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1. What are the two distinct forms of corporate tort liability?

ANSWER: primary and vicarious

Explanation: Corporate tort liability can be understood as the legal responsibility of a corporation for wrongful
acts. There are two main forms of this liability:

Primary Liability: This occurs when the wrongful act is directly attributable to the corporation itself, typically
through its policies, decisions, or actions that are officially sanctioned by the corporation.

Vicarious Liability: This form of liability arises when a corporation is held responsible for the wrongful acts
committed by its employees or agents while they are acting within the scope of their employment or authority.

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

ANSWER: A corporation is subject to accountability for both.

Explanation: Both primary and vicarious liabilities involve holding the corporation accountable for
wrongdoings. In primary liability, the corporation's own actions or policies are the direct cause of the
wrongdoing. In vicarious liability, though the corporation may not have directly committed the act, it is still
held responsible for the actions of its employees or agents performed in the course of their work.

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?
ANSWER: Yes, through application of the identification theory.

Explanation: In this scenario, a court would likely apply the identification theory, which is a subset of primary
liability. The identification theory holds a corporation directly responsible for wrongful acts committed by
individuals who are in a position to represent the corporation's decision-making body. Since a senior vice
president of marketing is a high-ranking official whose decisions reflect corporate policy, their actions (like
choosing potentially confusing branding) are identified with the corporation itself, leading to direct liability.

4. Which of the following individuals might be classified as a ‘directing mind’ of a corporation?

ANSWER: a corporate officer

Explanation: A 'directing mind' of a corporation refers to individuals who have decision-making authority and
represent the corporate will and control of the company. Corporate officers, such as CEOs, presidents, vice
presidents, and other high-ranking executives, typically fall into this category. Their decisions and actions are
considered to represent the corporation's intentions and, therefore, can directly affect the corporation's legal
liabilities.

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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
ANSWER: if a specific provision expressly relieves such liability
Explanation: Promoter's Personal Liability in Unincorporated Entity Contracts: A promoter may not be
personally liable for contracts related to an entity yet to be incorporated if there's a specific provision in the
contract that expressly relieves them of such liability. This provision must clearly indicate that only the future
corporation, once legally formed, will be held responsible for the contract's obligations.

6. Under what circumstances will a court find that a corporation is bound by a contract entered into by an
agent of the corporation?
ANSWER: where the agent was acting with actual or apparent authority

Explanation: Corporation Bound by Agent's Contract: A court will find a corporation legally bound by a
contract entered into by an agent of the corporation if the agent was acting within their actual or apparent
authority. Actual authority is explicitly granted to the agent by the corporation, while apparent authority arises
when the corporation's actions lead a third party to reasonably believe that the agent has the authority to act on
behalf of the corporation.

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?
ANSWER: It facilitates direct entrance into contractual obligations by the corporation.

Explanation: Using a Shelf Company for Risk Management: A shelf company, which is an already incorporated
entity with no prior business history, is preferred for taking prompt advantage of business opportunities because
it allows for immediate entry into contractual obligations. Since the shelf company is already incorporated, it
can engage in contracts and business activities right away, bypassing the time-consuming process of forming a
new corporation.

8. Which statement best describes a corporation’s liability in criminal law?

ANSWER: Corporations can be liable for intentional and negligence criminal offences.

Explanation: Corporation's Liability in Criminal Law: In criminal law, a corporation can be held liable for
both intentional and negligence-based criminal offences. This means that a corporation can be found criminally
responsible if it intentionally commits a crime or if the crime results from its negligence, such as failing to
follow legal standards or protocols.

9. What is the authority an individual must possess to trigger an organization’s criminal liability?
ANSWER: the authority to enact organizational policy
Explanation: Authority to Trigger Organization's Criminal Liability: The authority needed by an individual to
trigger an organization's criminal liability is the authority to enact organizational policy. This means that
individuals who have decision-making power in creating and implementing policies that guide the
organization's operations can make the organization legally liable for their actions.

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10. Which statement best describes the ‘directing mind’ of a corporation?

ANSWER: There may be more than one directing mind of a corporation.

