Exam 20: Directors, Officers, and Controlling Shareholders.

Fact Pattern 20-1 Tonya is the president of Big Corporation. Big Corporation 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 Big Corporation 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 20-1.Which of the following is a widely used test for determining whether an opportunity belongs to a corporation?

Which of the following is true regarding breakup fees?

In order to take advantage of the business judgment rule,directors must have made an informed decision and have no conflict of the interest with the corporation.

Which of the following is true regarding any duties of controlling shareholders in relation to control of a corporation?

Companies listed on the New York Stock Exchange must have compensation committees composed entirely of independent directors.

Which of the following is true regarding state rules of corporate governance?

What is required by the Sarbanes-Oxley Act of 2002 in regard to the certification of the accuracy of public companies' SEC filings and the adequacy of internal controls?

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

What is greenmail? What is a standstill agreement? When,if ever,is the process of greenmail protected by the business judgment rule?

Brice is on the board of ABC Corporation.XYZ Corporation has made a move to acquire ABC.Tina,the president of ABC advises the board that the offer made by XYZ is a good one that should be accepted.She did not disclose,however,that XYZ had offered her a generous bonus if she could convince the board members of ABC to take XYZ's offer.Brice tells the other board members that they should simply rely on Tina because she is probably right,and under the business judgment rule they are protected even if she is wrong.Which of the following is true regarding Brice's advice?

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

A poison pill is a defensive measure that would make any takeover not approved by the directors prohibitively expensive.

The Delaware Supreme Court has held that,regardless of the circumstances,a majority shareholder may never freeze out the minority shareholders.

Maurice is a fairly new director at ABC Corp.Peg,another director,tells him that she believes that the company is in Revlon mode and that the directors should act accordingly.What is Peg referencing?

Under no circumstances do controlling shareholders owe fiduciary duties to other shareholders.

Fact Pattern 20-1 Tonya is the president of Big Corporation. Big Corporation 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 Big Corporation 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 20-1.Did Tonya violate any duties owed to the corporation?

The __________ requires that officers and directors not take personal advantage of a desirable business investment that rightfully belongs to the corporation.

Fact Pattern 20-1 Tonya is the president of Big Corporation. Big Corporation 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 Big Corporation 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 20-1.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?

In CASE 20.1Smith v.Van Gorkom (1985)discussed in the text,plaintiff-shareholders alleged the directors were grossly negligent in failing to inform themselves adequately before making a decision about a merger.How did the court rule and why?

What is meant by the business judgment rule?