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Nova Scotia RAS study materials
Nova Scotia RAS study resources

Nova Scotia RAS practice questions

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Question 1Real Estate Law and Regulation in Nova Scotia

Which statute is the primary provincial legislation governing the licensing of real estate brokers and salespeople in Nova Scotia?

  1. The Mortgage Brokers Act
  2. The Land Registration Act
  3. The Residential Tenancies Act
  4. The Real Estate Trading Act Correct answer.

Explanation

The Real Estate Trading Act is the provincial statute that establishes licensing, trust account, and trading requirements for brokers and salespeople in Nova Scotia. The other listed statutes regulate different subject areas such as mortgage brokerage, land titles, and residential leasing.

Question 2Real Estate Law and Regulation in Nova Scotia

In Nova Scotia, which body administers the licensing and discipline of real estate brokers and salespeople under the Real Estate Trading Act?

  1. The Nova Scotia Real Estate Commission Correct answer.
  2. The Law Society of Nova Scotia
  3. The Nova Scotia Securities Commission
  4. The provincial Department of Municipal Affairs

Explanation

The Nova Scotia Real Estate Commission is the delegated regulatory body that administers licensing, education, and discipline for the real estate trading industry. It operates under authority conferred by the Real Estate Trading Act.

Question 3Real Estate Law and Regulation in Nova Scotia

A salesperson wishes to trade in real estate in Nova Scotia. Under the licensing framework, the salesperson must be licensed under the authority of which party?

  1. The local municipality in which the salesperson works
  2. A licensed broker who employs or engages the salesperson Correct answer.
  3. The Law Society of Nova Scotia
  4. The Nova Scotia Real Estate Commission directly as an independent licensee

Explanation

Salespeople in Nova Scotia are licensed to trade under a licensed broker and cannot trade independently. The broker is responsible for supervising the salesperson's trading activity and trust handling.

Question 4Real Estate Law and Regulation in Nova Scotia

Which of the following activities generally requires a real estate licence under the Real Estate Trading Act when done for another person for remuneration?

  1. Conducting a property tax assessment appeal
  2. Negotiating the purchase or sale of an interest in real property Correct answer.
  3. Preparing a mortgage amortization schedule for a lender
  4. Drafting a will that devises real property

Explanation

Trading in real estate, which includes negotiating or attempting to negotiate a purchase, sale, or lease of real property on behalf of another for compensation, requires licensing. Peripheral activities such as tax appeals, mortgage calculations, and will drafting fall outside the trading definition.

Question 5Real Estate Law and Regulation in Nova Scotia

A broker receives a deposit from a buyer on a pending transaction. Under Nova Scotia requirements, the deposit must generally be held in which manner?

  1. In the broker's general operating account as earned revenue
  2. In cash held in the brokerage office safe
  3. In the buyer's personal bank account until closing
  4. In a trust account maintained in accordance with the Act and regulations Correct answer.

Explanation

Deposits and other money held on behalf of clients are trust funds and must be deposited into a properly designated trust account as required by the Real Estate Trading Act and its regulations. Commingling with operating funds or holding cash outside a trust account is not permitted.

Question 6Real Estate Law and Regulation in Nova Scotia

Which statement best describes the standard of care a licensee owes a client in a Nova Scotia real estate transaction?

  1. No duty beyond avoiding outright fraud
  2. A duty owed equally to all parties in the transaction at all times
  3. A fiduciary duty of loyalty, good faith, and full disclosure to the client Correct answer.
  4. A duty to act only when specifically instructed by the client

Explanation

A licensee acting for a client owes fiduciary obligations including loyalty, confidentiality, good faith, and full disclosure of material information. These duties run to the client and are distinct from the fair dealing owed to other parties.

Question 7Real Estate Law and Regulation in Nova Scotia

A licensee represents both the seller and the buyer in the same transaction with the informed written consent of both. This arrangement is best described as which of the following?

  1. Subagency
  2. Designated agency
  3. Transactional brokerage with no representation
  4. Dual agency Correct answer.

Explanation

Dual agency arises when one licensee or brokerage represents both sides of a transaction, which requires informed consent and careful disclosure because the duty of loyalty is shared. It is distinct from designated agency and from non-representational service.

