer: A director is liable for harm caused in the exercise of his or her duties if his or her behaviour does not meet the standard of a reasonably prudent person. Correct Answer: A director is liable for harm caused in the exercise of his or her duties if his or her behaviour does not meet the standard of a reasonably prudent person. Answer Feedback: You are correct! A director is liable for harm caused in the exercise of his or her duties if his or her behaviour falls below the standard of a reasonably prudent person. (Topic 10.5) ·  Question 5 0.5 out of 0.5 points What information do shareholders have the right to obtain? Answer Selected Answer: Documents of incorporation, lists of all shareholders, lists of officers and directors, and audited financial statements Correct Answer: Documents of incorporation, lists of all shareholders, lists of officers and directors, and audited financial statements Answer Feedback: You are correct! Shareholders have a right to obtain certain information: documents of incorporation, lists of all shareholders, lists of officers and directors, and audited financial statements. (Topic 10.6) ·  Question 6 0.5 out of 0.5 points Art Raskle was an officer, director, and employee of a large reporting company. At a directors’ meeting, he was surprised but pleased to learn that the company was discussing a resolution to contract with the firm of Fielding’s Office Supply for $200 worth of office equipment. He and Patricia Eastern recently bought that business; Raskle has a 45% interest. Raskle voted for the contract and the resolution passed without discussion by a vote of 6-0. Several months after completion of the purchase, the other directors learned of Raskle’s interest in Fielding’s Office Supply and called on him to account to the company for any profit made. He admitted the ownership and a profit but referred to a provision in the articles of the company and also in his employment contract that provided that he, like the other directors, was relieved from his fiduciary duty to the company. Which one of the following is true? Answer Selected Answer: Raskle must account for any profit made as a director because he failed to disclose his interest and voted on the question. Correct Answer: Raskle must account for any profit made as a director because he failed to disclose his interest and voted on the question. Answer Feedback: You are correct! Directors must disclose to the other directors the fact that they stand to benefit from a contract with the corporation and must account for any profit from the impugned transaction. (Topic 10.5) Source: Ruth Yates, Business Law in Canada: Test Item File, 6th edition (Prentice Hall, 2002), Question 34, page 503. ISBN: 0-13-088202-X ·  Question 7 0.5 out of 0.5 points Wolfgang is a dog breeder and the owner of Canine Co. He is also a director of Guard Co. which provides guard-dog services to various corporations. Guard Co. wants a steady and reliable supply of dogs for training and negotiates with various kennels. It also negotiates with Canine Co. Which of the following is true? Answer Selected Answer: Wolfgang cannot vote as a director of Guard Co. on the proposed contract with Canine Co. Correct Answer: Wolfgang cannot vote as a director of Guard Co. on the proposed contract with Canine Co. Answer Feedback: You are correct! A director has a fiduciary duty to the corporation and must disclose to the corporation that he or she stands to benefit from a contract with the corporation, and is not allowed to vote. (Topic 10.5) ·  Question 8 0.5 out of 0.5 points How can the relief from oppression remedy best be described? Answer Selected Answer: The right of a shareholder to have the court appoint a receiver to take control of the company or to provide for its dissolution if it feels that the shareholder’s complaint is justified. Correct Answer: The right of a shareholder to have the court appoint a receiver to take control of the company or to provide for its dissolution if it feels that the shareholder’s complaint is justified. Answer Feedback: You are correct! The relief from oppression remedy gives a shareholder the right to go to court when, for example, the directors arrange for the sale of shares just to weaken the voting position of a particular shareholder, or fire an employee-shareholder to force the sale of the shares. The court may appoint a receiver to take control of the company or to provide for its dissolution if it feels that the shareholder’s complaint is justified. (Topic 10.7) ·  Question 9 0.5 out of 0.5 points Which one of the following is an example of breach of fiduciary duty? Answer Selected Answer: An officer of the company learned of a business opportunity intended for the company and intercepted it for his own benefit. Correct Answer: An officer of the company learned of a business opportunity