Eileen Is Considering Incorporating a Corporation Under the Canada Business

question 66

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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Definitions:

Forward Contract

A non-standardized agreement between two parties to buy or sell an asset at a specified future date for a price that is agreed upon today.

Wheat Price

The cost per unit of wheat, which can fluctuate based on market conditions, supply and demand, and external economic factors.

Interest Rate Cap

A financial derivative or agreement that limits the maximum interest rate that can be charged on a variable-rate loan or mortgage.

Interest Rate Floor

An agreement in which a lower limit is set on the interest rate that can be paid on a financial obligation.