Question 8Real Estate Law and Regulation in Nova Scotia

Under Nova Scotia's disclosure obligations, a seller's property disclosure statement primarily serves which purpose?

  1. To transfer title from seller to buyer at closing
  2. To satisfy the lender's mortgage approval conditions
  3. To record the seller's knowledge of material facts about the property's condition Correct answer.
  4. To replace the need for a home inspection

Explanation

A property disclosure statement captures the seller's knowledge of material defects and conditions affecting the property so buyers can make informed decisions. It does not convey title, satisfy lenders, or substitute for an inspection.

Question 9Real Estate Law and Regulation in Nova Scotia

A buyer asks a licensee whether a property is located in a designated flood zone. The licensee is unsure. What is the most appropriate course of action?

  1. Ignore the question because it is outside the licensee's expertise
  2. Advise the buyer to verify with the appropriate authority and document the advice Correct answer.
  3. Assure the buyer the property is outside any flood zone
  4. Provide a personal opinion and label it as fact

Explanation

Licensees must not make statements on matters they cannot verify; instead they should direct clients to the appropriate authority and document the advice given. Providing unfounded assurances could expose the licensee to liability for misrepresentation.

Question 10Real Estate Law and Regulation in Nova Scotia

In Nova Scotia, which of the following is required before a brokerage may disburse trust funds in a transaction that has failed to close?

  1. A verbal instruction from the salesperson handling the file
  2. A majority vote of the brokerage's salespeople
  3. Approval by the local real estate board
  4. A clear legal entitlement to the funds, such as written agreement of the parties or a court order Correct answer.

Explanation

Trust funds may only be released when the brokerage has a clear legal basis, such as the parties' written agreement or a court order. Unilateral release on informal instructions risks a breach of trust obligations.

Question 11Real Estate Law and Regulation in Nova Scotia

A salesperson leaves one brokerage and joins another. Which statement about the listings and clients is generally correct?

  1. The salesperson may take all listings to the new brokerage automatically
  2. The salesperson may take client files containing confidential information without consent
  3. Listings and client relationships belong to the brokerage, not to the departing salesperson Correct answer.
  4. The listings are void and must be relisted with the new brokerage

Explanation

Listing contracts and the agency relationship are between the client and the brokerage, so listings stay with the brokerage when a salesperson departs. Client confidentiality also continues to apply to information obtained during the prior engagement.

Question 12Real Estate Law and Regulation in Nova Scotia

Which of the following best describes the purpose of the Nova Scotia real estate licence education requirements?

  1. To guarantee licensees will earn a minimum income
  2. To certify licensees as property appraisers
  3. To ensure licensees have foundational knowledge of law, ethics, and practice before trading Correct answer.
  4. To replace the need for continuing professional development

Explanation

Pre-licensing education ensures entrants understand the legal, ethical, and practical framework of real estate trading. It does not guarantee income, eliminate ongoing education, or confer appraisal credentials.

Question 13Real Estate Law and Regulation in Nova Scotia

A licensee advertises a property for sale. Under Nova Scotia advertising rules, the advertisement must generally do which of the following?

  1. Identify the brokerage with which the licensee is licensed Correct answer.
  2. Show only the licensee's personal name and cell number
  3. Include a guaranteed selling price
  4. Omit the brokerage name to protect the client's privacy

Explanation

Advertising by licensees must identify the brokerage so the public knows which regulated entity is responsible for the advertising. Omitting the brokerage name or guaranteeing prices would mislead the public.

Question 14Real Estate Law and Regulation in Nova Scotia

A licensee receives an offer on a listing that is lower than the asking price. What is the licensee's obligation to the seller client?

  1. Hold the offer until a higher one arrives
  2. Present the offer promptly and let the seller decide how to respond Correct answer.
  3. Reject the offer without presenting it because it is below asking price
  4. Advise the buyer that the seller will never accept it

Explanation

Licensees must promptly present all offers to the client and allow the client to make the decision. A licensee cannot reject an offer on the client's behalf merely because it is below the asking price.

