Chapter 11

Question 1

Annual general meeting

Answer 1

A meeting where shareholders elect directors and vote on other important resolutions

Question 2

Articles of association

Answer 2

Internal regulations setting out the procedures for governing a corporation in a registration jurisdiction

Question 3

Articles of incorporation

Answer 3

A method of incorporating based on a US approach and used in some jurisdictions in CAD

Question 4

Auditor

Answer 4

A party responsible for ensuring that an organizations financial statements have been properly prepared

Question 5

Bond

Answer 5

A share interest in the indebtedness of a corporate

Question 6

Broadly held corporations

Answer 6

Corporations that are publicly traded on the stock market; referred to as distributing corporations in some places

Question 7

Closely held corporations

Answer 7

Corporations in which there are relatively few shareholders; called non distributing corporations in some places

Question 8

Common shareholders

Answer 8

Holders of common shares who do not have any preferential rights or privileges

Question 9

Common shares

Answer 9

Shares to which no preferential rights or privileges are attached

Question 10

Corporate myth

Answer 10

A corporation is a legal fiction

Question 11

Debenture

Answer 11

An acknowledgment of debts by a corporation normally involving more than one creditor, may be secured by a floating charge against inventory or unsecured

Question 12

Deeds of settlement

Answer 12

Contracts used historically for setting up a company

Question 13

Derivative action

Answer 13

A lawsuit in which certain shareholders are given the right to launch a civil action against the directors on behalf of an injured corporation; also called representative action

Question 14

Dissent and appraisal

Answer 14

The right of minority shareholders who are adversely affected by major changes to indicate their opposition and force the corporation to buy back the shares at a fair price

Question 15

Distributing corporations

Answer 15

Corporations that are publicly traded on the stock market

Question 16

Dividend

Answer 16

Payment to shareholders out of corporate profits

Question 17

Due diligence

Answer 17

Doing everything reasonable to avoid a problem leading to legal liability

Question 18

Franchising

Answer 18

Arrangements based on contracts of service and the supply of products between larger and smaller units of one organization

Question 19

Insider knowledge

Answer 19

Info that affects share pricing that is not publicly known

Question 20

Insider trading

Answer 20

When people use their insider knowledge to trade shares

Question 21

Letters patent

Answer 21

A method of incorporating used in some jurisdictions in Canada whereby a government grants recognition to the company as a separate legal entity

Question 22

Limited liability

Answer 22

Liability is restricted to capital contributed; shareholders are shielded from liability for corporations debts

Question 23

Memorandum of association

Answer 23

The constitution of a corporation in a registration jurisdiction

Question 24

Non distributing corporations

Answer 24

Corporations in which there are relatively few shareholders

Question 25

Oppression action

Answer 25

An action against the directors who have allegedly offended the rights of creditors or minority shareholders

Question 26

Par value shares

Answer 26

A share with a stated value at issuance (most shares are now no par value)

Question 27

Personal guarantee

Answer 27

A guarantee of payment for another’s obligation

Question 28

Preemptive right

Answer 28

The right of a shareholder to buy new shares in the same proportion as their current ownership of sales

Question 29

Preferred shareholders

Answer 29

Holders of preferred shares who may have a right to vote arising if dividends are not paid

Question 30

Preferred shares

Answer 30

Shares giving the shareholders preference over other classes of shares; often pertains to dividends

Question 31

Promoter

Answer 31

A person who participated in the initial setting up of a corporation or who assist the corporation in making a public share offering

Question 32

Prospectus

Answer 32

A public document disclosing relevant info about a corporation

Question 33

Proxy

Answer 33

When shareholders designate another person to vote on their behalf at an annual general meeting

Question 34

Registration

Answer 34

A legislated requirement for incorporating a company in some jurisdictions in Canada

Question 35

Representative action

Answer 35

Same as derivative action

Question 36

Securities commission

Answer 36

A provincial agency that serves as a watchdog for the stock market

Question 37

Separate legal entity

Answer 37

The principle that a corporation exists separately to the people who created it

Question 38

Share

Answer 38

The means of acquiring funds from a large number of sources to run a corporation; an interest in a corporation held by an investor

Question 39

Shareholder agreement

Answer 39

An agreement among the shareholders of a corporation that sets out the terms of their relationship