business 7 ja

Jury 1 To- Z (first letter of last name) DUE at 11pm66 unread replies.66 replies.

The Case of the Director Who Wore Too Many Hats

Amanda is one of 5 directors of Abundent Investments Corporation. She is also a majority shareholder holding both common and preferred stock. Her stock with voting rights amounts to 47% of all stock issued with voting rights.

Amanda buys, for $1,500, an option to purchase a tract of real estate called Blackacre, which is next to Abundent’s home office, for $50,000. Amanda forms a new corporation, Commercial Property, Inc., to hold the option. She then has Commercial Property buy Blackacre. As a director of Abundent, Amanda orders Abundent to authorize its real estate agent to negotiate the purchase of the land from Commercial Property for $100,000. After a successful negotiation for the purchase of Blackacre for $100,000, Amanda has Commercial Property sell it to Abundent, and loan the money to Abundent for the purchase price at a 5% interest rate which is 2% below the market rate. Justin, a minority shareholder in Abundent, formally complains to Abundent’s board which takes no action.

The Trial

Justin files a suit against Amanda on Abundent’s behalf seeking to cancel the sale. Amanda asks the Court to dismiss the lawsuit as Justin has no standing to bring the lawsuit.

Arguments At Trial

Amanda’s attorney argues that Blackacre is necessary for Abundent as it will allow them to expand their offices and production plant thus increasing the net worth and potential profits to the shareholders. Further, the Board of Directors of Abundent authorized the purchase which appeared to be in accordance with the Articles of Incorporation.

Justin’s attorney argues that the purchase of Blackacre should have been put to a vote of the shareholders of Abundent as required by Abundent’s Bylaws. Abundent’s Board of Directors failed in its duty to make sure this sale was in the corporation’s best interest.

Questions to Decide

1. What kind of suit will Justin file and what is its basis?
2. Who are the Plaintiffs and who are the Defendants? Why?
3. What are the defenses, if any, of Abundent or Amanda?
4. Who will win the case and why?