Eileen Is Considering Incorporating a Corporation Under the Canada Business

question 65

Multiple Choice

Eileen is considering incorporating a corporation under the Canada Business Corporations Act to carry on her toxic waste disposal business.She has heard that incorporation is a foolproof strategy to avoid personal liability for obligations of the business.Which of the following is FALSE?

• A)Sometimes, at the request of a creditor, courts will disregard the separate legal existence of the corporation and impose liability on a shareholder, but these circumstances generally involve egregious or fraudulent conduct using the corporation as a cloak to facilitate that conduct.
• B)Sophisticated creditors may demand that a shareholder guarantee a debt of the corporation, with the result that the shareholder becomes liable for the debt as well as the corporation.
• C)Incorporation will generally shield shareholders for the claims of trade creditors and consumers.
• D)Incorporation does reduce risk for shareholders by protecting them against liability for torts for which the corporation is liable.
• E)A shareholder of a corporation obtains no business advantage by conducting business through a corporation as opposed to a proprietorship.

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