Explanation: Directing Mind' of a Corporation: The 'directing mind' of a corporation can encompass more than
one individual. These are the individuals who exercise decision-making authority in matters of corporate policy,
guiding the organization's actions and decisions. Their actions and decisions are considered as those of the
corporation itself.

11. Remy is the president of Envirotox Inc., a corporation that specializes in the storage of toxic waste. One of
Envirotox’s trucks was in an accident while transporting toxic waste, and the corporation is expecting
prosecution under environmental protection legislation. Which of the following describes Remy’s personal
liability under environmental legislation?
ANSWER: It is possible he will face personal liability because he is an officer.

Explanation: Remy's Personal Liability: As the president of Envirotox Inc., Remy may face personal liability
under environmental legislation due to his role as an officer of the corporation. His position implies a level of
decision-making authority and responsibility, making him potentially liable for the actions of the corporation,
especially in areas related to environmental compliance.

12. The directors of ABC Corporation have voted to form a strategic alliance with Atlas Supplies Ltd., a
corporation owned by a block of ABC’s shareholders. They plan to pay a premium over the market rate for
the services of Atlas in recognition of their close relationship. Which statement best describes this
situation? ANSWER: The directors have breached their fiduciary duties by favouring on particular group of
shareholders.
Explanation: Directors Breaching Fiduciary Duties: In the case of ABC Corporation, the directors have
breached their fiduciary duties by favouring a particular group of shareholders. By forming a strategic alliance
with Atlas Supplies Ltd. and paying a premium over the market rate for their services, the directors are not
acting in the best interests of all shareholders but are instead showing preferential treatment to a specific group,
which is a violation of their fiduciary duties.

13. Which statement best describes the relationship between directors and officers in a corporation?
ANSWER: Officers are appointed by directors.

Explanation: Relationship Between Directors and Officers in a Corporation: Directors and officers have
distinct roles within a corporation. The directors form the governing body of the corporation and are
responsible for overseeing the corporation's strategic direction and policies. Officers, on the other hand, are
responsible for the day-to-day management and operations of the corporation. Officers are typically appointed
by the board of directors and are accountable to them.

14. What type of liability is imposed by a court where it is not open to the accused to show he was without
fault? ANSWER: absolute liability
Explanation: Absolute Liability: Absolute liability is a legal principle where fault or intent is not required to
establish liability. In cases of absolute liability, the accused cannot escape liability by proving they were

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without fault. This type of liability is often applied in regulatory offenses where public safety is a primary
concern.

15. Which statement best exemplifies the standard of care expected of directors?
ANSWER: The care, diligence, and skill that a reasonably prudent person would exercise in comparable
circumstances.

Explanation: Standard of Care Expected of Directors: Directors of a corporation are expected to act with a
certain level of care, diligence, and skill. This standard is often described as what a reasonably prudent person
would exercise in similar circumstances. It implies that directors should make informed and thoughtful
decisions, acting in the best interests of the corporation and its stakeholders.

16. Which of the following describes a role of the Canadian Securities Administrators (CSA)?
ANSWER: to establish best practices for corporate governance

Explanation: Role of the Canadian Securities Administrators (CSA): The Canadian Securities Administrators
(CSA) play a significant role in establishing best practices for corporate governance in Canada. This includes
providing guidance on matters like board nominations, board renewal, and diversity in corporate governance
structures. The CSA's role is to ensure fair and efficient capital markets and to protect investors from unfair or
fraudulent practices.

17. Which of the following is a requirement of the CSA?

ANSWER: Public corporations must explain why the corporation is not adhering to best practices.

Explanation: Requirement of the CSA (Canadian Securities Administrators): Public corporations are required
by the CSA to explain why they are not adhering to best practices. This requirement emphasizes transparency
and accountability, ensuring that corporations justify any deviation from established governance standards.

18. What is the role of the fiduciary principle in matters with respect to corporate law relating to
governance? ANSWER: to impose duties owed to the corporation
Explanation: Role of Fiduciary Principle in Corporate Governance: The fiduciary principle in corporate law
imposes duties owed to the corporation. Directors and officers must act in the best interest of the corporation,
demonstrating loyalty and care. This principle prevents self-dealing and conflicts of interest, ensuring that
decisions are made for the benefit of the corporation and its shareholders.