Question 15Real Estate Law and Regulation in Nova Scotia

Which of the following situations would most likely require the licensee to recommend that the client obtain independent legal advice?

  1. The client wants to view a property a second time
  2. The client is asked to sign a contract with unusual terms the licensee cannot fully explain Correct answer.
  3. The client asks how long the property has been on the market
  4. The client asks for a copy of the listing agreement

Explanation

When a contract contains unusual or complex terms beyond the licensee's competence, the client should be advised to seek independent legal advice. Routine requests such as copies, viewings, and market history do not require legal referral.

Question 16Real Estate Law and Regulation in Nova Scotia

What is the primary function of the Nova Scotia land registration system administered under the Land Registration Act?

  1. To license real estate salespeople
  2. To resolve landlord and tenant disputes
  3. To provide a reliable public record of interests in land and support title certainty Correct answer.
  4. To set real estate commission rates

Explanation

The land registration system creates a public registry of interests in land that supports certainty of title and supports the land titles model. It does not set commissions, license salespeople, or handle tenancy disputes.

Question 17Real Estate Law and Regulation in Nova Scotia

A licensee is asked by a client to prepare a formal deed transferring title. What is the appropriate response?

  1. Use a template downloaded from the internet and sign it as the grantor
  2. Ask the lender to prepare the deed
  3. Prepare the deed personally because the licensee holds a trading licence
  4. Decline and advise the client to retain a lawyer for the conveyance Correct answer.

Explanation

Preparing a deed is legal work that falls outside the scope of a real estate trading licence and should be done by a lawyer. A licensee who prepares conveyancing documents risks unauthorized practice of law.

Question 18Real Estate Law and Regulation in Nova Scotia

Which of the following best describes the concept of 'material fact' in a Nova Scotia real estate transaction?

  1. Any fact the licensee finds personally interesting
  2. Information that must always be kept confidential from the client
  3. Only facts recorded on the property's deed
  4. Information that could affect a reasonable person's decision to buy, sell, or lease Correct answer.

Explanation

A material fact is information that could influence a reasonable person's decision about the transaction, such as a known defect or environmental issue. Licensees must disclose material facts to their clients and avoid misrepresenting them to others.

Question 19Real Estate Law and Regulation in Nova Scotia

A seller tells a licensee in confidence that the basement floods every spring but instructs the licensee not to tell anyone. How should the licensee proceed?

  1. Quietly warn the buyer without telling the seller
  2. Explain that the latent defect must be disclosed and, if the seller refuses, decline the listing Correct answer.
  3. Keep the information confidential as instructed and market the property normally
  4. Disclose the information only to the buyer's lender

Explanation

A licensee cannot participate in concealing a known latent defect, since doing so could amount to misrepresentation. The proper approach is to persuade the seller to disclose and, failing that, decline to act rather than assist in concealment.

Question 20Real Estate Law and Regulation in Nova Scotia

Which of the following is a key purpose of continuing professional education for Nova Scotia licensees?

  1. To keep licensees current on legal, regulatory, and practice developments Correct answer.
  2. To replace the initial licensing examination
  3. To guarantee licensees a higher commission split
  4. To allow licensees to practise law without a law licence

Explanation

Continuing education keeps licensees informed about changes in law, regulation, and industry practice so they can maintain competence. It does not substitute for initial licensing, guarantee income, or expand the scope of practice into law.

Question 21Real Estate Law and Regulation in Nova Scotia

A licensee discovers that a colleague is repeatedly depositing client deposits into a personal account. What is the most appropriate action under Nova Scotia regulatory expectations?

  1. Confront the colleague privately and take no further action
  2. Ignore the matter because it is not the licensee's file
  3. Report the conduct to the brokerage's broker and to the regulator Correct answer.
  4. Post the details on social media to warn the public

Explanation

Licensees are expected to report suspected trust fund misconduct to the broker and to the Nova Scotia Real Estate Commission so the matter can be investigated. Silence or public disclosure on social media would not fulfill this responsibility.

