Chapter 16 The Corporate Form: Operational Matters: Multiple Choice

Chapter 16 The Corporate Form: Operational Matters
MULTIPLE CHOICE
1. In which areas of law were rules were developed to determine the legal
consequences of corporate behaviour?
a. torts, crimes, agency, and equity
b. torts, contracts, crimes, and regulatory offences
c. agency, torts, contracts, and equity
d. agency, contracts, torts, and regulatory offences
ANS: B PTS: 1 DIF: Easy REF: 367
BLM: Remember
2. What do primary liability and vicarious liability have in common?

a. A corporation is subject to accountability for both.
b. A corporation cannot be assessed for either using the identification theory.
c. Both require the directing mind to share liability from the corporation.
d. Both are irrelevant to actual or apparent authority.
ANS: A PTS: 1 DIF: Medium REF: 367
BLM: Understand
3. The senior vice president of marketing surprised everyone at the meeting with
his decision to use the initials “HjW” on the labels of T-Shirt Corp.’s toddlers’ T-shirt line. The
likelihood of ensuing confusion with a competitor’s products in that market was obvious to all
present. If asked to assess responsibility for liability for wrongdoing in these circumstances,
would a court apply the theory that holds a corporation directly at fault for the commission of
this wrongful act?
a. Yes, through the application of vicarious liability principle.
b. Yes, through application of the identification theory.
c. No; the area of primary liability is inherently problematic.
d. No; the courts generally have not followed this approach.
ANS: B PTS: 1 DIF: Medium REF: 367
BLM: Evaluate
4. What commercial inconvenience involving corporations was resolved by the

abolition of the doctrine of constructive notice?
a. the inability to delegate corporate signing authority to the officers
b. the specific limitation of the authority of a corporation’s agents
c. the inability to rely on the apparent authority of corporate agents to contract
d. the specific limitation of an agent’s authority to contract
ANS: C PTS: 1 DIF: Medium REF: 368
BLM: Remember
5. In litigation involving a promoter, one of the parties named in a contract is

described as an entity yet to be incorporated. Under what circumstances will a court find the
promoter NOT to be personally liable?
a. if a specific advantage of a valuable business opportunity exists
b. if a specific provision expressly relieves such liability
c. if the corporation has committed a crime
d. if the directing mind has committed a crime
ANS: B PTS: 1 DIF: Challenging REF: 368
BLM: Understand
6. Which of the following is a distinguishing characteristic of pre-incorporation

contracts?
a. They can be entered into only on behalf of a shelf company.
b. They are the sole vehicle for doing corporate business quickly.
c. They are governed by federal and provincial statutes.
d. They pose the same conceptual problems as tort liability.
BLM: Remember
7. Why is it preferable for risk management to use a shelf company as the vehicle
for taking prompt advantage of a valuable business opportunity?
a. Outsiders retain liability if the corporation fails to come into existence.
b. It facilitates direct entrance into contractual obligations by the corporation.
c. It facilitates the ability of promoters to sign in a personal capacity.
d. Outsiders are restricted from relying on the apparent authority of agents.
BLM: Understand
8. The judge’s review of the evidence confirmed the parties did not indicate who
they intend to be liable if their contemplated new corporate entity fails to come into existence.
In which of the following circumstances is such a finding likely to be most problematic?
a. in a pre-incorporation contract
b. if the identification theory applies
c. where the contract is in writing
d. if there is criminal liability
BLM: Evaluate
9. What is the authority an individual must possess to trigger an organization’s