19. 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?
ANSWER: Ingel provided a written disclosure and abstained from voting on the fair and reasonable deal.

Explanation: Enforceability of Ingel's Self-Dealing Contract: In corporate law, self-dealing contracts are
scrutinized to prevent conflicts of interest. Ingel's contract with MIV Inc. is enforceable because he provided full
disclosure of his interest in the contract and abstained from voting on it. This ensures that the transaction is
conducted fairly and reasonably, without the influence of Ingel's personal interests.

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20. Which of the following is a distinguishing feature of self dealing contracts?

ANSWER: They give rise to conflict of interest situations.

Explanation: Distinguishing Feature of Self-Dealing Contracts: Self-dealing contracts are characterized by the
potential for conflict of interest situations. When a director or officer of a corporation enters into a contract
with the corporation, their personal interests might conflict with the interests of the corporation. This requires
careful management to ensure that the transaction is fair and does not compromise the corporation’s interests.

21. 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?
ANSWER: a resolution enacted by the corporation’s consenting shareholders and directors
Explanation: To ensure there is no legal impediment to Marion pursuing a corporate opportunity declined by
the corporation where she is a fiduciary, a court would typically require a resolution passed by the
corporation's consenting shareholders and directors. This is to uphold the fiduciary duties of loyalty and
fairness, ensuring that the opportunity is genuinely unwanted by the corporation and can be pursued without
conflict of interest

22. Kramer is the sole director and shareholder of a failing corporation. In his role as director, Kramer has
elected to declare dividends even though doing so will cause the corporation to default on its outstanding
loan from the bank. Which statement best describes Kramer’s risk of liability for this decision?
ANSWER: Kramer can be personally sued for breaching his duty of care to a creditor of the corporation.

Explanation: Kramer's decision to declare dividends, leading the corporation to default on a bank loan,
exposes him to personal liability for breaching his duty of care to the corporation's creditor. As the sole director
and shareholder, his decisions directly impact the corporation's financial stability, and he must balance the
interests of all stakeholders, including creditors.

23. Three directors of a courier business who became aware of a business opportunity resigned and formed
their own corporation in order to take advantage of the opportunity. The opportunity turned out to be very
lucrative. Which of the following remedies is a court most likely to order in this situation?
ANSWER: an accounting of profits

Explanation: In the case of the courier business directors who resigned and formed a new corporation to
exploit a business opportunity, a court is likely to order an accounting of profits. This remedy addresses the
breach of fiduciary duty, ensuring that the profits earned from the opportunity, which rightfully belonged to the
original corporation, are accounted for.

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24. 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?
ANSWER: the quantum of knowledge possessed and factors influencing it being obtained

Explanation: To determine a breach of fiduciary duty regarding misappropriation of a corporate opportunity, a

judge will consider the extent of the individual's knowledge about the opportunity and the circumstances under
which this knowledge was obtained. This helps assess whether the individual exploited information or
opportunities that should have been presented to the corporation first.

25. 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? ANSWER: the nature of the corporate opportunity
Explanation: When a court examines how clearly a corporate opportunity has been identified and its proximity
to acquisition, it is assessing whether the opportunity falls within the scope of the corporation's business
interests. This is essential for determining whether directors or officers have breached their fiduciary duty by
exploiting the opportunity for personal gain, which would be contrary to the corporation's interests.

26. 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?
ANSWER: It is inconsequential, because directors are not bound to consider those interests.

Explanation: The Peoples Department Stores v. Wise ruling recognizes that directors may legitimately consider
various stakeholders' interests. However, this does not fundamentally alter their primary fiduciary duty to act in
the best interests of the corporation. Directors are not legally bound to prioritize the interests of shareholders,
employees, suppliers, creditors, consumers, governments, and the environment over the corporation's interests

27. 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?
ANSWER: diligence, skill, and care

Explanation: Directors and officers are expected to exercise a degree of diligence, skill, and care in their roles
that a reasonably prudent person would in comparable circumstances. This standard is a benchmark to assess
whether they have fulfilled their duty of care towards the corporation. It involves acting thoughtfully, with
reasonable knowledge and understanding of the matters at hand.

