CHAPTER 10: BUSINESS ORGANIZATION 195 Case 4 You are the sole director of a private corporation, Sounds Incredible Inc., which operates a very successful sound recording studio. You and your brother Dom are the two shareholders, and each of you owns two common shares in the company. Dom holds the office of Treasurer of the corporation and you are the President. The company was started three years ago using a $50,000 loan from your aunt, Jerusha, and so far she has only required interest to be paid on the loan annually. The loan is payable on demand and if it had to be repaid, Sounds Incredible would be on shaky ground to survive. Dom had a meeting with Jerusha yesterday to confirm the amount of the annual interest to be paid for this year. He met with you today to talk about how delighted Jerusha was with the company's success, and some "suggestions" she had made during their conversation to help the business continue to grow while using the money she had loaned you. Jerusha's daughter, Jaspreet, is finishing high school this year. Jaspreet won a singing competition at school and is very interested in the music industry. Your aunt thinks it would be an excellent opportunity for her daughter to learn about the industry by becoming a director of Sounds Incredible. Also, Jerusha's husband, Navdar, who had owned and operated a video store as a sole proprietorship for a number of years, has declared bankruptcy. Navdar is hanging around the house feeling lost, and Jerusha believes that if he were to become a director of Sounds Incredible, it would give him a sense of direction again. And she suggested that the company could hire him as an employee to handle marketing, which would make good use of his talents and give him a salary. Jerusha looks forward to hearing the results of the elections to be held at your shareholders' meeting next week. Outline and discuss the legal issues, if any, in this case in light of the following: (LO 10.1, 10.5, 10.6) a. Jaspreet and Navdar's qualifications for election as directors of the corporation; b. Navdar's employment by Sounds Incredible; C. Obligations you and Dom have as shareholders of the corporation; and d. Obligations you have as a director of the corporation.