criminal liability?
a. the authority to enact organizational policy
b. the authority to act as a subordinate manager
c. the authority as the directing mind who commits the offence
d. a combined authority with two or more individuals in a single chain of command
ANS: A PTS: 1 DIF: Easy REF: 369
BLM: Remember
10. What factor would a court now consider when setting fines since the new
amendments to the Criminal Code were made?
a. the ability to pay
b. public opinion
c. moral blameworthiness
d. the inexperience of the directors
BLM: Analyze
11. An oil company has been found guilty of an environmental crime. What must a
court use in order to ensure remedial steps are undertaken to prevent the likelihood of a
subsequent offence?
a. a summary conviction for the offending act, together with a fine of up to $100 000
b. a probation order giving court oversight and regulation of reforming efforts
c. an accounting of profits from economic advantage gained by the commission of
crime
d. a summary conviction for the offence and a fine of greater than $25 000
BLM: Analyze
12. What type of liability is imposed by a court where it is not open to the accused
to show he was without fault?
a. primary liability
b. absolute liability
c. vicarious liability
d. strict liability
BLM: Analyze
13. Which of the following would allow a party to avoid strict liability for a
statutory offence?
a. showing reasonable care and due diligence
b. showing a lack of moral blameworthiness
c. showing the potential for rehabilitation
d. publishing the offence in the media
ANS: A PTS: 1 DIF: Challenging REF: 372
BLM: Evaluate
14. Ravi Inc. has been fined 10 percent of the amount it owed because it was the
organization’s first offence. What offence has Ravi most likely committed?
a. a workplace safety offence causing the loss of a worker’s limb
b. wilfully neglecting to pay fines for parking violations
c. failing to remit income tax deducted at source
d. failing to create a buffer zone to prevent damage to a wildlife habitat
ANS: C PTS: 1 DIF: Easy REF: 372
BLM: Understand
15. What must be used in order to circumvent the general powers of the directors
of a corporation to manage or supervise the ongoing business and affairs of a corporation?
a. provisions made in the bylaws or unanimous shareholders agreement
b. resolution of the majority shareholders of the corporation
c. provisions contained in the bylaws or a shareholders’ agreement
d. unanimous resolution of majority and minority shareholders
BLM: Evaluate
16. Which of the following would be outside of the general authority of directors
with respect to their management of a corporate entity?
a. the delegation of approval of financial statements
b. the appointment of executive managerial officers
c. the drafting of corporate bylaws
d. the preparation of corporate records
BLM: Remember
17. In what way are a duty of competence and a fiduciary duty similar?
a. Both are obligations owed to a corporation’s creditors.
b. Both are strict liability obligations owed to external stakeholders.
c. Directors are relieved from them by delegating authority to officers.
d. Neither is an obligation owed by a director that can be delegated.
ANS: D PTS: 1 DIF: Medium REF: 374 | 377
BLM: Understand
18. Which of the following is a valid criticism of the CSA corporate governance
policies adopted as “best practices” guidelines in June 2005 by the Canadian Securities
Commissions?
a. Enforced mandatory guidelines increase the lifting of the corporate veil.
b. They fail to nationally harmonize securities regulation policies.
c. They fail to enforce the effective oversight of the auditing profession.
d. Non-mandatory guidelines are ineffective compared to enforceable deterrents.
ANS: D PTS: 1 DIF: Challenging REF: 373
BLM: Evaluate
19. Which of the following is a requirement of the CSA rules with respect to
corporate governance reforms?
a. creating an oversight committee composed of subordinate directors
b. creating an audit committee composed of autonomous directors
c. avoiding appointing a maverick individual to the position of chair
d. avoiding circumstances that enable boards to act independently of management
BLM: Remember
20. What is the role of the fiduciary principle in matters with respect to corporate
law relating to governance?
a. to impose duties owed to the board of directors
b. to impose duties owed to the corporation
c. to uphold duties owed to creditors
d. to uphold duties owed to a group of shareholders
BLM: Understand
21. Ingel is a director in MIV Inc., a large, successful software development

company. He entered into a contract involving the sale of software he developed to MIV Inc.
In law, this is a self-dealing contract. Why is it enforceable?
a. Political lobbying efforts have successfully avoided a blanket prohibition of self-
dealing.
b. Ingel’s self-dealing is permissible if the governance committee has given assurance
it is not a rip-off.
c. Ingel provided a written disclosure and abstained from voting on the fair and
reasonable deal.
d. Self-dealing contracts are permissible if an oversight committee has confirmed the
deal is not a rip-off.
BLM: Understand
22. Which of the following is a commonly held characteristic of corporate