28. 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?
ANSWER: The law extends the duty of care beyond the corporation

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Explanation: The Supreme Court of Canada's decision to allow creditors to pursue actions based on a duty of
care extends directors' responsibilities beyond the corporation to its creditors. This is significant because it
recognizes that the actions of directors can directly impact creditors, especially in situations of insolvency or
financial distress. This broader interpretation of the duty of care holds directors accountable for decisions that
adversely affect creditors.

29. 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?
ANSWER: a. liability in tort

Explanation: Liability in Tort Concerns: In the context of the seminar attended by Isabella and Emily, the
concern is about liability in tort. This refers to the legal responsibility that directors might face for wrongful
acts (torts) committed in the course of their duties. Traditionally, directors are protected from personal liability
if their actions are justifiable and in the interest of the company, but recent court decisions have shown a shift,
potentially exposing directors to personal liability for certain tortious actions.

30. Under what circumstances would a court “lift the corporate veil”?
ANSWER: where the corporation is a “mere facade” concealing the true facts

Explanation: Lifting the Corporate Veil: The term "lifting the corporate veil" refers to the judicial act of
disregarding the separate legal entity of a corporation in order to hold its shareholders personally liable. This
usually happens in circumstances where the corporation is used as a "mere facade" to conceal true facts, such
as fraudulent activities or evasion of legal obligations.

31. 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?
ANSWER: provisions made in the bylaws or unanimous shareholders agreement

Explanation: Circumventing Directors' Powers: To override the general powers of directors in managing or
supervising a corporation, specific provisions must be included either in the corporation's bylaws or in a
unanimous shareholders agreement. These provisions can define or limit the powers of directors, thereby
allowing shareholders to exert more control over corporate affairs.

32. Which of the following would be NOT be a responsibility of the directors of a corporation?
ANSWER: calling a special shareholders’ meeting
Explanation: Directors' Responsibilities Excluding Shareholders' Meetings: The responsibility to call a special
shareholders' meeting typically does not fall under the duties of the directors of a corporation. This task is
usually reserved for shareholders under specific circumstances outlined in corporate laws or the corporation's
bylaws.

33. In which situation might a shareholder resort to the oppression remedy?

ANSWER: to prevent the directors from favouring one shareholder over another

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Explanation: Oppression Remedy: A shareholder may resort to the oppression remedy to address situations
where the actions of the directors are oppressive, unfairly prejudicial, or show unfair disregard to the interests
of some shareholders, particularly minority ones. This remedy is sought when there's an allegation that the
directors are favoring one shareholder or a group of shareholders over others, leading to unfair treatment.

34. In which situation might a shareholder exercise the right of dissent and appraisal?
ANSWER: where the shareholder dissents in a vote to amalgamate with another corporation

Explanation: Right of Dissent and Appraisal: Shareholders might exercise the right of dissent and appraisal in
situations where they disagree with significant corporate changes, such as an amalgamation with another
corporation. In such cases, if a shareholder does not agree with the decision, they can demand the corporation
to buy back their shares at a fair value, thus allowing them to exit the corporation under reasonable financial
terms.

35. What is the legal term for the shareholder remedy where the court orders the corporation to purchase the
shares of a shareholder at a reasonable price?
ANSWER: dissent an appraisal

Explanation: Legal Term - Dissent and Appraisal: The legal term for the shareholder remedy where the court
orders the corporation to purchase the shares of a shareholder at a fair and reasonable price is known as
"dissent and appraisal". This remedy is particularly relevant in situations where shareholders disagree with
major corporate actions and wish to exit the corporation.

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?
ANSWER: piercing the corporate veil
Explanation: Piercing the Corporate Veil: When a plaintiff’s counsel argues that a corporation is essentially
an agent of its shareholders, they are attempting to "pierce the corporate veil". This legal concept is used to
hold shareholders personally liable for the actions of the corporation, especially in cases of fraud or when the
corporation is used as a facade for personal dealings. This argument is aimed at disregarding the corporation's
separate legal entity to reach the personal assets of the shareholders.