Question 22Real Estate Law and Regulation in Nova Scotia

A buyer client asks the licensee to keep the buyer's maximum budget confidential from the seller's side. How should the licensee handle this information?

  1. Keep the buyer's budget confidential and avoid disclosing it to the seller or the seller's agent Correct answer.
  2. Use the budget to pressure the seller to reduce the price
  3. Announce the budget at the open house
  4. Disclose the budget to the seller's agent to speed up negotiations

Explanation

A licensee owes the client a duty of confidentiality, and the buyer's financial capacity is confidential information that must not be shared with the opposing side. Sharing it would undermine the buyer's negotiating position and breach fiduciary duty.

Question 23Real Estate Law and Regulation in Nova Scotia

Which of the following best describes the difference between a client and a customer in a Nova Scotia real estate transaction?

  1. A client is always the seller and a customer is always the buyer
  2. A client has an agency relationship with a licensee, while a customer does not Correct answer.
  3. A customer pays higher commission than a client
  4. A customer receives full fiduciary duties while a client receives none

Explanation

A client has entered into an agency relationship with the brokerage and is owed fiduciary duties, while a customer is a member of the public who is not represented and is owed fair and honest dealing. The distinction turns on agency, not on commission or transaction role.

Question 24Real Estate Law and Regulation in Nova Scotia

A licensee is selling a property in which the licensee holds a personal ownership interest. What disclosure is required?

  1. The licensee must disclose the personal interest in writing to the other party Correct answer.
  2. No disclosure is needed because the licensee is a professional
  3. The licensee must transfer the listing to another brokerage without disclosure
  4. The licensee may conceal the interest to obtain a better price

Explanation

A licensee with a personal interest in a property must disclose that interest in writing to the other party so they can assess the transaction with full knowledge. Concealing the interest is a conflict of interest and a breach of the duty of honesty.

Question 25Real Estate Law and Regulation in Nova Scotia

Which of the following statements about the Nova Scotia Real Estate Commission's disciplinary powers is most accurate?

  1. It can impose penalties such as fines, suspension, or revocation of licence after a hearing Correct answer.
  2. It can set commission rates for the industry
  3. It can only issue informal warnings with no formal consequences
  4. It can imprison licensees for breaches of the Act

Explanation

The Commission has statutory authority to discipline licensees, including imposing fines, suspending or revoking licences, and attaching conditions after a hearing. It does not impose imprisonment or set commission rates.

Question 26Real Estate Law and Regulation in Nova Scotia

Under Nova Scotia's real estate legislation, which body is responsible for administering the licensing of real estate salespeople and brokers in the province?

  1. The local municipal council
  2. The Nova Scotia Real Estate Commission Correct answer.
  3. The provincial Department of Justice
  4. The Nova Scotia Barristers' Society

Explanation

The Nova Scotia Real Estate Commission is the regulatory body that administers licensing, sets standards of conduct, and oversees discipline for real estate salespeople and brokers in the province. It operates under the authority of provincial real estate legislation rather than municipal or judicial control. Other bodies listed do not administer real estate licensing.

Question 27Real Estate Law and Regulation in Nova Scotia

A licensee is holding a buyer's deposit in the brokerage trust account. Before the funds may be released, which condition must generally be satisfied under Nova Scotia trust account rules?

  1. The licensee's managing broker gives verbal approval by telephone
  2. The listing brokerage has received its full commission payment
  3. The buyer and seller have both provided written direction or the transaction has closed as set out in the agreement Correct answer.
  4. The licensee has deposited the funds for a minimum of thirty days

Explanation

Trust funds must be handled according to strict rules, and disbursement generally requires written authorization from the parties or a completed transaction as specified in the agreement of purchase and sale. Verbal approval or an arbitrary holding period does not satisfy the requirement. Commission entitlement alone does not authorize release of a buyer's deposit.

Question 28Real Estate Law and Regulation in Nova Scotia

A licensee is preparing a written advertisement for a listed property. Which element is most consistent with Nova Scotia advertising requirements for licensees?

