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Questions and Answers
What is a primary requirement of fiduciary duty for directors?
What is a primary requirement of fiduciary duty for directors?
- Acting in the interests of shareholders only
- Acting honestly in the best interests of the corporation (correct)
- Prioritizing the interests of all stakeholders equally
- Resolving conflicts primarily in favor of the corporation
Which of the following describes the duty of care for directors?
Which of the following describes the duty of care for directors?
- To act as a mediator between employees and shareholders
- To neglect conflicts if they are financially beneficial
- To gather support only from corporate shareholders
- To remain informed about the corporation's financial status (correct)
What does the term 'directors' liabilities' refer to?
What does the term 'directors' liabilities' refer to?
- Statutory obligations that directors share with the corporation (correct)
- Liabilities that directors can ignore
- Financial benefits received for fulfilling their roles
- Positive outcomes resulting from shareholders' decisions
Which of the following is true about private corporations?
Which of the following is true about private corporations?
What is a conflict of interest for a director?
What is a conflict of interest for a director?
In fiduciary duty, what must directors ensure regarding stakeholders?
In fiduciary duty, what must directors ensure regarding stakeholders?
What is a defining characteristic of a sole proprietorship?
What is a defining characteristic of a sole proprietorship?
What is often a characteristic of private corporations?
What is often a characteristic of private corporations?
Which of the following best describes a partnership?
Which of the following best describes a partnership?
What liability can directors face under certain statutes?
What liability can directors face under certain statutes?
What happens to personal assets in the case of a sole proprietorship's debt?
What happens to personal assets in the case of a sole proprietorship's debt?
Which business structure allows for limited liability among partners?
Which business structure allows for limited liability among partners?
Under what condition could a sole proprietor's personal creditors access business assets?
Under what condition could a sole proprietor's personal creditors access business assets?
What is generally required for a partnership to exist?
What is generally required for a partnership to exist?
What differentiates a public corporation from a private corporation?
What differentiates a public corporation from a private corporation?
How are liabilities treated in a sole proprietorship?
How are liabilities treated in a sole proprietorship?
What is a primary role of a receiver in insolvency proceedings?
What is a primary role of a receiver in insolvency proceedings?
What is required for someone to be elected as an inspector?
What is required for someone to be elected as an inspector?
What is the role of a monitor in insolvency situations?
What is the role of a monitor in insolvency situations?
What distinguishes a receiver-manager from a regular receiver?
What distinguishes a receiver-manager from a regular receiver?
Who can appoint a monitor in a private appointment scenario?
Who can appoint a monitor in a private appointment scenario?
What is true about the role of an LIT in an insolvency proceeding?
What is true about the role of an LIT in an insolvency proceeding?
In which situation are inspectors not required?
In which situation are inspectors not required?
What defines an interim receiver?
What defines an interim receiver?
What is the primary role of a guarantor in a loan agreement?
What is the primary role of a guarantor in a loan agreement?
Which group generally recovers last in an insolvency proceeding?
Which group generally recovers last in an insolvency proceeding?
Under what circumstances can a creditor pursue a guarantor?
Under what circumstances can a creditor pursue a guarantor?
What is a choice concerning being a guarantor?
What is a choice concerning being a guarantor?
What type of claims are prioritized first in the scheme for asset distribution during insolvency?
What type of claims are prioritized first in the scheme for asset distribution during insolvency?
Who is held financially responsible for the corporation's conduct?
Who is held financially responsible for the corporation's conduct?
What commonly happens to shareholders in an insolvency proceeding?
What commonly happens to shareholders in an insolvency proceeding?
What occurs when the primary debtor encounters an event of default?
What occurs when the primary debtor encounters an event of default?
What is the primary purpose of the BIA in relation to creditors?
What is the primary purpose of the BIA in relation to creditors?
Which creditors are recognized in the distribution scheme of the BIA?
Which creditors are recognized in the distribution scheme of the BIA?
How do federal and provincial legislations interact concerning insolvency in Canada?
How do federal and provincial legislations interact concerning insolvency in Canada?
Which section of the Constitution Act grants Parliament exclusive jurisdiction over bankruptcy and insolvency?
Which section of the Constitution Act grants Parliament exclusive jurisdiction over bankruptcy and insolvency?
What would likely occur if each creditor pursued their claims individually without the BIA?
What would likely occur if each creditor pursued their claims individually without the BIA?
In Canada, what type of legal systems coexist in relation to insolvency?
In Canada, what type of legal systems coexist in relation to insolvency?
What is the role of the trustee in relation to creditor claims?
What is the role of the trustee in relation to creditor claims?
What is indicated by the term 'bijural' in the context of Canadian law?
What is indicated by the term 'bijural' in the context of Canadian law?
Study Notes
Business Structures in Canada
- Three primary forms of business structures: sole proprietorships, partnerships (including limited liability partnerships), and corporations (both public and private).
- A sole proprietorship is owned and operated by a single individual, who is personally liable for business debts; personal and business assets are not distinct.
- In a partnership, multiple individuals work together for mutual benefit; fiduciary duties are required to act in the best interests of the business.
Corporation Responsibilities
- Directors have a fiduciary duty to act honestly and in good faith for the corporation’s interests, resolving conflicts appropriately.
- Directors are accountable to shareholders and must stay informed about the corporation’s financial status, including compliance with payroll and tax obligations.
- Directors may be held jointly liable with the corporation for certain obligations under laws, including CBCA Section 119.
Types of Corporations
- Private corporations typically have fewer shareholders, often connected by a common interest and are subject to limits on share solicitation.
- Public corporations are open to broader investor participation and disclosure requirements.
Insolvency Concepts
- Receivership involves appointing a receiver to manage and liquidate a debtor's assets for creditors.
- An interim receiver protects a debtor's property during insolvency proceedings, while monitors review debtor activities and report to creditors and courts.
- A LiT (Licensed Insolvency Trustee) monitors insolvent individuals under Part III of the BIA (Bankruptcy and Insolvency Act).
Guarantors and Claims
- Guarantors provide additional security to creditors, with the option not to become one; they are pursued if the primary debtor defaults.
- In insolvency proceedings, shareholders are the last to receive any recovery after trust claimants, secured creditors, preferred creditors, and ordinary unsecured creditors.
Legal Framework of Insolvency
- Canada operates under a bijural system where federal and provincial laws coexist, with federal statutes on bankruptcy/insolvency taking precedence.
- Key federal legislation includes the Bankruptcy and Insolvency Act, impacting the rights of creditors and insolvency procedures.
- Courts play a vital role in overseeing insolvency proceedings and enforcing laws related to bankruptcy and creditor claims.
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Description
This quiz explores the required readings on the different types of business structures in Canada, including corporations and their characteristics. Focus will be on the general differences between business entities rather than taxation specifics. Key legislation such as the Canada Business Corporations Act will be considered.