37. Of the 1000 issued and outstanding common voting shares of Trunda Adventures 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?
ANSWER: the right to control the company

Explanation: Right to Control the Company for Isaac: In Trunda Adventures Corp., Isaac holds a majority of
the shares (501 out of 1000), granting him more than 50% of the voting power. This majority stake enables
Isaac to have significant influence over corporate decisions, including electing directors and approving major
corporate changes. Since he holds the majority, he effectively has the right to control the company, as the other
shareholders (Marielle and Lorenzo) do not individually or collectively have more voting power than Isaac.

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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?
ANSWER: successfully soliciting proxy votes

Explanation: Importance of Soliciting Proxy Votes in SunEnergy4U Inc.: In a publicly traded company like
SunEnergy4U Inc., where a dispute exists among shareholder groups, proxy votes become crucial. Shareholders
may not always be able to attend meetings in person, so they can vote through proxies. A corporate lawyer
would understand that each group's ability to influence the outcome of the dispute, such as a change of the
company's name, largely depends on their success in gathering proxy votes to represent their interests.

39. What is a distinguishing characteristic attributable to preferred shares?

ANSWER: They have a preferential right in the distribution of proceeds on dissolution.

Explanation: Distinguishing Characteristic of Preferred Shares: Preferred shares are distinguished by having a
preferential right in the distribution of proceeds on dissolution. This means that in the event of the company's
dissolution, holders of preferred shares are entitled to be paid from the company's assets before common
shareholders. This preferential treatment in asset distribution is a key feature that differentiates preferred shares
from common shares.

40. Why is knowing whether directors have been purchasing shares of a corporation a fundamental right
belonging to the shareholders of a corporation?
ANSWER: It permits shareholders to determine the use of confidential information for personal profit.

Explanation: Significance of Directors Purchasing Shares: Knowing whether directors have been purchasing
shares is fundamental for shareholders because it can indicate if directors are using confidential, non-public
information for personal gain. Shareholders have the right to be informed about such transactions as it can
impact their assessment of the company's health and the fairness of the market. It’s a matter of transparency
and trust in the management's actions.

41. What is the most important factor contributing to a shareholder’s decision to exercise her pre emptive
right? ANSWER: a desire to maintain her current level of control
Explanation: A shareholder, like the one mentioned in the question, might exercise her pre-emptive right
primarily to maintain her current level of control in the company. By acquiring additional shares proportionate
to her existing ownership, she can prevent dilution of her voting power and influence in company decisions.
This is especially significant in closely held or smaller corporations where changes in share distribution can
significantly impact control dynamics.

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42. 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?
ANSWER: exercising her dissent and appraisal right
Explanation: Zoe, who voted against a major change in the company, can exercise her dissent and appraisal rights.
This means she has the right to disagree with the majority decision and request that the company buys back her
shares at a fair value. It's a form of protection for minority shareholders in decisions they believe are detrimental to
their interests or the value of their holdings.

43. What is the most important factor that contributes to a minority shareholder’s ability to commence a
derivative action?
ANSWER: The action must be in the corporation’s cause as a result of some injury to it.

Explanation: The key factor for a minority shareholder to commence such action is that it must be in the
corporation’s interest due to some injury or harm caused to the company. This is usually due to
mismanagement, fraud, or breach of fiduciary duty by the company's directors or officers. The shareholder
essentially steps into the shoes of the corporation to seek remedy for wrongs that the management failed to
address.

44. Clifton has purchased shares in a corporation that carry a pre emptive right. What right does this confer
to Clifton? ANSWER: the right to purchase new shares before they are offered to outsiders
Explanation: For Clifton, owning shares with pre-emptive rights means he has the first option to buy new
shares issued by the corporation. This right is crucial in ensuring that his ownership percentage isn't diluted
and his influence in the company remains intact. It allows him to maintain his proportional control and voting
power in the company.

