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Unformatted text preview: ADMN 390: Assignment 5 Your Name: 1 of 7 Assignment 5 Complete Assignment 5 after Unit 13. Follow the general directions provided under “Course Assessment” in the Study Guide. MULTIPLE CHOICE Choose the one alternative that best completes the statement or answers the question. ONE MARK EACH (8 marks for section) 1. Which of the following situations would allow a shareholder of a closely‐held corporation, with permission of the court, to sue on behalf of the corporation? A) If the corporation had been wronged by the negligent and fraudulent acts of one of its directors, but the corporation refused to take any action against the wrongdoer. B) If the directors solicited proxies from all of the shareholders. C) If four of the five directors, in the best interests of the corporation, voted against the fifth director, voted to end the employment contract of the fifth director, and voted not to buy his shares. D) If the directors refused to declare a dividend. E) If the shareholders refused to enter into a shareholderʹs agreement. 2. Which of the following is not a fiduciary relationship? A) Director of the corporation and the shareholders of the corporation B) Directors of the corporation and the corporation C) Officer of the corporation and the corporation D) Agent and his principal E) Partners in a partnership TRU Open Learning ADMN 390: Assignment 5 Your Name: 2 of 7 3. With regard to corporate law, which of the following is false? A) The directors are required to manage the affairs of the company. B) A director can be liable for unpaid wages and taxes. C) Because of the separate entity nature of a company, directors cannot be personally liable for company obligations. D) A person who wants to have his business under a federally incorporated company can register under the provisions of the Canada Business Corporations Act. E) The Articles of Incorporation are the documents that must be submitted to incorporate in Ontario. 4. Which of the following is false with regard to real property law? A) The essential characteristic of an estate in land is that the owner of the estate, whether it is a fee simple, life estate, or leasehold, has exclusive possession. B) A true interest less than estate, properly registered, runs with the land and therefore is an exception to the privity of contract rule. C) A covenant in a land contract must be restrictive in nature to be binding on subsequent purchasers of land. D) A contract for land in which a person sells the property with a restriction that the new owner not sell to any person of a certain race cannot be challenged by the courts because it is a restrictive covenant that runs with the land. E) A building scheme is a type of restrictive covenant attaching to all the properties within a particular development plan. TRU Open Learning ADMN 390: Assignment 5 Your Name: 3 of 7 5. Which of the following is false with regard to real property law? A) If a person wants to live in a co‐operative, he will be buying a share in a company that entitles him to lease one of the units; he will not be buying the fee simple interest. B) The right to foreclose is a remedy from the Court of Equity that allows the mortgagee to end the mortgagorʹs equitable right to redeem. C) In the land titles system, when documents concerning an interest in land are filed in the Land Title Office, each document is examined and, if it is in order, the title certificate is amended to show the change. D) If a first and only mortgagee, unpaid, proceeds by way of judicial sale, all the money realized from the sale of die property goes to that mortgagee even if it is greater than the debt owed plus costs. E) A registered interest less than an estate (e.g., a right of way) binds the parties to the contract and also binds the subsequent purchasers of either the dominant or servient tenement because it ʺruns with the land.ʺ 6. Which of the following is not considered personal property in legal terms? A) A claim against someone that has value B) Intangible property or chose in action C) Intellectual property (ideas and creative work) D) Chattels E) None of the above TRU Open Learning ADMN 390: Assignment 5 Your Name: 4 of 7 7. Which of the following is false with regard to trademark? A) The distinctive design of a product container may be the subject of trademark protection. B) Registration under the Trademark Act establishes a presumption that the person registered is the owner of the trademark. C) Registration of a trademark grants the owner protection for 15 years with the right to renew. D) Registration of a trademark gives the owner of the trademark the exclusive right to use it throughout Canada. E) If a person registers a trademark but later fails to use it, protection of the mark will not be lost; it is still his and is protected for the remainder of the period of protection granted. 8. Which of the following is not protected by intellectual property law? A) Music compositions B) Inventions C) Building designs D) Sculptures E) Scientific theories SHORT ANSWER In no more than three sentences, write the answers to the following four questions. THREE MARKS EACH (12 marks for section) 1. Indicate three examples where a director can be personally liable for the debts of the corporation. 2. How can a corporation be brought to an end? TRU Open Learning ADMN 390: Assignment 5 Your Name: 5 of 7 3. 