intended for the company and intercepted it for his own benefit. Answer Feedback: You are correct! Directors cannot take personal advantage of corporate opportunities. (Topic 10.5) Source: Ruth Yates, Business Law in Canada: Test Item File, 6th edition (Prentice Hall, 2002), Question 12, page 493. ISBN: 0-13-088202-X ·  Question 10 0.5 out of 0.5 points Because the director of a closely-held company breached his duties to the company, the company lost $15,000. Despite the urging of the shareholders, the board of directors refused to begin an action on behalf of the company. Which one of the following provisions of the Company Act would aid the shareholders? Answer Selected Answer: Derivative action Correct Answer: Derivative action Answer Feedback: You are correct! A derivative action gives shareholders the right to sue directors on behalf of the company when the directors have done something actionable and the board will not act. (Topic 10.7). Source: Ruth Yates, Business Law in Canada: Test Item File, 6th edition (Prentice Hall, 2002), Question 1, page 489. ISBN: 0-13-088202-X ·  Question 11 0.5 out of 0.5 points Failed Co. has gone bankrupt. It owes some unpaid wages to its employees. It paid out a dividend just before declaring itself bankrupt. It also owes some money to ABC Credit. It has also breached some environmental laws. Which of the following is true? Answer Selected Answer: The directors are liable for the unpaid wages and for the amounts paid out as dividends, and potentially liable for breach of the environmental laws. Correct Answer: The directors are liable for the unpaid wages and for the amounts paid out as dividends, and potentially liable for breach of the environmental laws. Answer Feedback: You are correct! The directors are liable for the unpaid wages (up to $2,000 for each employee) and for the amounts paid out as dividends when the corporation was insolvent, and potentially liable for breach of the environmental laws. (Topic 10.5) ·  Question 12 0.5 out of 0.5 points ABC Co. is a closely-held company. Two of the shareholders serve as directors. As directors, they’ve voted to issue themselves more shares to increase their voting control of the company. Which of the provisions of the Act governing companies, if granted by a shareholder agreement or the incorporating documents, would aid the other shareholders? Answer Selected Answer: Preemptive right Correct Answer: Preemptive right Answer Feedback: You are correct! A preemptive right is the right to purchase a portion of any new share offering proportionately equal to a shareholder’s present holding in order to allow the shareholder to maintain its percentage of ownership. (Topic 10.7) Source: Ruth Yates, Business Law in Canada: Test Item File, 6th edition (Prentice Hall, 2002), Question 2, page 489. N: 0-13-088202-X   > Subject: RE: {LW1 Summer} Quiz #5 > Date: Sun, 12 Aug 2012 22:14:48 -0400 > From: mar...@dmsproperty.com > To: lw1-s...@googlegroups.com; lw1-s...@googlegroups.com; lw1-s...@googlegroups.com > > Attached is my Quiz 5. Good luck to everyone in Final exam, and thanks to all of you for the great support :) > > > -----Original Message----- > From: lw1-s...@googlegroups.com on behalf of Maryam Jan Mohammadi > Sent: Sun 8/12/2012 9:22 PM > To: lw1-s...@googlegroups.com; lw1-s...@googlegroups.com > Subject: RE: {LW1 Summer} Quiz #5 > > > Got it from a friend. Not done with mine yet :( > > -----Original Message----- > From: lw1-s...@googlegroups.com on behalf of Lori Roberts > Sent: Sun 8/12/2012 8:35 PM > To: lw1-s...@googlegroups.com > Subject: RE: {LW1 Summer} Quiz #5 > > > Here's my quiz #5. Good luck on the exam everyone! Question 1 > > 0.5 out of 0.5 points > > > > > > > > > > > Failed Co. has gone > bankrupt. It owes some unpaid wages to its employees. It paid out a dividend > just before declaring itself bankrupt. It also owes some money to ABC Credit. It > has also breached some environmental laws. Which of the following is > true?Answer > > > > > > Selected Answer: > > The directors are liable for the > unpaid wages and for the amounts paid out as dividends, and potentially liable > for breach of the environmental laws. > > Correct Answer: > > The directors are liable for the > unpaid wages and for the amounts paid out as dividends, and potentially liable > for breach of the environmental laws. > > Answer Feedback: > > You are correct! The directors > are liable for the unpaid wages (up to $2,000 for each employee) and for the > amounts paid out as dividends when the corporation was insolvent, and > potentially liable for breach of the environmental laws. (Topic > 10.5) > > > > Question 2 > > 0.5 out of 0.5 points > > > > > > > > > > > Which of the > following most accurately describes a duty of a director of a corporation > and a duty of a shareholder?Answer > > > > > > Selected