In 2011,Rambolin incorporated Rambolin Industries Ltd.and became its sole shareholder.He loaned the corporation $10 000 and took a chattel mortgage from the corporation as security for repayment of the loan.He became director,president,and secretary of the corporation.The corporation prospered.Last year,you began supplying the corporation with office supplies.You were paid at the end of each month for supplies delivered during that month.For the last six months,however,you have not been paid.You learn that other suppliers also have not been paid because sales have dropped drastically,apparently due to Rambolin's nasty temper caused by ill health.Which of the following is true?
A)If this corporation were placed into bankruptcy,Rambolin would be in a better position than you for receiving proceeds realized from the sale of the assets of the corporation.
B)Shareholders have a statutory obligation to manage the corporation,so Rambolin,as shareholder,must exercise care in that task.
C)You could take an action under the pre-emptive right provisions under the relevant legislation.
D)If you decided to sue for the debt,you could sue Rambolin because he is the sole shareholder and his nasty temper caused all of the trouble.
E)If Rambolin dies,his corporation would automatically die too,and there wouldn't be any person to sue.

Question

Quizplus · Accepted Answer

Rambolin, having a chattel mortgage as security for his loan to the corporation, would be in a better position than unsecured creditors, like the supplier of office supplies, in the event of bankruptcy. This is because secured creditors are typically paid before unsecured creditors from the proceeds of the sale of secured assets.

In 2011,Rambolin Incorporated Rambolin Industries Ltd