  1. Stating a guaranteed selling price to attract more buyers
  2. Identifying the brokerage name and ensuring the claims made are accurate and not misleading Correct answer.
  3. Using the seller's name without consent to add credibility
  4. Omitting the brokerage name to keep the advertisement concise

Explanation

Advertising by licensees must identify the brokerage and must be accurate, avoiding misleading or deceptive claims. Consent is generally needed before using a client's name, and guarantees about outcomes cannot be made. Accuracy and proper identification are the core requirements.

Question 29Real Estate Law and Regulation in Nova Scotia

A licensee has personal ownership interest in a property that the licensee is helping to sell. Which approach best reflects the licensee's disclosure obligation in Nova Scotia?

  1. Disclose the interest only if a buyer specifically asks about it
  2. Disclose the interest to the brokerage but not to the buyer
  3. Disclose the interest in writing to all parties before any transaction proceeds Correct answer.
  4. Remain silent because ownership is a private financial matter

Explanation

A licensee who has a personal interest in a property must disclose that interest in writing to the parties so they can assess the conflict and make informed decisions. Silence or disclosure limited to the brokerage does not satisfy the obligation. Proactive written disclosure protects both the client and the public.

Question 30Real Estate Law and Regulation in Nova Scotia

A licensee learns that a property the licensee is listing has a history of a neighbouring industrial operation that may have contaminated the soil, though the seller insists it is irrelevant. How should the licensee reason about the disclosure obligation?

  1. Conceal it to protect the seller's negotiating position
  2. Report it only if a government order has already been issued
  3. Treat it as irrelevant because the seller decides what is material
  4. Assess whether it is a material fact that could affect a reasonable buyer's decision and advise disclosure accordingly Correct answer.

Explanation

The licensee's duty is to evaluate whether information is material, meaning it could influence a reasonable buyer's decision, and to advise the seller accordingly. The seller's preference does not override the obligation to address material facts. A pending government order is not the threshold for materiality.

Question 31Agency, Representation, and Fiduciary Duties

Under the Nova Scotia Companies Act, the power to manage the business and affairs of a company is generally vested in which body?

  1. The company secretary
  2. The board of directors Correct answer.
  3. The shareholders at large
  4. The auditor

Explanation

Company law allocates management authority to the board of directors, which acts collectively as the governing organ of the corporation. Shareholders retain reserved powers such as electing directors and approving fundamental changes, but day-to-day management rests with the board.

Question 32Agency, Representation, and Fiduciary Duties

A director who sits on the board of a Nova Scotia company owes her duties primarily to which party?

  1. The employees collectively
  2. The corporation itself Correct answer.
  3. The company's creditors
  4. The largest shareholder

Explanation

Directors owe their fiduciary duties to the corporation as a legal entity, not to any individual stakeholder group. This principle means directors must act in the best interests of the company as a whole.

Question 33Agency, Representation, and Fiduciary Duties

Which duty requires a director to act honestly and in good faith with a view to the best interests of the corporation?

  1. The duty of care
  2. The duty of confidentiality
  3. The duty of disclosure
  4. The fiduciary duty Correct answer.

Explanation

The fiduciary duty is the obligation of loyalty: acting honestly and in good faith in the corporation's best interests. It is distinct from the duty of care, which concerns competence and diligence.

Question 34Agency, Representation, and Fiduciary Duties

The duty of care requires a director to exercise the care, diligence and skill of which standard?

  1. A reasonably prudent person in comparable circumstances Correct answer.
  2. The minimum effort needed to attend meetings
  3. The highest expert standard in the industry
  4. The standard set by the largest shareholder

Explanation

The duty of care is measured objectively against a reasonably prudent person in comparable circumstances. Directors are not held to a superhuman or expert-industry standard unless they hold particular expertise.

Question 35Agency, Representation, and Fiduciary Duties

A director of a Nova Scotia company learns of a profitable business opportunity that the corporation could pursue. Taking the opportunity personally without offering it to the company most directly implicates which duty?