Answer: > > A shareholder and a director > cannot use insider information for their own purposes. > > Correct Answer: > > A shareholder and a director > cannot use insider information for their own purposes. > > Answer Feedback: > > You are correct! A shareholder > who has been classified as an insider has the same obligation as a director not > to use insider information for his or her own benefit or for the benefit of > friends or relatives. (Topics 10.3 and > 10.5) > > > > Question 3 > > 0.5 out of 0.5 points > > > > > > > > > > > With regard to > company law, which one of the following is true?Answer > > > > > > Selected Answer: > > A creditor of a company could sue > if the directors of the company voted for a resolution to pay a dividend when > the company was insolvent. > > Correct Answer: > > A creditor of a company could sue > if the directors of the company voted for a resolution to pay a dividend when > the company was insolvent. > > Answer Feedback: > > You are correct! Directors will > be personally liable to creditors of the corporation for any amounts paid out as > dividends if the corporation is insolvent. (Topic 10.3) > Source: Ruth Yates, Business Law in Canada: Test Item File, 6th edition > (Prentice Hall, 2002), Question 20, page 496. ISBN: > 0-13-088202-X > > > > Question 4 > > 0.5 out of 0.5 points > > > > > > > > > > > Because the > director of a closely-held company breached his duties to the company, the > company lost $15,000. Despite the urging of the shareholders, the board of > directors refused to begin an action on behalf of the company. Which one of the > following provisions of the Company Act would aid the > shareholders?Answer > > > > > > Selected Answer: > > Derivative action > > Correct Answer: > > Derivative action > > Answer Feedback: > > You are correct! A derivative > action gives shareholders the right to sue directors on behalf of the company > when the directors have done something actionable and the board will not act. > (Topic 10.7). > Source: Ruth Yates, Business Law in Canada: Test Item File, 6th edition > (Prentice Hall, 2002), Question 1, page 489. ISBN: > 0-13-088202-X > > > > Question 5 > > 0.5 out of 0.5 points > > > > > > > > > > > Ruth Sullivan, an > employee of Zoltron Ltd., was authorized by the board of directors to purchase > lot A from Stone Bros. Ltd. Although there were no restrictions set out in the > incorporating documents, there were several internal rules for such sales. > Contrary to these rules, she used Form 3 instead of Form 5 and obtained the > signature of the president instead of the secretary when she entered into the > contract on behalf of the company for lot A. Which one of the following is > true?Answer > > > > > > Selected Answer: > > The company would be bound if > Stone Bros. Ltd. did not know of the irregularity and could not reasonably have > known of it. > > Correct Answer: > > The company would be bound if > Stone Bros. Ltd. did not know of the irregularity and could not reasonably have > known of it. > > Answer Feedback: > > You are correct! According to the > indoor management rule, a corporation cannot claim that it has not followed its > own rules and procedures and thus avoid responsibility for the actions of its > agents. As long as the agent is acting within the scope of its apparent > authority and the third party has no notice of any irregularity, there is no > need for the third party to enquire further if the authority appears to be in > order. (Topic 10.4) > Source: Ruth Yates, Business Law in Canada: Test Item File, 6th edition > (Prentice Hall, 2002), Question 49, page 509. ISBN: > 0-13-088202-X > > > > Question 6 > > 0.5 out of 0.5 points > > > > > > > > > > > What information do > shareholders have the right to obtain?Answer > > > > > > Selected Answer: > > Documents of incorporation, lists > of all shareholders, lists of officers and directors, and audited financial > statements > > Correct Answer: > > Documents of incorporation, lists > of all shareholders, lists of officers and directors, and audited financial > statements > > Answer Feedback: > > You are correct! Shareholders > have a right to obtain certain information: documents of incorporation, lists of > all shareholders, lists of officers and directors, and audited financial > statements. (Topic > 10.6) > > > > Question 7 > > 0.5 out of 0.5 points > > > > > > > > > > > The shareholders > are the owners of the corporation. Which of the following statements is > true?Answer > > > > > > Selected Answer: > > Shareholders do not own the > assets of the corporation. They do not have the power to bind the > corporation. > > Correct Answer: > > Shareholders do not own the > assets of the corporation. They do not have the power to bind the > corporation. > > Answer Feedback: > > You are correct! The corporation > owns its