Week 8 Discussion "Director Duties."Our old friends are back!
Please respond to the following:
Our old friends are back!
Tony, Sheila and you have finally built a successful corporation. You are the CEO of the corporation, and you all are on the Board of Directors. The three of you collective own 75% of the stock, and 25% is owned by the general public as publicly traded stock.
One day, Tony approaches the Board with an idea about expanding the business into real estate development. Tony proposes building a shopping center in the town of Nirvana. You happen to own undeveloped land in Nirvana, and you agree to sell the property to the corporation. You offer to sell the property for $1 million dollars which you believe, but do not know for sure, is the market value. A vote is taken regarding the sale and the proposed development. You abstain since you are the seller of the land. Both Tony and Sheila vote to approve of the sale and the development of the property.
Shortly after the sale is completed, the zoning application is denied for the construction of a shopping center. The corporation suffers a huge loss and the stock value drops 50%. The shareholders file suit to collect damages.
Discuss whether Tony, Sheila or you have any legal liability to the shareholders. Be sure to reference the concepts of fiduciary duties and possible defenses.
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Submitted by PROFSTAN on September 3rd, 2016 08:17
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