Question 1

John and George wish to incorporate their manufacturing business and intend to manufacture and sell their products throughout Canada.In such a case,they should consider incorporating

Accepted Answer

A)  a federal company.
B)  an international company.
C)  a professional corporation.
D)  a private provincial company.
E)  none of the aboveF) A) and B)
G) A) and C) A

Question 2

Mario Black has,along with two others,formed a corporation to market specialized computer software.Each partner initially purchased ten common shares at $10 a piece,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.

Accepted Answer

Three ways of raising $25 000 would include: (1)selling additional shares in the corporation,(2)borrowing money from the shareholders (by way of shareholders' loans),and (3)borrowing money from external sources by issuing bonds or promissory notes.(1)Equity is beneficial from the company's standpoint because it is carried as an asset and not as a liability.The person supplying the equity,however,is not entitled to the return of his or her money because he or she becomes a shareholder and not a creditor.(2)Shareholders' loans,if the corporation is dissolved,are repaid prior to the distribution of funds to shareholders.If only one shareholder is going to inject the $25 000,she or he may be glad to have that priority.(3)Debt instruments such as bonds or promissory notes are carried by the corporation as a liability on its books.The interest on these instruments would be a legal obligation.If the corporation has pledged any assets in support of the debt,upon dissolution,they would be available to the secured creditors,giving them priority over unsecured creditors and shareholders.A combination of the above three ways of raising money might be appropriate.

Question 3

Elvin inherited 1000 shares of 7 percent preferred.She has been assured by her broker that the company is in sound financial health even though it did not pay any dividends this year.Elvin should next find out whether

Accepted Answer

A)  this preferred stock qualifies for the dividend tax credit.
B)  rights are cumulative.
C)  there is any collateral for these shares.
D)  rights are participating.
E)  the preferred stock is included under the registered class rights.F) A) and C)
G) D) and E)

Question 4

The doctrine of ultra vires,as applied to corporations,has now been abolished throughout Canada.This means that Canadian corporations

Accepted Answer

A)  do not have the capacity and all the rights,powers,and privileges of a natural person.
B)  can only act through the authority vested in their agents.
C)  cannot be held to contracts entered into that are outside of their charter.
D)  cannot act beyond their constitutional powers.
E)  have broadened powers and capacity to contract.F) A) and B)
G) A) and E)

Question 5

The ultra vires doctrine applies in most provinces in Canada.

Accepted Answer

A) True 
 B)False

Question 6

Megacorp Ltd.is a large private Ontario construction company in which Albert,John,and Michael are the shareholders and George,Mary,and Sam are the directors.Recently,Albert and John started up a building supplies business,which now has a contract to provide building supplies to Megacorp Ltd.However,Michael objects to this.In this situation

Accepted Answer

A)  Michael is not correct in objecting because Albert and John have no fiduciary duty to Megacorp Ltd.
B)  Michael is correct in objecting because Albert and John are shareholders in Megacorp Ltd.
C)  Michael is correct in objecting because Albert and John have a fiduciary duty to Megacorp Ltd.
D)  Michael is not correct in objecting because Albert and John have a duty of good faith to Megacorp Ltd.
E)  none of the aboveF) A) and B)
G) All of the above A

Question 7

A professional corporation is a special type of corporation that may be established by members of a profession.

Accepted Answer

A) True 
 B)False

Question 8

In both theory and reality,a corporation always protects the liability of its shareholders.

Accepted Answer

A) True 
 B)False

Question 9

A corporation can sue and be sued in its own name.

Accepted Answer

A) True 
 B)False

Question 10

There is no practical difference between the rights of a shareholder and those of the holder of a debenture.

Accepted Answer

A) True 
 B)False

Question 11

What is the doctrine of ultra vires in corporate law and what is its current effect across Canada?

Accepted Answer

Ultra vires means "beyond the powers of ...

Question 12

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

Accepted Answer

Even though the CBCA is especially suita...

Question 13

Under the articles of incorporation system,a corporation is formed by filing articles of incorporation in the prescribed form,filing a shareholder's agreement,and paying the required registration fee.

Accepted Answer

A) True 
 B)False

Question 14

In a private corporation without a shareholders agreement,why would it be necessary to restrict the transfer of shares by first requiring the consent of the board of directors?

Accepted Answer

In most private corporations,the incorpo...

Question 15

A private corporation is one that is not permitted to offer its shares to the public.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)  The number of shareholders is restricted.
B)  The directors of the company are prohibited from holding more than 60 percent of the outstanding shares.
C)  The number of required shareholders can be as small as one.
D)  Any invitation to the public to buy shares is prohibited.
E)  The right to transfer shares must be restricted in some manner.F) All of the above
G) A) and E)

Question 17

A,B,and C are three lawyers who want to start a construction business.Each has enough capital to invest in the business to avoid borrowing money from the bank,and all of them want to limit their liability as much as possible while having a role in the management and operation of the business.In this case,they can protect themselves by

Accepted Answer

A)  setting up a limited partnership.
B)  setting up a joint venture.
C)  setting up a partnership.
D)  setting up a limited liability partnership.
E)  incorporating a company.F) A) and D)
G) A) and E)

Question 18

In comparison with a partnership,which of the following is NOT considered to be an advantage of the corporate form of business?