opportunities?
a. Most tempt fiduciaries to act with self-interest.
b. They have a very high revenue potential.
c. They can be either pursued or declined.
d. Most give rise to conflict-of-interest situations.
BLM: Remember
23. Which of the following would a court most likely require in order to find there
is no legal impediment to Marion proceeding to pursue a corporate opportunity declined by
the corporation in which she holds a fiduciary position?
a. a resolution enacted by the corporation declining the corporate opportunity
b. a consenting resolution passed by the directors of the corporation
c. a consenting resolution passed by the shareholders of the corporation
d. a resolution enacted by the corporation’s consenting shareholders and directors
BLM: Analyze
24. What common law decision provides the leading analysis of the principles
underlying the corporate opportunity doctrine?
a. Re City Equitable Fire Insurance Co. [1925] 1 Ch 407
b. Canadian Aero Service Ltd. v. O’Malley [1974] S.C.R. 592
c. Peoples Department Store v. Wise (2004), 244 DLR (4th) 564 (S.C.C.)
d. BCE v. 1976 Debenture Holders (2008) SCC 69
BLM: Remember
25. Why would a court consider an accounting of profits to be an appropriate

remedy for a breach of the corporate opportunity doctrine?
a. It is the most obvious remedy available to the courts.
b. It facilitates the return of something that belonged to the corporation.
c. It is a readily available calculation to be made.
d. It facilitates quick and effective punishment for white collar crimes.
BLM: Understand
26. What evidence would strongly support a judge’s examination of facts and
matters giving rise to a question of whether an individual is in breach of a fiduciary duty with
respect to an alleged misappropriation of a corporate opportunity?
a. the quantum of knowledge possessed and factors influencing it being obtained
b. the amount of profits earned by the individual committing the breach of duty
c. the circumstances under which the employment relationship of the officer arose
d. the duration of time an individual has held a fiduciary position with the entity
ANS: A PTS: 1 DIF: Challenging REF: 375
BLM: Evaluate
27. A court has examined evidence regarding how clearly an opportunity had been
identified by a corporation and how close it was to acquiring the opportunity. What subject
was the court seeking to determine?
a. the amount of knowledge the fiduciarys possessed
b. the position or office held by the directors or officers
c. the nature of the corporate opportunity
d. the nature of the fiduciary’s obligation
ANS: C PTS: 1 DIF: Challenging REF: 375
BLM: Analyze
28. In BCE v. 1976 Debenture Holders, (2008) SCC 69, the court opined that the
directors need to treat affected stakeholders fairly, commensurate with the corporation’s duties
as a responsible corporate citizen. Which of the following is a valid criticism of the Supreme
Court’s ruling in this matter?
a. Directors are not bound to consider the interests of various outside stakeholders.
b. Directors are not bound to reverse the effects of pollution on the environment.
c. Little recognition is given to stakeholders such as employees and the community.
d. It fails to elaborate on a corporation’s duties as a responsible corporate citizen.
ANS: D PTS: 1 DIF: Medium REF: 389
BLM: Evaluate
29. In Peoples Department Stores v. Wise (2004), 244 DLR (4th) 564 (S.C.C.), the
court noted that it may be legitimate for directors to consider inter alia the interests of
shareholders, employees, suppliers, creditors, consumers, governments, and the environment.
How does this ruling affect the fiduciary duty owed by directors to act in the best interests of
the corporation?
a. It complicates matters, because directors are now bound to consider these outside
interests.
b. It is inconsequential, because directors are not bound to consider those interests.
c. Duties to the corporations are confounded by duties of corporate social responsibili-
ty.
d. It is inconsequential, because the duty owed to the corporation is relieved by social
responsibility.
BLM: Evaluate
30. The exercise of which of the following is required by a duty owed by directors
or officers that compares them to a reasonably prudent person in comparable circumstances?
a. honesty, skill, and care
b. diligence, honesty, and fairness
c. diligence, skill, and care
d. prudence, fairness, and honesty
BLM: Understand
31. Why was the standard of care of a corporation’s directors and officers codified?
a. The law required an objective standard to ensure that fiduciaries strive for perfec-
tion.
b. The unduly low common law standard of care compromised the duty of
competence.
c. Fiduciaries had to exhibit a greater degree of skill than could reasonably be expect-
ed.
d. Fiduciaries were held to an unreasonably exacting duty of competence.
BLM: Analyze
32. Why is it important that the Supreme Court of Canada has set law in place
allowing creditors to pursue an action based on the obvious and more open-ended duty of
care?
a. The law extends a change in duty in the vicinity of insolvency.
b. The law extends the duty of care beyond the corporation.
c. The duty of care is to be judged subjectively.
d. The court will disregard socioeconomic conditions.
BLM: Understand
33. Isabella and Emily both attended a recent seminar for directors regarding
corporate governance. The seminar focused on the recent departure of certain courts from the
traditional shielding of directors from personal liability where their actions were taken in
furtherance of their duties to the company and their conduct was justifiable. What type of
liability are Emily and Isabella concerned with?
a. liability in tort
b. liability in contract
c. statutory offence liability
d. criminal offence liability
BLM: Understand
34. Which of the following operates in such a way that a corporation is liable, with
respect to contractual obligations, to the outsider as opposed to the directors who acted on the
corporation’s behalf?
a. doctrine of constructive notice
b. principles of indemnification
c. identification principle
d. principles of agency
ANS: D PTS: 1 DIF: Easy REF: 379
BLM: Analyze
35. What is the legal term for the corporate practice of paying the litigation
expenses of officers and directors for lawsuits related to corporate affairs?
a. compensation
b. indemnification
c. ratification
d. surety
BLM: Remember
36. A court is satisfied with plaintiff counsel’s efforts to establish that, based on the
facts of the matter, the defendant corporation is the agent of its shareholders. In presenting this
argument, what legal feat was plaintiff’s counsel attempting to accomplish on his client’s
behalf?
a. lifting of the identification principle
b. lifting obligations for a personal guarantee
c. piercing the indemnification veil
d. piercing the corporate veil
ANS: D PTS: 1 DIF: Easy REF: 383
BLM: Understand
37. Of the 1000 issued and outstanding common voting shares of Trunda Adven-
tures Corp., Isaac holds 501, Marielle holds 250, and Lorenzo holds the remaining 249.Which
of the following rests only with Isaac based on this arrangement?
a. the right to ask questions
b. the right to attend meetings
c. the right to control the company
d. the right to introduce motions
BLM: Evaluate
38. A dispute has arisen among the various factions of shareholders over the
proposed change of name of SunEnergy4U Inc., a publicly traded company. What would a
corporate lawyer believe to be important to each of the competing shareholder groups?
a. applying the statutory oppression remedy
b. exercising their automatic preemptive rights
c. applying the shareholders’ agreement
d. successfully soliciting proxy votes
BLM: Analyze
39. Which of the following is a distinguishing characteristic attributable to