  1. The duty to hold annual meetings
  2. The duty to avoid conflicts of interest Correct answer.
  3. The duty to maintain accounting records
  4. The duty to file annual returns

Explanation

Usurping a corporate opportunity places the director in a conflict between personal interest and corporate interest, engaging the duty of loyalty. Directors must not divert opportunities that properly belong to the corporation.

Question 36Agency, Representation, and Fiduciary Duties

A director who has a material interest in a proposed contract with the company should ordinarily do what?

  1. Resign immediately from the board
  2. Disclose the interest and abstain from voting on the transaction Correct answer.
  3. Delegate the decision to a subordinate
  4. Vote in favour because she understands the deal best

Explanation

A conflicted director must disclose the nature and extent of the interest and generally refrain from voting on the matter. This transparency protects the corporation and preserves the integrity of board decisions.

Question 37Agency, Representation, and Fiduciary Duties

A director's fiduciary duty of loyalty is best described as which type of obligation?

  1. A duty to avoid all business risk
  2. A duty to place the corporation's interests ahead of personal interests Correct answer.
  3. A duty to maximize personal compensation
  4. A duty to follow the majority shareholder's instructions

Explanation

Loyalty requires subordinating personal interest to the corporation's welfare when the two conflict. It does not demand risk avoidance or obedience to any single shareholder.

Question 38Agency, Representation, and Fiduciary Duties

Which of the following best describes the business judgment rule?

  1. A rule requiring court approval of every board decision
  2. A deferential standard that presumes directors acted honestly and in good faith Correct answer.
  3. A rule allowing directors to ignore statutory duties
  4. A rule that shields directors from all liability

Explanation

The business judgment rule reflects judicial deference to board decisions made honestly, prudently and in good faith. It is a presumption of propriety, not an absolute immunity from liability.

Question 39Agency, Representation, and Fiduciary Duties

A director of a small Nova Scotia company is also the sole supplier of raw materials to that company. Which step best satisfies her conflict-of-interest obligations?

  1. Ask a fellow director to sign on her behalf without disclosure
  2. Proceed quietly because the amounts are modest
  3. Disclose the interest fully and refrain from voting on the supply arrangement Correct answer.
  4. Set the price herself to save the company time

Explanation

Full disclosure of the interest and abstention from the relevant vote are the core requirements when a director contracts with the corporation. Modest amounts or informal workarounds do not displace the duty to disclose.

Question 40Agency, Representation, and Fiduciary Duties

A director resigns from the board but, before leaving, learns of a confidential acquisition target. After resigning, she uses the information to buy shares personally. This conduct is most vulnerable to challenge because:

  1. The duty of care ends only after one year
  2. Share purchases are always prohibited for former directors
  3. Resignation automatically transfers information rights to the director
  4. Confidential corporate information remains protected after resignation Correct answer.

Explanation

The obligation to keep corporate confidences can survive the end of the directorship where the information was acquired in that capacity. Using it for personal gain after resignation breaches the continuing duty of loyalty.

Question 41Agency, Representation, and Fiduciary Duties

A board approves a major acquisition after a single brief meeting with no diligence and no discussion of risks. If the deal fails, the directors are most likely exposed to liability for:

  1. Breach of the duty to hold shares
  2. Breach of the duty of care Correct answer.
  3. Breach of the duty to file returns
  4. Breach of the duty to pay dividends

Explanation

Failing to inform themselves adequately before a significant decision breaches the duty of care, and the business judgment rule will not protect a process that was grossly negligent. Directors must make reasonable inquiries and deliberate.

Question 42Agency, Representation, and Fiduciary Duties

A director of a Nova Scotia corporation is offered a personal payment by a supplier in exchange for favourable contract terms. Accepting the payment would most clearly violate:

  1. The fiduciary duty of loyalty Correct answer.
  2. The duty to prepare financial statements
  3. The duty to maintain a registered office
  4. The duty to call annual meetings

Explanation

Accepting a secret personal benefit in exchange for corporate favour is a classic breach of loyalty. The director has placed personal gain ahead of the corporation's interests and corrupted the decision-making process.

Question 43Agency, Representation, and Fiduciary Duties

Which statement best captures the relationship between the duty of care and the fiduciary duty?

