Module 1 - Corporations

Question 1

Are corporations separate legal entities?

Answer 1

Yes, they are separate

Question 2

What can corporations do as separate legal entities?

Answer 2

Can own property, take out loans, and enter contracts

Question 3

Corporations are incorporated under the ____________________

Answer 3

The Canada Business Corporations Act
or
The Alberta Business Corporations Act

Question 4

Corporations are subject to _________ legislation

Answer 4

Securities

Question 5

What does the securities legislation govern?

Answer 5

The trading and disclosing of shares

Question 6

What forms are required to be filed in order to start at corporation?

Answer 6

Articles of Incorporation
Notice of directors
Notice of address
Bylaws (which set out day-to-day operation of corporation)

Question 7

What does a corporation receive after filing all necessary documents at official corporate registry?

Answer 7

Certificate of Incorporation

Question 8

What is the main document a corporation needs to file in order to be incorporated?

Answer 8

Articles of Incorporation

Question 9

A corporation is made up of pieces called _______

Answer 9

Shares

Question 10

Where are share rights set out?

Answer 10

In the Articles of Incorporation

Question 11

What is a distributing corporation?

Answer 11

A corporation where trades are publicly recognized and traded on stock exchange

Question 12

What is a non-distributing corporation?

Answer 12

A corporation where shares are not publicly traded

Question 13

What are 3 other names for a distributing corporation

Answer 13

Reporting issuer
Public company
Widely held corporation

Question 14

What is SEDAR?

Answer 14

A website which provides access to public securities documents and information filed by issuers

Question 15

What are 2 other names for non-distributing corporations?

Answer 15

Private corporations
Closely held corporations

Question 16

What is the maximum number of shareholders in a non-distributing corporation?

Answer 16

50 maximum shareholders

Question 17

How do shareholders invest into a corporation?

Answer 17

By buying shares

Question 18

What are the rights of shareholders?

Answer 18

Right to vote
Right to information
Financial rights

Question 19

What are shareholders also considered as?

Answer 19

Owners of the corporation

Question 20

How do shareholders acquire ownership interest?

Answer 20

By purchasing shares

Question 21

Who are corporations managed by?

Answer 21

Directors and officers

Question 22

What is the directors role?

Answer 22

To oversee “big picture” ideas
Has power to appoint officers

Question 23

Who elects directors of a corporation?

Answer 23

The shareholders

Question 24

Who manages or supervises management of a corporation?

Answer 24

Directors

Question 25

Who do directors delegate work to?

Answer 25

Officers

Question 26

What is an officers role in a corporation?

Answer 26

To manage day-to-day business of the corporation

Question 27

Can a person hold all three positions in a corporation?
(Shareholder, director, officer)

Answer 27

Yes, a person can hold all three positions

Question 28

Can a corporation be composed of one person?

Answer 28

Yes, if said person holds all three positions

Question 29

Do directors and officers need to be shareholders?

Answer 29

No, they do not need to be shareholders

Question 30

What two duties do directors and officers owe a corporation?

Answer 30

Fiduciary duty
Duty of competence

Question 31

What is a fiduciary duty?

Answer 31

Duty to act honestly and in good faith in the best interests of the company

Question 32

What is duty of competence?

Answer 32

Duty to exercise care, diligence, and skill which a reasonably prudent person would exercise under similar circumstance

Question 33

What are corporations considered under law?

Answer 33

Corporations are considered as legal “persons”

Question 34

What are corporations liable for?

Answer 34

The corporations own torts, debts, and actions

Question 35

Are the people of a corporation liable for the corporation?

Answer 35

No, they are not liable

Question 36

What does it mean to “pierce the corporate veil”?

Answer 36

To have the court put aside limited liability of a corporation’s person(s) in order to hold said person(s) liable for the actions or debts of the company

Question 37

What must be shown in order to pierce the corporate veil?

Answer 37

Complete domination by the person(s) sought to be made liable

Question 38

What is a shareholders liability limited to?

Answer 38

The amount invested into the company

Question 39

What is “vicarious liability”?

Answer 39

Liability of one’s employee or agent of corporation’s torts

Question 40

What is the lifespan of a corporation?

Answer 40

Corporations have an unlimited lifespan

Question 41

Can one pass their shares to family members?

Answer 41

Yes, shares can be passed through families

Question 42

How can a corporation be dissolved?

Answer 42

If a majority of shareholders vote to dissolve

Question 43

What are some advantages of a corporation?

Answer 43

Limited liability of shareholders (corporation carries most of the risk)
Flexible corporate structure
Shareholders can be as involved as they want
Continuous lifespan
Can incentive employees

Question 44

Disadvantages of Corporations

Answer 44

Potential for people behind corporation to be held personally liable
Strict disclosure and reporting requirements
Can be difficult to transfer shares