Assignment

Answer each question as fully as possible, and define your terms where applicable. Do not forget to answer each sub-part of the question. You are prohibited from collaborating on this assessment.

1. Arnold is a director and the majority shareholder of Beta Investments Corporation. Arnold buys, for $1500, an option to purchase a tract of real estate for $50,000.Arnold forms a new corporation, Commercial Property, Inc., to hold the option.As the majority shareholder, and thus controlling director, of Beta, Arnold orders Beta to authorize the purchase of the land from Commercial Property for $100,000.Arnold then has Commercial Property buy the land and sell it to Beta, and loan the money to Beta for the purchase at a 10% interest rate.Diana, a minority shareholder in Beta, complains to Beta's board, which takes no action.Can Diana file a lawsuit suit against Arnold on Beta's behalf?Will she prevail? Why or why not?If Arnold flees the country with the company's private jet with 100 million dollars stolen from the company, can the shareholders pierce the corporate veil and sue Arnold individually?Why or why not?(25%)
2. Discuss and evaluate examples of behavior which amounted to breaches of fiduciary duty in the movie, "The Social Network." How would you have handled these issues under the circumstances?Who were the promoters of Facebook?How did they finance the business at its inception, and how did the financing and business model change as the business grew?(40%)
3. Amelia Borrow was a director of Borrow Corporation, a business founded by her husband. After her husband died, Amelia's daughters Emily and Stephanie took control of the company.For years, they looted the assets of the corporation through theft and payments to themselves for work they did not perform.The company's financial statements revealed these payments, but Amelia did not read them because she was too busy playing on her computer.She did not know what Emily and Stephanie were doing or that they were engaging in any unlawful behavior.Could she be held liable for failing to protect the company's assets if she were unaware of the illegal activity?Who could sue her, and on what grounds?Who would prevail and why? (25%)
4. M Company is the target of a take-over attempt by I Company. The Board of Directors of M Company wants to oppose the unwanted takeover.What can they do to prevent I Company from taking over the company? (10%)

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