  1. They are identical and always assessed together
  2. They are distinct duties, one concerning diligence and the other loyalty Correct answer.
  3. The fiduciary duty applies only to officers
  4. The duty of care overrides the fiduciary duty

Explanation

The duty of care addresses the quality of the director's diligence and competence, while the fiduciary duty addresses loyalty and good faith. Courts assess them separately even when the same conduct engages both.

Question 44Agency, Representation, and Fiduciary Duties

A director abstains from a board vote but later votes in favour of the same transaction at a subsequent meeting without further disclosure. This conduct is problematic because:

  1. The later participation re-engages the conflict she had a duty to avoid Correct answer.
  2. A single abstention satisfies the duty forever
  3. Abstention permanently resolves all conflicts
  4. Disclosure is only required once per year

Explanation

Abstaining at one meeting does not discharge the duty if the director later participates in the same conflicted matter. The obligation to avoid conflicts is continuing and applies each time the matter is considered.

Question 45Agency, Representation, and Fiduciary Duties

A director uses a corporate opportunity for personal gain but later repays the company the profits earned. Which statement is most accurate?

  1. Repayment is irrelevant because no breach occurred
  2. Repayment fully cures the breach and eliminates liability
  3. Repayment may be a remedy but does not erase the antecedent breach Correct answer.
  4. Repayment converts the taking into a valid transaction

Explanation

Disgorgement of profits is a remedy for breach, but the breach itself occurred when the opportunity was diverted. Returning the gain does not retroactively validate the director's conduct.

Question 46Agency, Representation, and Fiduciary Duties

An officer of a Nova Scotia company who is not a director is asked whether fiduciary duties apply to her. The most accurate answer is:

  1. No, only directors owe fiduciary duties
  2. Only if she owns shares
  3. Yes, officers owe fiduciary duties to the corporation Correct answer.
  4. Only if the board votes to impose them

Explanation

Senior officers exercise delegated authority over corporate affairs and therefore owe fiduciary duties to the corporation. The duties arise from the role, not from share ownership or a board resolution.

Question 47Agency, Representation, and Fiduciary Duties

A director votes to approve a transaction in which her spouse has a significant financial interest, and she says nothing to the board. Which principle is most directly engaged?

  1. The duty to set dividend policy
  2. The duty to maintain minute books
  3. The duty to appoint an auditor
  4. The duty to disclose indirect interests in transactions Correct answer.

Explanation

Conflicts extend to indirect interests, including those of close family members, and must be disclosed to the board. Silence in the face of such an interest breaches the duty of loyalty.

Question 48Agency, Representation, and Fiduciary Duties

Which factor most strengthens the protection of the business judgment rule for a board decision?

  1. A documented, informed deliberation process Correct answer.
  2. Unanimous approval without discussion
  3. A very short meeting with no materials
  4. Reliance on a single director's intuition

Explanation

The business judgment rule protects decisions reached through an informed and documented process. Thorough deliberation and records demonstrate that directors met their duty of care.

Question 49Agency, Representation, and Fiduciary Duties

A director of a Nova Scotia company is also a director of a competitor that is bidding on the same contract. What is the most appropriate course of action?

  1. Resign from one board only after the bid closes
  2. Disclose the dual role and recuse herself from the competing matter Correct answer.
  3. Keep the dual role confidential to avoid disruption
  4. Continue participating because she has relevant expertise

Explanation

Serving on both sides of a competitive matter creates a conflict that must be disclosed and managed, typically by recusal. Expertise does not neutralize the loyalty concern.

Question 50Agency, Representation, and Fiduciary Duties

A director of a Nova Scotia corporation learns that the company is about to announce a major contract. She buys shares before the announcement and sells after the price rises. Her conduct most clearly breaches:

  1. The duty to hold an annual meeting
  2. The duty to file annual returns
  3. The duty to maintain a registered office
  4. The fiduciary duty not to profit from confidential corporate information Correct answer.

Explanation

Trading on confidential corporate information obtained in her role is a breach of the duty of loyalty and may also violate securities law. The director has exploited corporate information for personal gain.