Elroy Was the Controlling Shareholder and Sole Director of Maxi-

question 11

Multiple Choice

Elroy was the controlling shareholder and sole director of Maxi- Screen Ltd, which carries on a film production business. His wife Ann is a minority shareholder. The corporation was incorporated in 1995 and has paid a substantial dividend each year to its shareholders. In 2009, Ann and Elroy separated. Elroy did not declare a dividend even though the business was more profitable than ever because he did not want to share the profits with Ann. Which of the following statements best reflects Ann's legal position?

• A) She could seek relief on the basis that Elroy and the corporation have defeated her reasonable expectations and thereby oppressed her or unfairly disregarded or prejudiced her interests.
• B) She has no remedy because the declaration of dividends is a matter within the discretion of the directors.
• C) She has no remedy because Elroy is the controlling shareholder and can do what he wants.
• D) The only way she could seek relief is to apply to the court for permission to bring a derivative action against Elroy on behalf of the corporation for breaching his fiduciary duty.
• E) She has no remedy because the failure to pay dividends is not an action that she can dissent from.

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Definitions:

Notes Payable

written promissory notes in which the writer agrees to pay a certain amount of money, at a future date or on demand, to the holder of the note.

Revaluation Accounting

A method under International Financial Reporting Standards (IFRS) that allows an entity to adjust the book value of its assets and liabilities to their fair value.

Tangible Assets

Physical assets that have a form you can touch or handle, like buildings, machinery, and land.

Acquirer

The entity that obtains control of another entity (acquiree) in a business combination, typically through the purchase of its equity interests or assets.