45. Which of the following are uncommon remedies available to a corporation’s minority shareholders through
common law and legislation?
ANSWER: winding up and the return of surplus assets

Explanation: Winding up and the return of surplus assets are indeed uncommon remedies available to a
corporation’s minority shareholders. These measures are typically used in cases where minority shareholders
feel their interests are being ignored or abused. Winding up a company can be a drastic step, often considered
when other remedies are inadequate. The return of surplus assets is another remedy that seeks to ensure fair
treatment of minority shareholders, especially in a liquidation scenario.

46. Identification theory holds that a corporation is liable when the person committing the wrong is the
corporation’s directing mind. True or False
ANSWER: True

Explanation: The statement about identification theory is true. Identification theory in corporate law posits
that a corporation can be held liable for the actions of individuals who are in positions of authority and

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represent the corporation's "directing mind and will." This concept acknowledges that a corporation, as a
legal entity, acts through its employees and officers, and thus, their actions can be attributed to the
corporation itself, particularly when they act within the scope of their authority.

47. SunDials4U Inc. will bear vicarious liability for the commission of torts by its directors and executive
officers. True or False
ANSWER: False

Explanation: The statement regarding SunDials4U Inc. bearing vicarious liability for the torts committed by its
directors and executive officers is false. Generally, a corporation is not vicariously liable for torts committed by
its directors or executive officers merely due to their position. Vicarious liability typically applies to the
employer-employee relationship, where the employer can be held responsible for the actions of the employee if
they were performed in the course of employment.

48. A director does not generally attract liability for the corporation’s contracts. True or False
ANSWER: True

Explanation: The statement that a director does not generally attract liability for the corporation's contracts is
true. In corporate law, directors act on behalf of the corporation, and it is the corporation, as a separate legal
entity, that is liable for contractual obligations. Directors are usually not personally liable for the contracts
they enter into on behalf of the company, provided they act within their authority and do not engage in
fraudulent or illegal activities.

49. Corporations are immune from criminal law because they cannot be incarcerated. True or False
ANSWER: False

Explanation: Corporations are immune from criminal law because they cannot be incarcerated. - False

Corporations, though they cannot be incarcerated, can still be held criminally liable. This is based on the
principle that a corporation, as a legal "person," can be responsible for criminal acts committed by its
employees or agents, particularly when these acts are within the scope of their employment and are
intended, at least in part, to benefit the corporation.

50. 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. True or False
ANSWER: True

Explanation: Both board members and chief financial officers have fiduciary duties to the corporation. This
includes acting honestly, in good faith, and in the best interests of the corporation. These positions hold
significant responsibilities and are expected to prioritize the corporation's well-being.

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51. Directors can be personally liable if a corporation fails to remit required taxes. True or False
ANSWER: True

Explanation: Directors can face personal liability in certain circumstances, including the failure of a
corporation to remit required taxes. This liability arises from the responsibility they hold in managing the
affairs of the corporation, including financial obligations.

52. A corporate opportunity is a contract in which an officer of the corporation has an interest. True or False
ANSWER: False

Explanation: A corporate opportunity is not merely a contract in which an officer has an interest. Rather, it
refers to a business opportunity that is relevant to the corporation and typically should be offered to the
corporation before the officer can exploit it personally. This principle is part of the fiduciary duties of
officers and directors to prioritize the interests of the corporation above their own.

53. Service on a board of directors carries significant risk.

True or False
ANSWER: True

Explanation: Service on a board of directors carries significant risk.

True. Directors have significant responsibilities and can be held personally liable for certain actions or
failures, such as fraud, misappropriation, or failing to act with due diligence and loyalty to the corporation.

54. The directors’ fiduciary duty changes when the corporation moves into the vicinity of insolvency. True or
False
ANSWER: False

Explanation: The directors’ fiduciary duty changes when the corporation moves into the vicinity of
insolvency.

False. The fiduciary duties of directors, such as acting in the best interest of the corporation, remain
consistent regardless of the corporation’s financial status. However, the way these duties are executed may
be scrutinized more closely in situations of insolvency.

55. 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. True or False
ANSWER: False

Explanation: 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.

