Case summary: Persons W and M, shareholders of firm C, filed a law suit against other shareholders MH and K and accountant J for breach of duty. Persons W and M claimed that accountant J acted on behalf of MH and K and caused disadvantages to them. It was alleged that J had purposely altered the books of firm C to increase the financial liabilities of W and M.
To find:The duty of J towards W and M.
Case summary: Persons W and M, shareholders of the firm C, filed a law suit against other shareholders MH and K and accountant J for breach of duty. Persons W and M claimed that accountant J acted on behalf of MH and K and caused disadvantages to them. It was alleged that J had purposely altered the books of firm C to increase the financial liabilities of W and M.
To find:The possibility of the breach of duty by person J.
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Chapter 19 Solutions
The Legal Environment of Business: Text and Cases (MindTap Course List)
- Muller, a shareholder of SCM, brought an action against SCM over his unsuccessful negotiations to purchase some of SCM’s assets overseas. He then formed a shareholder committee to challenge the position of SCM’s management in that suit. To conduct a proxy battle for management control at the next election of directors, the committee sought to obtain the list of shareholders who would be eligible to vote. At the time, however, no member of the committee had owned stock in SCM for the six-month period required to gain access to such information. Then Lopez, a former SCM executive and a shareholder for more than one year, joined the committee and demanded to be allowed to inspect the minutes of SCM shareholder proceedings and to gain access to the current shareholder list. His stated reason for making the demand was to solicit proxies in support of those the committee had nominated for positions as directors. Lopez brought this action after SCM rejected this demand. Will Lopez succeed?arrow_forwardSpence was a promoter in the incorporation of a new business. The new corporation had not yet been formed when he bought Huffman’s employment agency to serve as the nucleus of that corporation. Eventually, the corporation was formed, but it never generated enough cash to pay Huffman for the employment agency. Huffman sued Spence, attempting to hold him personally liable for the amount due. Spence claimed that the corporation was liable and that his personal assets were not a proper target of the suit. Was Spence correct? Explain.arrow_forwardSally and Tom decide to go into business, selling discounted merchandise through their website “e-Buy.” They sign a partnership agreement that requires Sally to contribute $12,000 and Tom to contribute $8,000 in capital to start the firm. The agreement also states that only Sally will have the authority to bind the partnership in deals with third parties, but the agreement says nothing about the management of the firm or a division of profits. Without Sally’s knowledge, Tom tells United Computer Products, Inc., that he represents the firm and signs a contract with United to buy hard drives for resale on e-Buy. In the first year, e-Buy makes a profit of $50,000. What are the partners’ rights with respect to the management of the firm? Is the partnership bound to the contract with United? Do the partners split the first year’s profits? If so, how much is each entitled to?arrow_forward
- Kenneth Thomas brought suit against his former employer, Kidder, Peabody & Company, and two of its employees, Barclay Perry and James Johnston, in a dispute over commissions on sales of securities. When he applied to work at Kidder, Peabody & Company, Thomas had filled out a form, which contained an arbitration agreement clause. Thomas had also registered with the New York Stock Exchange (NYSE). Rule 347 of the NYSE provides that any controversy between a registered representative and a member company shall be settled by arbitration. Kidder, Peabody & Company is a member of the NYSE. Thomas refused to arbitrate, relying on Section 229 of the California Labor Code, which provides that actions for the collection of wages may be maintained “without regard to the existence of any private agreement to arbitrate.” Perry and Johnston filed a petition in a California State court to compel arbitration under Section 2 of the Federal Arbitration Act. Should the petition of Perry and…arrow_forwardThe pre-emptive rights of stockholders in a corporation are not statutory rights, but are ____________ and exist even when no specific grant or recognition of such right is provided for in statutory law. inherent rights common law rights provided by the Corporation Code implied rights A share held by a third person to be released only upon the performance of a condition or the happening of a certain event contained in the agreement. Common share Preferred share Escrow share Treasury share One of the attributes of a corporation is that it is an artificial being with a separate personality. As a result of this attribute, the corporation: is not liable for torts committed by its officer or agent. is liable for torts committed by its officer or agent. is liable for torts by its stockholders. is liable for torts committed by its stockholders and officers or agents. The “Grandfather Rule” in Corporation law means that: corporate stockholdings would be traced from the nationality of the…arrow_forwardPritchard & Baird was a reinsurance broker. A reinsurance broker arranges contracts between insurance companies so that companies that have sold large policies may sell participations in these policies to other companies in order to share the risks. Charles Pritchard, who died in December 2011, controlled Pritchard & Baird for many years. Prior to his death, he brought his two sons, Charles Jr. and William, into the business. The pair assumed an increas ingly dominant role in the affairs of the business during the elder Charles’s later years. Starting in 2008, Charles Jr. and William began to withdraw from the corporate account ever-increasing sums that were designated as “loans” on the balance sheet. These “loans,” however, represented a significant misappropriation of funds belonging to the corporation’s clients. By late 2013, Charles Jr. and William had plunged the corporation into hopeless bankruptcy. A total of $12,333,514.47 in “loans” had accumulated by October of that…arrow_forward
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