preferred shares?
a. They give the right to a priority interest in a liquidated corporation’s assets.
b. They must state “nonvoting” on the share certificate itself.
c. They give the right to be given notice of shareholders’ meetings.
d. They must be issued as nonvoting shares with dividend rights.
BLM: Remember
40. Why is knowing whether directors have been purchasing shares of a corpora-
tion a fundamental right belonging to the shareholders of a corporation?
a. It permits shareholders to maintain the optimum proportionate share of ownership.
b. It is the simplest and least costly method of earning capital gains.
c. It is the simplest and least costly method of soliciting proxies.
d. It permits shareholders to determine the use of confidential information for personal
profit.
BLM: Understand
41. What is the most important factor contributing to a shareholder’s decision to

exercise her pre-emptive right?
a. a desire to inspect the register of share transfers
b. a need to ask the court to appoint an inspector
c. a desire to maintain her current level of control
d. a need to know if directors are purchasing shares
ANS: C PTS: 1 DIF: Challenging REF: 386
BLM: Analyze
42. Which of the following are uncommon remedies available to a corporation’s
minority shareholders through common law and legislation?
a. appraisal and the return of surplus assets
b. winding up and derivative action
c. appraisal and derivative action
d. winding up and the return of surplus assets
BLM: Analyze
43. By a two-thirds majority vote, EcoGreen Inc.’s shareholders approved a

