Question 6 (12 points)

Carol, Sidney and Michael were wise to start the white-water business as it has been successful beyond their wildest dreams. In fact, they have written a five-year business plan which included plans to open a second location in the Ottawa area. The area seems ideal for expansion as it not only has a population to support the business but also is close to the Ottawa River which has a series of rapids perfect for white-water sports. In fact, as part of their expansion plans, they have located three possible sites for a new location. They contacted the owners of the locations but none of them were willing to sell. Carol, Sidney and Michael decide to bide their time and wait for the owners to change their minds.

One day Carol and Sidney were visiting their friend Abby. Abby casually mentioned that her Uncle Amos had decided to move to Mexico and intends to sell his property located along the Ottawa River. The two immediately realized this was one of the properties they had earmarked for a possible second location and that Amos was one of the owners who had refused to sell.

Without a moment's hesitation, Carol and Sidney contact Amos who agreed to sell the property for $320,000. The $320,000 price was well under the fair market value but Amos was willing to take a lower offer as Carol and Sidney are friends of his niece.

Carol and Sidney took title to the property in their own names (not in the name of Fearless) and immediately offered it for sale to Fearless for $760,000, the fair market value for the property. Acting as the majority of the directors they accepted their offer and were paid the $760,000 by Fearless.

Michael is furious and feels he has been mistreated by Carol and Sidney. He approaches them about what he considers their "secret profit.' When he raised it with Sidney, he was told that, "if he doesn't like it, he'd better learn to lump it because so long as Carol and I own the majority shares you're stuck."

Michael smiling at them responded "We'll see about that"

6. Carol and Sidney are interested in Michael's response. Advise them of anything you feel they, as Directors may have done incorrectly and also what rights Michael may have. (12 marks) ANSWER SHOULD HAVE VERY THOROUGH DETAIL AND EXPLANATION OF BUSINESS LAW CONCEPTS AND PRACTICES.