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False. Directors or officers are not automatically liable for torts committed on company time. Liability
typically depends on the circumstances and whether the actions were within the scope of their corporate
duties.

56. 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. True or False
ANSWER: False

Explanation: 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.

False. Exercising care, diligence, and skill in their duties is often crucial in reducing personal liability for
corporate directors. By fulfilling these responsibilities, directors can demonstrate that they acted
appropriately in their role, thus mitigating the risk of personal liability.

57. 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. True or False
ANSWER: False

Explanation: Preferred shares in a corporation typically do carry the right to share in dividends and the
proceeds on dissolution. However, they generally do not carry voting rights, which are usually associated
with common shares.

58. The preferred shares of a corporation typically carry the priority right to the distribution of dividends and
the proceeds on dissolution. True or False
ANSWER: True

Explanation: Preferred shares often have a priority right to the distribution of dividends and the proceeds on
dissolution. This means that holders of preferred shares are usually paid before common shareholders.

59. A shareholder has no right to have dividends just because the corporation has earned large profits. True or
False
ANSWER: True

Explanation: The right to receive dividends is not automatic for shareholders, even if the corporation has
earned large profits. The declaration and distribution of dividends are typically at the discretion of the
corporation's board of directors.

60. The oppression remedy is a personal action that can be brought by shareholders, creditors, directors, and
officers. True or False
ANSWER: True

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Explanation: The oppression remedy is a legal action that can be brought by shareholders, creditors,
directors, and officers against a corporation. It is used in cases where these parties feel that the
corporation's actions have been oppressive or unfairly prejudicial to their interests.

61. The dissent and appraisal remedy can be utilized to require a corporation to buy the shares of a shareholder
who dissents from certain fundamental changes. a. True
b. False

ANSWER: True

Explanation: The dissent and appraisal remedy allows shareholders who disagree with certain fundamental
changes in a corporation to require the corporation to buy back their shares at a fair market value. This
remedy is especially relevant in cases like mergers, acquisitions, or other major corporate restructurings.

62. In assessing a claim for oppression, a court must, among other things, determine whether the evidence
supports a reasonable expectation of the stakeholder. True or False
ANSWER: True

Explanation: When assessing a claim for oppression, a court looks at whether there's a reasonable
expectation of the stakeholder that has been violated. This means evaluating if the stakeholder's
expectations were legitimate and if the corporation's actions unfairly disregarded these expectations.

63. A unanimous shareholder agreement is an agreement that defines the relationship among people who have
an ownership interest in a corporation. True or False
ANSWER: False

Explanation: A unanimous shareholder agreement (USA) is more specific. It is an agreement that

effectively transfers the powers and responsibilities of a corporation's board of directors to its shareholders.
USAs are typically used in closely held corporations where the shareholders want direct control over
decisions instead of delegating them to a board of directors.

64. Unlike a derivative action, which is brought on behalf of the corporation, the oppression remedy is a
personal action, which can be brought by shareholders and specified stakeholders. True or False
ANSWER: True

Explanation: The oppression remedy is indeed a personal action that can be brought by shareholders and
other stakeholders like creditors or directors. It differs from a derivative action, which is filed on behalf of
the corporation itself to address harm done to the corporation, whereas the oppression remedy addresses
harm done to individual stakeholders.

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65. The purpose of a unanimous shareholders’ agreement is to convince the court that the directors are in the
wrong and have been oppressive. True or False
ANSWER: False

Explanation: The primary purpose of a unanimous shareholders' agreement (USA) is not to convince the
court of director oppression but to restrict the powers of directors and transfer management responsibilities
and decision-making authority directly to the shareholders. This is especially relevant in closely held
corporations. USAs serve as contracts existing alongside the corporate power structure, defining the
relationship among shareholders and setting out their rights and obligations. While they can play a role in
establishing the intentions of corporate parties, which may be relevant in cases of shareholder oppression,
their fundamental purpose is governance and management rather than litigation against directors.