proposed amendment to the articles of incorporation allowing for the public ownership of the
company’s shares and the adoption of a dual-class share structure. Zoe voted against the
change. What is Zoe’s best solution to her dissatisfaction?
a. seeking a court-ordered oppression remedy
b. commencing a derivative action
c. soliciting proxy votes
d. exercising her dissent and appraisal right
BLM: Evaluate
44. What is the most important factor that contributes to a minority shareholder’s
ability to commence a derivative action?
a. The action must arise from discrimination against minority shareholders.
b. The action must be a pursuit of proper and adequate disclosure of material informa-
tion.
c. The action must arise as a direct result of a fundamental change to the corporation.
d. The action must be in the corporation’s cause as a result of some injury to it.
BLM: Understand
45. What is most likely to be the result if a corporation fails to file its annual
corporate returns?
a. winding up of the corporation
b. court-ordered termination
c. being struck from the registrar
d. dissolution of the corporation
BLM: Evaluate
TRUE/FALSE
1. The identification theory makes a corporation’s liability directly attributable to

the acts of a corporation’s directing minds.
ANS: T PTS: 1 DIF: Easy REF: 367
BLM: Understand
2. SunDials4U Inc. will bear vicarious liability for the commission of torts by its
directors and executive officers.
ANS: F PTS: 1 DIF: Medium REF: 367

BLM: Remember
3. A promoter is an individual who participates in setting up a corporation.

BLM: Remember
4. A regulatory offence will arise only where a corporation’s actions are contrary
to private interests.

BLM: Remember
5. Jeremy is an elected member of the board of directors of the same corporation

where Johanna holds the position of chief financial officer. Their positions require each of
them to uphold their fiduciary duties to act honestly and in good faith with regard to the best
interests of the corporation.

BLM: Understand
6. Statutory procedures were enacted to avoid a blanket prohibition on self-

dealing contracts.
ANS: T PTS: 1 DIF: Medium REF: 374

BLM: Remember
7. A corporate opportunity is a contract in which an officer of the corporation has

an interest.

BLM: Understand
8. The higher the position in an organization held by a director or managerial

officer, the higher his or her fiduciary duty.

BLM: Understand
9. The directors’ fiduciary duty changes when the corporation moves into the
vicinity of insolvency.
ANS: F PTS: 1 DIF: Challenging REF: 378

BLM: Remember
10. Traditionally, courts have shown little reluctance to say that a director or
officer is automatically liable for a tort he or she committed on company time.

BLM: Remember
11. The exercise of care, diligence, and skill in the performance of their duties is
seldom enough to reduce the exposure to personal liability that corporate directors face.

BLM: Remember
12. A corporation’s preferred shares generally carry the right to share in dividends,
the right to vote, and a right to share in the proceeds on dissolution.

BLM: Remember
13. The common shares of a corporation typically carry the priority right to the
distribution of dividends and the proceeds on dissolution.

BLM: Remember
14. A shareholder who is unable to attend a meeting can exercise voting power
through a proxy.

BLM: Remember
15. The oppression remedy is a personal action that can be brought by

shareholders, creditors, directors, and officers.

BLM: Remember
16. The existence of the derivative action remedy means that directors are unable
to treat the corporation as their own personal fiefdom with impunity.

BLM: Understand
17. In assessing a claim for oppression, a court must, among other things,
determine whether the evidence supports a reasonable expectation of the stakeholder.

BLM: Remember
18. A unanimous shareholder agreement is an agreement that defines the relation-

ship among people who have an ownership interest in a corporation.

BLM: Remember
19. A shareholders’ agreement is an agreement among all shareholders that restricts

the powers of the directors to manage the corporation.

BLM: Remember
20. The steps involved in winding up a corporation are relatively simple and
straightforward, making it no more or less feasible than simply allowing a company to lapse.

BLM: Remember
SHORT ANSWER
1. Discuss the amendments to Canada’s Criminal Code pertaining to the type of