4. Give three examples of matters covered by copyright legislation. ESSAY QUESTIONS 1. Imagine you are an interior designer and want to set yourself up as an independent business person. As the business expands, you find two other designers who want to participate in the business. Discuss in detail the advantages and disadvantages of incorporation as a method of carrying on business as compared to sole proprietorship and partnership. (15 marks) 2. You are a second mortgagee. Consider the various remedies that are available to you in the event of a default, and discuss the effectiveness of each. (15 marks) CASE STUDIES 1. Mr. Ace of Comtec Inc., a closely‐held corporation, is one of three shareholders. After several years of considerable success, the corporation hit hard times. It appeared to the other shareholders, Mr. Brown and Mr. Cream, that Ace had lost interest and was no longer pulling his weight. Brown and Cream voted Ace out as a director and voted not to renew his employment contract. When each of the shareholders started out they had signed employment contract forms they downloaded from the internet, including a clause: ”All information gained from the business is confidential. I agree to keep all such information secret and not use it or share it with anyone outside the business.” Upset by the firing, Ace just wanted to sell his interest and leave the corporation. The other two shareholders, however, refused to buy his shares. Furthermore, when he attempted to sell his shares to his brother, who was interested in the corporation, they refused to register the brother as a member. Ace, in frustration, took as much information as he could to Xtec Inc. in exchange for a job with them. What, if any, remedies are open to Ace against Brown and Cream? Could he have done anything to prevent this situation? What can Brown and Cream do about the loss of confidential trade secrets? (15 marks) Distinguish between a tenancy in common and a joint tenancy. TRU Open Learning ADMN 390: Assignment 5 Your Name: 6 of 7 2. In 2000, Jonah sold a building and some excavation machinery to his two married sons: Bert, and Charles. They registered the building as joint tenants and each took ownership of half the machinery. In 2004, Charles was thinking of severing the joint tenancy, but before anything was said or done, Charles and Bert both drowned in a boating accident. Charles died immediately, but Bert died two months later, never having regained consciousness. Charles had willed his interest in all of his property, including the machinery, to his wife and Bert had willed his to his son. Who receives what from this scenario – and why? (10 marks) 3. Although mainly concerned with topics covered in the final Units, this case study also draws on legal principles covered in earlier parts of the course. It should be a useful part of your pre‐exam review. (25 marks) In 1995 Mac and Zach formed a partnership to operate a chrome plating business — Brightshine. Mac was a qualified metallurgist and Zach was a chemist who had changed careers to become a CGA. Mac hired the plating employees and Zach hired the payroll and other record keeping staff. From RKY Holdings Inc., they signed a 20‐year lease for a large parcel of land containing a warehouse with second floor offices. It was zoned “industrial”. In accordance with the lease and municipal regulations, before they started they obtained all necessary permits for dealing with heavy metal contaminants and acid leaching. The business was successful and by 1999 had 5 plating and 4 record keeping employees. In 2000, an environmental audit indicated that the level of soil contamination was slightly above acceptable limits and that their chromic acid tank would soon have to be replaced. RKY received a copy of this report but the manager filed it without reading it. When the owner of the adjoining property expressed concerns about possible dangers from the plating business, RKY’s manager assured him that Brightshine was acting with all due diligence. Having just taken a business law course, Zach persuaded Mac that they would have more personal security by converting the partnership into a limited corporation, MZ Brightshine Ltd. Mac was happy to agree as he had suspicions that the tank was in worse shape than the report indicated. They sold all of their equipment, including tank and plating machinery to the company. RKY agreed to the assignment of the lease to the new company but insisted that Mac and Zach sign a new document. Mac and Zach thought it TRU Open Learning ADMN 390: Assignment 5 Your Name: 7 of 7 was a simple assignment but it actually included personal guarantees for payment of the rent owing on the lease. Brightshine’s customers had no idea that the partnership had dissolved, as everything was “business as usual.” After a 2001 break in, without telling RKY or the municipality, Mac and Zach converted three of the upstairs offices into a residential caretaker suite. They hired Donald, an ex‐security guard and one of the plating staff, to do after hours clean‐up and patrol duties in exchange for $50 per month rent. If the suite had been in a residential area the fair market rent would have been $900 per month. By 2003, Zach realized that a huge capital outlay would be needed to bring the business up to new stricter environmental standards. He wanted to cash in the assets while they were still worth something and use the money to start up a sole proprietorship of his own. Mac wouldn’t hear of it. Zach was furious and began to email key technical information to his home computer. 2004 was “annus horribilis” for Brightshine. The tank burst and poured acid on to the adjoining property. During clean up, some slight traces of soil contaminants were found. Mac’s marriage broke up and his wife claimed half of his business assets. Zach neglected his duties while he secretly shopped around to find a buyer for his smuggled information and money to set up his new business. When Donald became ill due to exposure to contaminants and could no longer work efficiently as a plater or a caretaker, Mac and Zach fired him without notice for “absence from work.” They also served him with 10 days notice to vacate the suite. When Donald objected and said he would take them to the federal human rights tribunal, Mac made threatening gestures. Fearing that the business was about to go down the tubes, Mac and Zach signed a directors’ resolution declaring a large dividend. They paid off the other employees, closed the doors and stopped paying rent to RKY. Identify as many legal issues as you can from this scenario. Imagine you are the lawyer for each person and set out what advice you would give each one with respect to their rights and liabilities. In other words, who may be able to sue whom and for what? TRU Open Learning ...
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