Exam 21: Directors, Officers, and Controlling Shareholders

In establishing a fair price of a company,the courts will consider

Which of the following is not a prime consideration in determining whether a fiduciary has taken an opportunity that belongs to a corporation?

Officers and directors should act with the care reasonable persons would use in the management of their own property.

In assessing a takeover bid,the directors are not expected to consider the

Fact pattern 21-1 Tonya is the president of Growth Corporation.Growth is looking for land on which to build a new facility.Tonya locates suitable land,but purchases it for herself with plans to sell it at a profit at a later date.Rick,the majority shareholder of Growth hears about Tonya's purchase and complains to her about it.She tells Rick that she viewed and purchased the land on her own time and that she did not breach any duties owed to the corporation.Rick tells her that she should reconsider and that he plans to discuss the matter with the rest of the board. -Refer to fact pattern 21-1.Which of the following is a right of the corporation if it is determined that an officer wrongfully takes an opportunity belonging to the corporation?

The line of business test is the most widely used test to determine whether or not an officer or director has taken advantage of a corporate opportunity.

Shareholders,but not officers or directors,of a corporation may use the corporation's confidential information for personal gain.

A ________ occurs when minority shareholders are forced to convert their shares into cash,for example,when a subsidiary merges with its parent.

The business judgment rule protects all decisions made by the board of directors.

A repurchase of stock at ________ from an unhappy shareholder may violate the director's duty to the corporation.

Dan is a director of two Internet corporations,ABC.com and XYZ.com.ABC is about to release a new technology-Opt Out-that will automatically disguise an Internet user to protect their privacy.Dan is sure that Opt Out will be highly profitable.Dan convinces XYZ to initiate a hostile takeover bid for ABC,without disclosing any information about the new product.Has Dan breached his fiduciary duties,or other duties,to ABC? To XYZ? Discuss fully.

Yolanda,a ballroom dance instructor,was recently asked to be a director of Big Company which is publicly traded.She is very honored and excited.Her friend,Joe,asked her if she had any experience in accounting,business,or SEC requirements.Yolanda told him no,but that the president of Big had assured her that her only responsibility was to act as a figurehead because the officers took care of all detailed corporate business.Yolanda says that she is accepting the position because it will get her exposure in the community and perhaps increase her dance clientele.Is Yolanda correct,and why or why not?

In the context of takeovers,board members cannot reject an offer without taking sufficient time to analyze its merit.

A controlling shareholder normally owes a fiduciary duty to

Directors are always ________ of the corporation.

The Securities and Exchange Commission recognizes the affirmative responsibility of officers and directors under federal securities laws to ensure the accuracy and completeness of public company filings with the SEC.

Officers owe a duty of care to the directors but not to the corporation and its shareholders.

Controlling shareholders do not owe any fiduciary duties to other shareholders.

Who would be classified as a controlling shareholder? What duties do controlling shareholders have to other shareholders?

Some jurisdictions permit the shareholders to amend the articles of incorporation to relieve directors of any financial liability for violations of the duty of