individuals who may trigger an organization’s criminal liability. Include an explanation of the
law prior to the amendments and the subsequent effects of the amendments.
ANS:
Prior to the amendments, a corporation could be found liable only if the directing mind of the
corporation committed the offence. The amendments expand the range of individuals whose
actions can trigger liability of the corporation to senior officers. They are individuals who play
an important role in the establishment of the organization’s policies or are responsible for
managing an important aspect of the organizations’ activities. This prevents corporations from
avoiding liability by suggesting that wrongdoers simply had a management function and did
not set policy.
PTS: 1 DIF: Medium REF: 369 BLM: Remember
2. Identify and briefly explain the amendments to the Criminal Code regarding
the level of fines that may be imposed on a corporation as a result of a positive finding of that
corporation’s criminal liability.
ANS:
The amendments to Canada’s Criminal Code provide for stiffer penalties. A less serious
summary conviction offence carries a fine of up to $100 000 (increased from a maximum
$25 000). Fines for more serious indictable offences have been left without prescribed limits.
PTS: 1 DIF: Easy REF: 369 BLM: Remember
3. Identify and briefly explain the factors that a court must consider when setting
fines or imposing other penalties on a corporation found to be responsible for the commission
of a criminal offence.
ANS:
The legislation specifies the following factors that a court must consider when setting fines or
imposing other penalties on a corporation held responsible for the commission of criminal
acts:
i) moral blameworthiness; i.e., advantage gained by the organization committing the
crime
ii) the public interest; i.e., the cost of investigation and prosecution or the need to keep
the organization in business
iii) the prospects of rehabilitation; i.e., remedial steps directed to preventing the likelihood
of a subsequent offence
A corporate probation order may involve conditions such as requiring the corporation to
provide restitution to victims, publishing the offence in the media, and implementing policies
and procedures.
PTS: 1 DIF: Challenging REF: 370 BLM: Remember
4. Identify and briefly describe the circumstances that would permit the enforce-
ment of a self-dealing contract under the Canada Business Corporations Act.
ANS:
Under the Canada Business Corporations Act, a contract with a director involving the sale of
goods owned personally to the corporation in which he holds directorship is enforceable,
provided that the director has complied with each of the following:
i) written disclosure of the contract to the corporation
ii) abstaining from any vote of the directors approving the contract
iii) the contract is fair and reasonable to the corporation.
5. Identify the elements that the court has recommended be examined in order to
determine whether the appropriation of a corporate opportunity by a director or officer is a
breach of fiduciary duty.
ANS:
In order to determine whether the appropriation of a corporate opportunity is a breach of
fiduciary duty, the court has recommended examination of the following:
i) the position or office held by the directors and officers
ii) the nature of the corporate opportunity
iii) the director’s or managerial officer’s relation to the opportunity
iv) the amount of knowledge the directors and officers possessed and the circumstances in
which it was obtained
v) the time between when the opportunity arose and when the officers took the opportuni-
ty for themselves
vi) the circumstances under which the employment relationship between the officers and
the company terminated
6. Identify the source of and briefly discuss the present standard of care with
respect to the duty of competence owed to a corporation.
ANS:
The present standard contained in corporate legislation requires directors and officers to
display the care, diligence, and skill that a reasonably prudent person would exercise in
comparable circumstances. This is an objective standard, and, while directors are not expected
to be perfect, they are to act prudently and on a reasonably informed basis.
7. Briefly explain how corporate directors are able to meet their statutory standard
of care, and identify the various methods that directors should employ to achieve this goal.
ANS:
Directors can meet the statutory standard of care by being attentive, active, and informed. In
this regard, directors should do the following:
i) make all their decisions informed decisions
ii) do what is necessary to learn about matters affecting the company
iii) identify possible problems with the company
iv) stay apprised of and alert to the corporation’s financial and other affairs
v) regularly attend directors’ meetings
vi) ensure that they receive reliable professional advice.
8. Briefly discuss statutory derivative actions, including what they permit and
what is required for their commencement.
ANS:
A statutory derivative action permits a shareholder to obtain leave from the court to bring an
action on behalf of the corporation, where the shareholder is able to establish the following:
i) the corporation’s directors are unwilling to bring an action
ii) the shareholder is acting in good faith
iii) it appears to be in the interests of the corporation that the action proceed.
9. Briefly discuss the oppression remedy. Identify the categories of conduct a

