Please refer to the relevant legal concepts, terms and principles in your answer. Define and explain any legal concepts, terms and principles that you use.

14 marks

ABC Inc. was incorporated under the Canada Business Corporation Act and its core business was production and sale of electric scooters. Due to the COVID-19 pandemic, the board of directors of ABC Inc. decided to expand its presence on-line. In particular, the board decided to hire a new Chief Information Technology Officer to launch a new website where consumers could place orders for electric scooters using their credit cards. Joon, Kai, Lee, Mandy and Nelly were on the board of directors of ABC Inc. In April 2020, Olivia was hired as the Chief Information Technology Officer. The new website where consumers could place orders for electric scooters using their credit cards was launched at the end of June 2020.

In August 2020, ABC Inc was about to launch a new line of electric scooters. The electric scooters would be sold under the brand name "Super Fast Get-Away". ABC planned to sell its scooters in its store in Toronto and on-line.

Unfortunately, in August 2020, ABC Inc's customer information (e.g., credit card information) was stolen by hackers because ABC Inc's on-line security measures were inadequate. Olivia did not possess the skills required to address cyber security threats. ABC Inc's customers threatened to take legal actions against ABC Inc. The launch of "Super Fast Get-Away" scooters had to be delayed. ABC Inc's shareholders were furious.

Joon, Kai, Lee, Mandy and Nelly decided to review ABC Inc's assets and determine if any asset could be sold in order to pay for the legal costs associated with the cyber security breach. ABC Inc owned a parcel of vacant land. Kai (the treasurer) was tasked to find a buyer of ABC Inc's parcel of vacant land. Kai contacted Paul who was willing to buy that piece of land for $500,000.

A) The shareholders blamed the board of directors for mismanaging the corporation. Please provide two (2) examples of rights or actions that shareholders can take in order to influence the operations of a corporation. (3 marks)

B) Assume Olivia was Joon's cousin. Did Joon have to disclose this relationship to ABC Inc's directors? (1 mark) Why or why not? (1 mark)

C) Mandy discovered that Olivia provided fake diplomas and fictious references when Olivia was invited for an interview during the recruitment process. Mandy was worried that shareholders would take legal action against board members because the corporation was injured due to this hiring decision. What defences might be raised by the board of directors? (3 marks)

D) According to the Corporation's by-law, major business transactions must be approved by the board of directors in a board meeting. The board operated on a majority rule basis. All the officers were authorized to bind the corporation in contract. However, board members did not have time to convene a board meeting, so Kai just contacted each director informally to ask if they had any objection to selling the vacant land to Paul. Kai drew up a written purchase agreement that he signed on behalf of the corporation in his capacity as treasurer. Paul also signed the document. The directors later decided not to carry through with the sale, and Paul brought a legal action against the corporation for specific performance of the contract. What is the likelihood that Paul's action would be successful? (1 mark) Please explain why using relevant legal concepts and terms. (3 marks)

E) ABC Inc. decided to look for a smaller store in order to reduce operating costs. ABC Inc assigned the lease of its current store to DEF Inc. After the assignment, DEF Inc could not pay rent to the landlord due to poor sales. The landlord demanded payments from ABC Inc. Advise ABC Inc of its liabilities (if any). (2 marks)