assets. Directors and officers have the power to bind the corporation. > (Topic 10.3) > > > > Question 8 > > 0.5 out of 0.5 points > > > > > > > > > > > Which of the > following statements correctly describes the effect of the indoor management > rule on corporate behaviour?Answer > > > > > > Selected Answer: > > According to the indoor > management rule, a corporation cannot claim that it has not followed its own > rules and procedures and avoid responsibility for the actions of its > officers. > > Correct Answer: > > According to the indoor > management rule, a corporation cannot claim that it has not followed its own > rules and procedures and avoid responsibility for the actions of its > officers. > > Answer Feedback: > > You are correct! According to the > indoor management rule, a corporation cannot claim that it has not followed its > own rules and procedures and thus avoid responsibility for the actions of its > agents. As long as the agent is acting within the scope of its apparent > authority and the third party has no notice of any irregularity, there is no > need for the third party to enquire further if the authority appears to be in > order. (Topic > 10.4) > > > > Question 9 > > 0.5 out of 0.5 points > > > > > > > > > > > TV Network is > negotiating a contract with Indie Productions for Indie to produce a new > television cooking series that TV would broadcast. The negotiations fail because > TV is not ready to meet Indie's asking price to produce the series. Albert > resigns his position as president of Indie and forms a new corporation, New Co. > New Co. successfully negotiates a contract with TV to produce a new television > cooking show. Which of the following statements is correct?Answer > > > > > > Selected Answer: > > Albert has a fiduciary duty to > Indie which survives his resignation from Indie. > > Correct Answer: > > Albert has a fiduciary duty to > Indie which survives his resignation from Indie. > > Answer Feedback: > > You are correct! Albert had been > an executive of Indie Co., so he owes a fiduciary duty to the corporation even > though he has resigned. He must not take personal advantage of corporate > opportunities. (Topic > 10.5) > > > > Question 10 > > 0.5 out of 0.5 points > > > > > > > > > > > What is the > standard of care that a director owes to the corporation?Answer > > > > > > Selected Answer: > > A director is liable for harm > caused in the exercise of his or her duties if his or her behaviour does not > meet the standard of a reasonably prudent person. > > Correct Answer: > > A director is liable for harm > caused in the exercise of his or her duties if his or her behaviour does not > meet the standard of a reasonably prudent person. > > Answer Feedback: > > You are correct! A director is > liable for harm caused in the exercise of his or her duties if his or her > behaviour falls below the standard of a reasonably prudent person. (Topic > 10.5) > > > > Question 11 > > 0.5 out of 0.5 points > > > > > > > > > > > Larkson is a > director of Cargate Inc. The company is thinking about buying some land in which > Larkson owns part interest. What should Larkson do at the board of directors > meeting where this is discussed and voted on?Answer > > > > > > Selected Answer: > > Disclose his interest in the land > and abstain from voting on the matter because this is a potential conflict of > interest > > Correct Answer: > > Disclose his interest in the land > and abstain from voting on the matter because this is a potential conflict of > interest > > Answer Feedback: > > You are correct! Larkson must not > vote on the matter because of the potential conflict of interest, but he must > also disclose his interest to the board before it votes on the matter. (Topic > 10.4) > > > > Question 12 > > 0.5 out of 0.5 points > > > > > > > > > > > ABC Co. is a > closely-held company. Two of the shareholders serve as directors. As directors, > they've voted to issue themselves more shares to increase their voting control > of the company. Which of the provisions of the Act governing companies, if > granted by a shareholder agreement or the incorporating documents, would aid the > other shareholders?Answer > > > > > > Selected Answer: > > Preemptive right > > Correct Answer: > > Preemptive right > > Answer Feedback: > > You are correct! A preemptive > right is the right to purchase a portion of any new share offering > proportionately equal to a shareholder's present holding in order to allow the > shareholder to maintain its percentage of ownership. (Topic 10.7) > Source: Ruth Yates, Business Law in Canada: Test Item File, 6th edition > (Prentice Hall, 2002), Question 2, page 489. N: > 0-13-088202-X > > Sunday, August 12, 2012 8:27:06 PM EDT > OK > > > > > > > > > > > Date: Sun, 12 Aug 2012 12:56:35 -0700 > From: liliana.c...@gmail.com > To: lw1-s...