Free NCA Business Organizations Practice Questions

Sample Practice Questions

Try these 10 sample questions from the NCA Business Organizations practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1A professional practice sells advice rather than physical goods. Does that activity fall within business as defined by Ontario's Partnerships Act?

   1. A.Yes; professional activity is expressly included in the definition.Correct answer: A
   2. B.No; the definition is limited to buying and selling physical goods.
   3. C.Only if the professional practice is operated through a corporation.
   4. D.Only if the professional practice employs staff besides its owner.

   Explanation: The Act states: "“business” includes every trade, occupation and profession;" Professional practice is expressly included. Selling goods, incorporation and hiring employees are not conditions in that definition.

   Reference: Ontario Partnerships Act, R.S.O. 1990, c. P.5 — s. 1(1), definition of business

2. 2Two consultants carry on a consulting business together, intending to earn profits, without incorporating. Which feature is central to identifying an Ontario partnership?

   1. A.Using the same postal address for correspondence.
   2. B.Registering every contract in both personal names.
   3. C.Carrying on business in common with a view to profit.Correct answer: C
   4. D.Employing at least one person in the joint office.

   Explanation: The Act states: "Partnership is the relation that subsists between persons carrying on a business in common with a view to profit" The statutory relationship turns on business in common and a profit objective, not office address, contract registration or hiring.

   Reference: Ontario Partnerships Act, R.S.O. 1990, c. P.5 — s. 2

3. 3What territorial business capacity does the CBCA expressly give a corporation within Canada?

   1. A.It may carry on business throughout Canada.Correct answer: A
   2. B.It may operate only in its registered-office province.
   3. C.It may operate only where its shareholders reside.
   4. D.It may operate only in provinces named in each contract.

   Explanation: The source states: "A corporation may carry on business throughout Canada." The Act grants nationwide capacity. Registered office, shareholder residence and contract wording do not define that capacity; separate local registration requirements are a different issue.

   Reference: Canada Business Corporations Act, R.S.C. 1985, c. C-44 — s. 15(2)

4. 4Under the CBCA's ordinary governance framework, who may designate corporate offices and appoint officers, subject to the articles, by-laws and any unanimous shareholder agreement?

   1. A.The federal Director reviewing annual returns.
   2. B.The auditor reviewing financial statements.
   3. C.The directors of the corporation.Correct answer: C
   4. D.The employees voting by a simple majority.

   Explanation: The Act states: "the directors may designate the offices of the corporation, appoint as officers persons of full capacity" The board appoints officers under the stated governance conditions. The statutory Director, auditor and employees do not acquire that power through their roles.

   Reference: Canada Business Corporations Act, R.S.C. 1985, c. C-44 — s. 121(a)

5. 5A CBCA corporation changes its registered-office province in its articles. What shareholder approval generally authorizes that amendment under section 173(1)?

   1. A.An ordinary resolution of shareholders.
   2. B.A special resolution of shareholders.Correct answer: B
   3. C.An informal majority instruction to management.
   4. D.A resolution signed only by the external auditor.

   Explanation: The Act states: "the articles of a corporation may by special resolution be amended to" The listed changes include registered-office province. The statutory general approval is a special resolution, not an ordinary vote, informal instruction or auditor resolution.

   Reference: Canada Business Corporations Act, R.S.C. 1985, c. C-44 — s. 173(1)

6. 6To whom do CBCA directors owe their statutory fiduciary duty when corporate and creditor interests conflict?

   1. A.The largest creditor alone.
   2. B.The largest shareholder alone.
   3. C.The corporation itself.Correct answer: C
   4. D.Each stakeholder as a separate direct beneficiary.

   Explanation: The source states: "the directors owe their duty to the corporation, not to stakeholders" The duty's beneficiary is the corporation. Stakeholder interests can inform decisions and other remedies exist, but this does not create a separate fiduciary duty to each stakeholder.

   Reference: Supreme Court of Canada — BCE Inc. v. 1976 Debentureholders — para. 66

7. 7A person sold their CBCA corporate securities last month. Does former-holder status alone exclude them from the statutory definition of complainant in Part XX?

   1. A.Yes; only current registered voting shareholders are complainants.
   2. B.No; former registered holders and beneficial owners are expressly included.Correct answer: B
   3. C.No; but only if they are now the corporation's external auditor.
   4. D.Yes; every complainant must hold at least five per cent of current shares.

   Explanation: The source states: "a registered holder or beneficial owner, and a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates," The definition includes former holders. The particular remedy still has its own requirements, but neither current ownership, auditor status nor a five-percent stake is a universal standing prerequisite.

   Reference: Canada Business Corporations Act, R.S.C. 1985, c. C-44 — s. 238, definition of complainant, para. (a)

8. 8A designer operates alone as a sole proprietor and buys materials on business credit. Which assets are exposed to the business risk?

   1. A.Only assets held under the registered business name.
   2. B.The owner's personal assets as well as business assets.Correct answer: B
   3. C.Only the original cash invested in the business.
   4. D.Only future profits from the design business.

   Explanation: The source states: "The risks extend even to your personal property and assets." The proprietor has personal exposure. Registering a name, contributing a limited amount or hoping to pay from profits does not establish a separate liability shield.

   Reference: Canada Revenue Agency — Sole proprietorship — Sole proprietorship, opening paragraphs

9. 9Three Ontario general partners have no agreement about profit shares. One contributed twice as much capital as either other partner. How are profits shared by default?

   1. A.In proportion to their capital contributions.
   2. B.In proportion to their hours worked.
   3. C.According to the managing partner's discretion.
   4. D.Equally among the three partners.Correct answer: D

   Explanation: The Act states: "All the partners are entitled to share equally in the capital and profits of the business" Absent an agreement the default is equal sharing. Capital, hours and management discretion are plausible commercial alternatives but not this statutory default.

   Reference: Ontario Partnerships Act, R.S.O. 1990, c. P.5 — s. 24, para. 1

10. 10A CBCA corporation plans operations outside Canada. How does section 15 address its capacity there?

    1. A.Its Canadian certificate overrides the foreign jurisdiction's restrictions.
    2. B.Its capacity extends as far as the foreign jurisdiction's laws permit.Correct answer: B
    3. C.Its capacity depends only on consent from Canadian shareholders.
    4. D.Its capacity ends automatically at Canada's territorial border.

    Explanation: The source states: "A corporation has the capacity to carry on its business, conduct its affairs and exercise its powers in any jurisdiction outside Canada to the extent that the laws of such jurisdiction permit." Foreign-jurisdiction law limits extraterritorial capacity. Federal incorporation neither overrides that law nor prevents foreign business altogether.

    Reference: Canada Business Corporations Act, R.S.C. 1985, c. C-44 — s. 15(3)