Stan is a director of Acme Pipelines Limited. The corporation has decided to inv

Question

Stan is a director of Acme Pipelines Limited. The corporation has decided to invest a substantial amount of money into a new manufacturing equipment. Stan is aware of a corporation, Dynamic Engineering Inc, which could build the machinery. Stan is a director and a substantial shareholder of Dynamic and he knows that it is struggling in business and would be desperate to obtain a contract such as this.

1. Does Stan have any specific obligations to fulfil to Acme or Dynamic or both before their respective boards of directors approve a contract? What specific steps must Stan take?(3 marks)

2. Would your answer be any different if Stan held shares in both corporations but was not a director or officer of either?(2 marks)

Explanation / Answer

(1)

Stan wants to fulfill specific obligations to Acme Pipelines Limited which is increasing the revenues of the firm so that it increases its market value. The company at tits initial phase is facing struggle. The investment made needs to be recovered by increment in profits by a well planned strategy. The steps involved includes increasing the manpower to increase the output of the firm. It also includes increase in standards and quality of the product.

(2)

If Stan was not the director of the copany he would not be supervising the decision making process in the company. It would hinder the progress of the company due to lack of leadership and decision making qualities. The role of Stan to uplift the company suring the struggle days is important.

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