@googlegroups.com > Subject: {LW1 Summer} Quiz #5 > > Hi Everyone, Please see my quiz #5. I hope this helps you. Now onto studying for the exam. (Yikkeeesss...not looking forward to it) Question 1 > > 0.5 out of 0.5 points > > > > > > > > > > > Which of the > following statements correctly describes the effect of the indoor management > rule on corporate behaviour?Answer > > > > > > Selected Answer: > > According to the indoor > management rule, a corporation cannot claim that it has not followed its own > rules and procedures and avoid responsibility for the actions of its > officers. > > Correct Answer: > > According to the indoor > management rule, a corporation cannot claim that it has not followed its own > rules and procedures and avoid responsibility for the actions of its > officers. > > Answer Feedback: > > You are correct! According to the > indoor management rule, a corporation cannot claim that it has not followed its > own rules and procedures and thus avoid responsibility for the actions of its > agents. As long as the agent is acting within the scope of its apparent > authority and the third party has no notice of any irregularity, there is no > need for the third party to enquire further if the authority appears to be in > order. (Topic > 10.4) > > > > Question 2 > > 0.5 out of 0.5 points > > > > > > > > > > > Which one of the > following statements about the separate legal existence of a corporation is > true?Answer > > > > > > Selected Answer: > > The corporation has a legal > existence separate from its shareholders, directors, and managers or officers. > The shareholders enjoy the financial advantage of limited liability to the > extent of their capital contribution only. Shareholders may be held responsible > for the debts of the corporation in exceptional circumstances. > > Correct Answer: > > The corporation has a legal > existence separate from its shareholders, directors, and managers or officers. > The shareholders enjoy the financial advantage of limited liability to the > extent of their capital contribution only. Shareholders may be held responsible > for the debts of the corporation in exceptional circumstances. > > Answer Feedback: > > You are correct! Shareholders may > be responsible for the debts of the corporation when the corporation is used to > perpetuate a fraud. The courts will then lift the corporate veil in order to > prevent abuse of the concept of corporation. (Topic > 10.3) > > > > Question 3 > > 0.5 out of 0.5 points > > > > > > > > > > > One of the > fundamental aspects of corporate law is that the shareholders in a business have > limited liability. What is required for a shareholder to become liable to > creditors of the corporation?Answer > > > > > > Selected Answer: > > Lifting of the corporate veil to > identify an individual who controls the corporation, used that control to commit > a fraud, and caused the plaintiff's injury through this > misconduct. > > Correct Answer: > > Lifting of the corporate veil to > identify an individual who controls the corporation, used that control to commit > a fraud, and caused the plaintiff's injury through this > misconduct. > > Answer Feedback: > > You are correct! When the courts > lift the corporate veil, they expose individual shareholders to liability. For > this to happen, three specific conditions must be met: an individual must > control the corporation, that control must have been exercised to commit a > fraud, and the misconduct must be the cause of the plaintiff's injury. (Topic > 10.3) > > > > Question 4 > > 0 out of 0.5 points > > > > > > > > > > > What is the role of > bylaws and how do they come into effect?Answer > > > > > > Selected Answer: > > Bylaws are the rules that govern > the operation of the corporation and must be approved by the board of directors > in order to come into effect. > > Correct Answer: > > Bylaws are the rules that govern > the operation of the corporation and must be approved by a majority of the > shareholders present and voting at a general meeting in order to come into > effect. > > Answer Feedback: > > Incorrect. The board of directors > alone cannot approve bylaws. They must be approved by the majority of > shareholders. The correct answer is, bylaws are the rules that govern the > operation of the corporation and must be approved by a majority of the > shareholders present and voting at a general meeting. (Topic > 10.1) > > > > Question 5 > > 0.5 out of 0.5 points > > > > > > > > > > > Which one of these > is true?Answer > > > > > > Selected Answer: > > A corporation is bound by the > acts of its officers as long as they are acting within the scope of their > apparent authority. > > Correct Answer: > > A corporation is bound by the > acts of its officers as long as they are acting within the scope of their > apparent authority. > > Answer Feedback: > > You are