66. What is identification theory and how does it assist the courts to impose criminal and tort liability in the
case of corporate wrongdoing?
ANSWER:
Identification theory is used by the courts to attribute liability to the corporation by seeking to
determine which person or persons are the directing mind of the corporation. When that person
or persons commit a tort related to the business enterprise, this conduct is identified with or
attributed to the corporation itself. Generally, it is the highly placed corporate officers who are
classified as “directing” minds, while low level employees are not.
A corporation may have more than one directing mind. Each may be responsible for a different
aspect of the corporation’s business. For example, the vice president for marketing may be the
corporation’s directing mind in relation to the marketing function, whereas the vice president
for finance may be the directing mind in relation to finance.

67. Identify two situations where a director may face personal liability in contract for a corporation’s contracts.

ANSWER: A director may face personal liability on a contract if the facts indicate that the director
intended to assume personal liability. For example, liability to a director may accrue where:
• The director contracts on his own behalf, as well as on behalf of the company.
• The director guarantees the contractual performance of the company
68. 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.
ANSWER:
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: 1. Moral blameworthiness; i.e., advantage gained by the organization committing the
crime
2. The public interest; i.e., the cost of investigation and prosecution or the need to keep the
organizationin business

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3. The prospects of rehabilitation; i.e., remedial steps directed to preventing the likelihood
of asubsequent 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.

69. Identify five situations that might give rise to statutory liability for a director of a corporation.
ANSWER:
1. Failure to pay employee wages
2. Directing, authorizing, or permitting the release of toxic substances into the environment
3. Failure to remit required taxes
4. Failure to maintain health and safety standards
5. Insider trading
6. Engaging in anticompetitive behaviour
7. Paying a dividend when the company is insolvent
8. Misrepresentation on a prospectus
9. Improperly transporting dangerous goods

70. 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.
ANSWER:
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:
1. The position or office held by the directors and officers
2. The nature of the corporate opportunity
3. The director’s or managerial officer’s relation to the opportunity
4. The amount of knowledge the directors and officers possessed and the circumstances in which
it wasobtained
5. The time between when the opportunity arose and when the officers took the opportunity
forthemselves
71. The circumstances under which the employment relationship between the officers and the company
terminated
PTS: 1 DIF: Challenging REF: Directors and Officers
BLM: Remember
6. Identify the source of and briefly discuss the present standard of care with respect to the duty of
competence owed to a corporation.
ANSWER:
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

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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.

72. 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.
ANSWER:
Directors can meet the statutory standard of care by being attentive, active, and informed.
In this regard, directors should do the following: 1. Make all their decisions informed
decisions
2. Do what is necessary to learn about matters affecting the company
3. Identify possible problems with the company
4. Stay apprised of and alert to the corporation’s financial and other affairs
5. Regularly attend directors’ meetings
6. Ensure that they receive reliable professional advice.

73. Briefly discuss statutory derivative actions, including what they permit and what is required for their
commencement.
ANSWER:
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:
1. The corporation’s directors are unwilling to bring an action
2. The shareholder is acting in good faith
3. It appears to be in the interests of the corporation that the action proceed.
74. What is a unanimous shareholder’s agreement, what purpose does it serve and what might it typically
contain?
ANSWER:
A unanimous shareholders’ agreement (USA) is a specialized kind of shareholders’ agreement
among all shareholders that restricts, in whole or in part, the powers of the directors to manage
the corporation and ensures that control over matters dealt with in the USA remains with the
shareholders.
Typically, the USA will comprehensively set out—by agreement and in advance of any
conflict—what the shareholders’ expectations are, how the company is to be managed, and
how disputes will be addressed.
Typical issues addressed in a USA include:
• Management of the company
• Protection for minority shareholders
• Control over who the other shareholders will be
• Provision of a market for shares
• Capital contribution
• Buy/sell arrangements in the event of a dispute

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• Mechanism for terminating the agreement

75. 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 reasonable 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.
ANSWER: To determine whether a reasonable expectation exists, courts must consider the following
factors:
1. General commercial practice
2. Nature of the corporation
3. Relationship between the parties
4. Past practice
5. Steps the claimant could take to protect itself
6. Representations and agreements
7. 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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