Arnold and his wife are the majority shareholders of Beta Investments Corporatio

Question

Arnold and his wife are the majority shareholders of Beta Investments Corporation. They are two of the three directors of Beta. Arnold buys a tract of real estate for $50,000. Arnold discloses this to the Board of Directors. He and his wife then vote to have Beta buy the land for $100,000. Diana, one of several minority shareholders in Beta is not on the Board. When she is told about the transaction, she complains to Beta's board. The Board takes no action. Diana sues. What should her argument for liability be? Will she win? If she wins, who gets the damages? 4.

Explanation / Answer

Diana's argument for liability should be the breach of trust by directors. As directors, Arnold and his wife as acting as trustees of the shareholder's money.

She will win because the nature of transaction is clearly to defraud the Company. The directors have extracted gains from the Company for personal benefit rather than acting in the best interests of the Company.

The damages will be recived by the Company since the directors have defrauded the Company and not Diana directly.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.