correct! A corporation is > bound by the acts of its officers as long as they are acting within the scope of > their apparent authority. (Topic > 10.4) > > > > Question 6 > > 0 out of 0.5 points > > > > > > > > > > > Which of the > following does a shareholder bringing a derivative action need to > show?Answer > > > > > > Selected Answer: > > That the directors are acting in > bad faith > > Correct Answer: > > That the directors will not bring > the action > > Answer Feedback: > > Incorrect. The shareholder must > show that the shareholders are acting in good faith, not that the directors are > acting in bad faith. The correct answer is, a derivative action occurs when > shareholders bring an action, with permission of the courts, in the name of a > corporation in respect of a wrong done to the corporation. In order to obtain > permission for a derivative action, the shareholders must prove 1) that the > directors will not bring an action; 2) that the shareholders are acting in good > faith; and 3) that the action is in the best interests of the corporation or > shareholders. (Topic > 10.7) > > > > Question 7 > > 0.5 out of 0.5 points > > > > > > > > > > > Which of the > following statements accurately describes the rights of > shareholders?Answer > > > > > > Selected Answer: > > The shareholders have the right > to elect the members of the board of directors, and to certain information about > the corporation. > > Correct Answer: > > The shareholders have the right > to elect the members of the board of directors, and to certain information about > the corporation. > > Answer Feedback: > > You are correct! The shareholders > have the right to elect the members of the board of directors and to certain > information about the corporation (Topic > 10.6). > > > > Question 8 > > 0.5 out of 0.5 points > > > > > > > > > > > Forget Me Not Co. > is a nursery business. The majority shareholders decide to sell the inventory > and not to replace it. What remedy is available to the minority > shareholders?Answer > > > > > > Selected Answer: > > File a dissent > > Correct Answer: > > File a dissent > > Answer Feedback: > > You are correct! If a decision by > the majority of the shareholders has a negative impact on the minority > shareholders, the dissenting shareholders can, with the approval of the courts, > force the majority to purchase their shares at a fair price. (Topic > 10.7) > > > > Question 9 > > 0.5 out of 0.5 points > > > > > > > > > > > With regard to > company law, which one of the following is true?Answer > > > > > > Selected Answer: > > A creditor of a company could sue > if the directors of the company voted for a resolution to pay a dividend when > the company was insolvent. > > Correct Answer: > > A creditor of a company could sue > if the directors of the company voted for a resolution to pay a dividend when > the company was insolvent. > > Answer Feedback: > > You are correct! Directors will > be personally liable to creditors of the corporation for any amounts paid out as > dividends if the corporation is insolvent. (Topic 10.3) > Source: Ruth Yates, Business Law in Canada: Test Item File, 6th edition > (Prentice Hall, 2002), Question 20, page 496. ISBN: > 0-13-088202-X > > > > Question 10 > > 0.5 out of 0.5 points > > > > > > > > > > > What is meant when > shareholders have pre-emptive rights?Answer > > > > > > Selected Answer: > > Rights to retain their > proportionate holdings in a corporation > > Correct Answer: > > Rights to retain their > proportionate holdings in a corporation > > Answer Feedback: > > You are correct! Pre-emptive > rights mean that shareholders have the right to retain their proportionate > holdings in a corporation. (Topic > 10.6) > > > > Question 11 > > 0.5 out of 0.5 points > > > > > > > > > > > Which one of the > following is true with regard to the shareholders of a > corporation?Answer > > > > > > Selected Answer: > > The shareholders of a corporation > have limited liability for its debts. > > Correct Answer: > > The shareholders of a corporation > have limited liability for its debts. > > Answer Feedback: > > You are correct! Shareholders are > only liable for the amount of their initial investment in the corporation. > (Topic 10.3) > > > > Question 12 > > 0.5 out of 0.5 points > > > > > > > > > > > A corporation may > be created in which of the following manners?Answer > > > > > > Selected Answer: > > Articles of incorporation, > letters patent, and memorandum of association > > Correct Answer: > > Articles of incorporation, > letters patent, and memorandum of association > > Answer Feedback: > > You are correct! Corporations may > be created by statute, memorandum of association, letters patent or articles of > incorporation. (Topic 10.1) > > > > -- > > > > > > > > > -- > > > > > > -- > > > > > > -- > > > --       --       --       --