court would usually find to be oppressive in nature.
ANS:
The oppression remedy is the most widely used remedy by shareholders in Canada. A
shareholder who has been treated unfairly or oppressively may apply to a court for relief.
Courts usually find conduct to be oppressive when it falls into the following categories:
i) lack of a valid corporate purpose for a transaction
ii) lack of good faith on the part of the directors of the corporation
iii) discrimination among shareholders where the majority benefits to the exclusion or
detriment of the minority
iv) lack of adequate and proper disclosure of material information to minority sharehold-
ers
v) conflict of interest between the interests of the corporation and the personal interests of
one or more directors
10. In assessing a claim for oppression, a court must determine (i) whether the
evidence supports the reasonable expectation of the stakeholder, and (ii) whether the reason-
able expectation of the stakeholders was violated by the oppressive conduct. Identify the
factors that must be considered by the court in order to answer both of these questions.
ANS:
To determine whether a reasonable expectation exists, courts must consider the following
factors:
i) general commercial practice
ii) nature of the corporation
iii) relationship between the parties
iv) past practice
v) steps the claimant could take to protect itself
vi) representations and agreements
vii) resolution of conflicting interests between corporate stakeholders.
To answer the second question, a claimant must show that the failure to meet reasonable
expectations was the result of unfair conduct.

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Chapter 16 The Corporate Form: Operational Matters

2. What do primary liability and vicarious liability have in common?

4. What commercial inconvenience involving corporations was resolved by the

5. In litigation involving a promoter, one of the parties named in a contract is

6. Which of the following is a distinguishing characteristic of pre-incorporation

9. What is the authority an individual must possess to trigger an organization’s

21. Ingel is a director in MIV Inc., a large, successful software development

22. Which of the following is a commonly held characteristic of corporate

25. Why would a court consider an accounting of profits to be an appropriate

39. Which of the following is a distinguishing characteristic attributable to

41. What is the most important factor contributing to a shareholder’s decision to

43. By a two-thirds majority vote, EcoGreen Inc.’s shareholders approved a

1. The identification theory makes a corporation’s liability directly attributable to

ANS: F PTS: 1 DIF: Medium REF: 367

3. A promoter is an individual who participates in setting up a corporation.

ANS: T PTS: 1 DIF: Easy REF: 368

ANS: F PTS: 1 DIF: Medium REF: 369

5. Jeremy is an elected member of the board of directors of the same corporation

ANS: T PTS: 1 DIF: Easy REF: 374

6. Statutory procedures were enacted to avoid a blanket prohibition on self-

ANS: T PTS: 1 DIF: Medium REF: 374

7. A corporate opportunity is a contract in which an officer of the corporation has

ANS: F PTS: 1 DIF: Medium REF: 375

8. The higher the position in an organization held by a director or managerial

ANS: T PTS: 1 DIF: Easy REF: 376

ANS: F PTS: 1 DIF: Challenging REF: 378

ANS: F PTS: 1 DIF: Medium REF: 379

ANS: F PTS: 1 DIF: Medium REF: 379

ANS: F PTS: 1 DIF: Medium REF: 385

ANS: F PTS: 1 DIF: Medium REF: 385

ANS: T PTS: 1 DIF: Easy REF: 385

15. The oppression remedy is a personal action that can be brought by

ANS: T PTS: 1 DIF: Medium REF: 388

ANS: T PTS: 1 DIF: Easy REF: 387

ANS: T PTS: 1 DIF: Medium REF: 388

18. A unanimous shareholder agreement is an agreement that defines the relation-

ANS: F PTS: 1 DIF: Medium REF: 388

19. A shareholders’ agreement is an agreement among all shareholders that restricts

ANS: F PTS: 1 DIF: Medium REF: 390

ANS: F PTS: 1 DIF: Medium REF: 392

1. Discuss the amendments to Canada’s Criminal Code pertaining to the type of

PTS: 1 DIF: Medium REF: 369 BLM: Remember

PTS: 1 DIF: Easy REF: 369 BLM: Remember

PTS: 1 DIF: Challenging REF: 370 BLM: Remember

PTS: 1 DIF: Medium REF: 374 BLM: Remember

PTS: 1 DIF: Challenging REF: 376 BLM: Remember

PTS: 1 DIF: Easy REF: 377 BLM: Remember

PTS: 1 DIF: Medium REF: 382 BLM: Remember

PTS: 1 DIF: Easy REF: 387 BLM: Remember

9. Briefly discuss the oppression remedy. Identify the categories of conduct a

PTS: 1 DIF: Challenging REF: 388 BLM: Remember

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