Question 4 (20 marks) Gordon and Allan are directors of Hopes Ltd, a company involved in the mining industry. They are also drinking mates, and one night at the pub they overhear someone nearby saying that his company, Futures Ltd, has just located a promising gold reserve in Western Australia. They recognise the person as a director of Futures Ltd. On the basis of this information, they decide that their company should make an offer to buy all the shares of Futures Ltd.

(a) If the offer proceeds, who is guilty of insider trading and why? (5 marks)

(b) What steps must be taken by both companies to inform shareholders about the offer and its consequences? (5 marks)

(c) Assume that the offer succeeds and it turns out that there is no promising gold reserve in Western Australia. What standard of care applied to Gordon and Allan when they decided to make the offer? (5 marks)

(d) Explain the business judgement rule and why it would not help Gordon and Allan in this situation. (5 marks