Accepted Answer

A)  limited liability
B)  continuous existence
C)  duty of good faith
D)  transfer of ownership
E)  professional managementF) C) and D)
G) A) and B)

Question 19

Share and bond certificates are a type of

Accepted Answer

A)  real property capable of being registered on title.
B)  personal property known as negotiable instruments.
C)  choses in possession capable of being sold.
D)  goods capable of being sold or transferred.
E)  evidence of continuity of business.F) B) and D)
G) B) and C)

Question 20

John,Susan,and Terence retain a lawyer to incorporate a company that they expect will be taken public in the future.What basic information should the lawyer give to them concerning the incorporating documents?

Accepted Answer

All companies are initially incorporated...

Exam 25: The Nature of a Corporation and Its Formation

John and George wish to incorporate their manufacturing business and intend to manufacture and sell their products throughout Canada.In such a case,they should consider incorporating

Correct Answer
verified
A

Elvin inherited 1000 shares of 7 percent preferred.She has been assured by her broker that the company is in sound financial health even though it did not pay any dividends this year.Elvin should next find out whether

Correct Answer
verified

The doctrine of ultra vires,as applied to corporations,has now been abolished throughout Canada.This means that Canadian corporations

Correct Answer
verified

The ultra vires doctrine applies in most provinces in Canada.

Correct Answer
verified

Correct Answer
verified
A

A professional corporation is a special type of corporation that may be established by members of a profession.

Correct Answer
verified

In both theory and reality,a corporation always protects the liability of its shareholders.

Correct Answer
verified

A corporation can sue and be sued in its own name.

Correct Answer
verified

There is no practical difference between the rights of a shareholder and those of the holder of a debenture.

Correct Answer
verified

What is the doctrine of ultra vires in corporate law and what is its current effect across Canada?

Correct Answer
verified
Ultra vires means "beyond the powers of ...
View Answer

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

Correct Answer
verified
Even though the CBCA is especially suita...
View Answer

Under the articles of incorporation system,a corporation is formed by filing articles of incorporation in the prescribed form,filing a shareholder's agreement,and paying the required registration fee.

Correct Answer
verified

In a private corporation without a shareholders agreement,why would it be necessary to restrict the transfer of shares by first requiring the consent of the board of directors?

Correct Answer
verified
In most private corporations,the incorpo...
View Answer

A private corporation is one that is not permitted to offer its shares to the public.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

In comparison with a partnership,which of the following is NOT considered to be an advantage of the corporate form of business?

Correct Answer
verified

Share and bond certificates are a type of

Correct Answer
verified

John,Susan,and Terence retain a lawyer to incorporate a company that they expect will be taken public in the future.What basic information should the lawyer give to them concerning the incorporating documents?

Correct Answer
verified
All companies are initially incorporated...
View Answer

Exam 25: The Nature of a Corporation and Its Formation

John and George wish to incorporate their manufacturing business and intend to manufacture and sell their products throughout Canada.In such a case,they should consider incorporating

Correct AnswerverifiedA

Elvin inherited 1000 shares of 7 percent preferred.She has been assured by her broker that the company is in sound financial health even though it did not pay any dividends this year.Elvin should next find out whether

Correct AnswerverifiedShow Answer

The doctrine of ultra vires,as applied to corporations,has now been abolished throughout Canada.This means that Canadian corporations

Correct AnswerverifiedShow Answer

The ultra vires doctrine applies in most provinces in Canada.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA

A professional corporation is a special type of corporation that may be established by members of a profession.

Correct AnswerverifiedShow Answer

In both theory and reality,a corporation always protects the liability of its shareholders.

Correct AnswerverifiedShow Answer

A corporation can sue and be sued in its own name.

Correct AnswerverifiedShow Answer

There is no practical difference between the rights of a shareholder and those of the holder of a debenture.

Correct AnswerverifiedShow Answer

What is the doctrine of ultra vires in corporate law and what is its current effect across Canada?

Correct AnswerverifiedUltra vires means "beyond the powers of ...View AnswerShow Answer

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

Correct AnswerverifiedEven though the CBCA is especially suita...View AnswerShow Answer

Under the articles of incorporation system,a corporation is formed by filing articles of incorporation in the prescribed form,filing a shareholder's agreement,and paying the required registration fee.

Correct AnswerverifiedShow Answer

In a private corporation without a shareholders agreement,why would it be necessary to restrict the transfer of shares by first requiring the consent of the board of directors?

Correct AnswerverifiedIn most private corporations,the incorpo...View AnswerShow Answer

A private corporation is one that is not permitted to offer its shares to the public.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In comparison with a partnership,which of the following is NOT considered to be an advantage of the corporate form of business?

Correct AnswerverifiedShow Answer

Share and bond certificates are a type of

Correct AnswerverifiedShow Answer

John,Susan,and Terence retain a lawyer to incorporate a company that they expect will be taken public in the future.What basic information should the lawyer give to them concerning the incorporating documents?

Correct AnswerverifiedAll companies are initially incorporated...View AnswerShow Answer

Correct Answer
verified
A

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A

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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Ultra vires means "beyond the powers of ...
View Answer

Correct Answer
verified
Even though the CBCA is especially suita...
View Answer

Correct Answer
verified

Correct Answer
verified
In most private corporations,the incorpo...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
All companies are initially incorporated...
View Answer