... “A proper balance of the rights of majority and minority shareholders is essential for the smooth functioning of the company.”- Explain & Illustrate? 1. Introduction: The basic principal relating to the administration of the affairs of a company is that “the will of the majority is supreme”. The general rule is that the decisions of the majority shareholders in a company bind the minority. 1 In a world that recognizes ‘simple majority rules’, minority shareholders of companies are by default vulnerable to oppression, disregard and unfair treatment by majority shareholders who are in control of the company. Majority shareholders also have certain obligations to minority shareholders in their capacity of controlling the corporation. In certain cases this minority shareholder right can be exercised directly against a shareholder, without having to go against a corporation or through the derivatives action process.2 In such case a proper balance of the rights of majority and minority shareholders is essential for the smooth functioning of the company. The oppression of minority or mismanagement of a company by majority therefore calls for some remedial action. 3 Today’s minority shareholders come to the corporation with varied attitudes and agendas. Although their shareholder status results from a variety of circumstances, it is important in each case to make their relationship with the corporation and the other shareholders as productive as possible. This 1 2 Ashok, S. (2009-2010)...
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...Chapter 1,2,3 – Answers to Assigned End of the Chapter Questions 1-1. Shareholder (owner) wealth maximization is the most widely cited business goal. The justification for shareholder wealth maximization is that managers are hired by the owners (shareholders) and serve as their agents. In addition, the well-being of the managers is closely tied to the wealth of the shareholders. In perfect competition, shareholder wealth maximizing behavior is necessary just to survive. 1-2. a. Wealth maximization for a single-period decision is measured by economic profit which is the excess of earnings or cash flow over that which could have been earned on investments of similar risk. b. Wealth maximization for a multi-period decision is measured by discounting the expected future economic profits (which is the excess of earnings or cash flow for each period over that which could have been earned on investments of similar risk for that period) back to present. 1-4. Present value is either a single future amount discounted back to present or the sum of a number of future amounts discounted back to present. Net present value is the sum of the present value and the initial outlay or outlays necessary to produce the future amount(s). 1-5. A capital investment is an outlay that is expected to result in benefits extending more than one year into the future. Capital budgeting is the process of selecting capital investments. 1-6. Steps in capital budgeting process: ...
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...Table of Contents Introduction of the Case of Foss v. Harbottle…………………………………………………………………….Pg. 2 Describe and explain the rule set out in Foss v Harbottle and identify the exceptions to the rule …………………………………………………………………………………..……Pg 3,4,5 & 6 Describe the remedies, if any, which are available for ‘minority’ shareholders who feel that they have been the victim of wrongdoing by those in a ‘majority’……….…………………...Pg 7 & 8 References………………………………………………………………………………………………………………….Pg 9 & 10 Introduction of the Case of Foss v. Harbottle The Victoria Park Company is a company had been established during September 1835. This company is to establish a residential area for the prosperous business and professional families to stay. This estate will be established to the east of Wilmslow Road. Richard Foss and Edward Starkie are the minority shareholders. A bill was lodged by 2 shareholders of the company that incorporated by Art of Parliament, on their own and the other shareholders’ behalf. In the case they claim that fraudulent transactions misapplying the company’s assets did by 3 bankruptcy directors, a solicitor, proprietor and architect, and take some unqualified people to put in board of director to make it full and a company without clerk or office, in this situation the proprietors has no rights to take out the property from the hand of defendant directors. Observations were made on this point of case is that the trust between the company and company promoters...
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...Corporation 986 F.2d 138 (1983) United States Court of Appeals, Sixth Circuit PECK, Circuit Judge In 1985, civil penalties totaling $90,350 were assessed against WRW Corporation (WRW), a Kentucky corporation, for serious violations of safety standards under the Federal Mine Safety and Health Act (the Act) which resulted in the deaths of two miners. Following the imposition of civil penalties, WRW liquidated its assets and went out of business. Three individual defendants, who were the sole shareholders, officers, and directors of WRW, were later indicted and convicted for willful violations of mandatory health and safety standards under the Act. Roger Richardson, Noah Woolum, and William Woolum each served prison sentences and paid criminal fines. After his release from prison, Roger Richardson filed for bankruptcy under Chapter 7 of the Bankruptcy Code. The United States (the Government) brought this action in May of 1988 against WRW and Roger Richardson, Noah Woolum, and William Woolum to recover the civil penalties previously imposed against WRW. The district court denied the individual defendants' motion to dismiss and granted summary judgment to the Government piercing the corporate veil under state law and holding the individual defendants liable for the civil penalties assessed against WRW. For the reasons discussed herein, we affirm. The district court held that it was appropriate to pierce WRW's corporate veil under either an...
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...| The Criteria That Determine Sole Proprietorships | Not all corporations started as a corporate entity. Many businesses start out small with one owner. They are known as sole proprietorships, the simplest and most widespread form of business formation in the United States. Certain criteria are used to determine sole proprietorship status. A sole proprietorship: * is owned by a single individual When you are planning to do business with a sole proprietorship, bear in mind that since a single individual owns a sole proprietorship, one person makes all the decisions and does not have to contend with a legal department to approve contracts. The owner can only use personal funds, although he may have separate savings and checking accounts for the business. Also, it may be difficult for a sole proprietor to obtain loans so money may be tight. If a sole proprietor were to die, the business would probably end. * is not legally differentiated from the owner and is not usually required to register as a business A sole proprietor is not legally differentiated from the business, regardless of whether the business bears his name or a fictitious name, and does not have to meet many requirements to start a business. Since the business is not considered a legal entity, it is the owner who is sued rather than the business. * must be registered as a business if it operates under a fictitious name A sole proprietorship operating under a name other than the name of the owner is...
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... Ellis Mentioned Southern Railway Co. v. Greene Mentioned Radice v. New York Mentioned Minister for State for the Army v. Datziel Discussed Pennsylvania Coal Company v. Mahon Discussed Lindsley v. Natural Carbonic Gas Company Discussed Gulf, Colorado and Santa Fe'Railway v. W.H. Ellis Discussed Case Note: Sholapur Spinning and Weaving Company Act 1950-Act Dismissing Company's managing agents, removing its directors, authorising government for appointment of new directors and curtailing shareholders' right in the voting matter etc.-Validity-Whether infringement on fundamental rights-Right of property save not to be deprived by authority of law-Right to acquire, hold and dispose property-Right to equal protection of law Constitution of India, Arts. 14, 19(1) (f), 19(f), 31, 32-Deprivation of property,-- Meaning of “property”, “acquisition”, “taking possession”, “equal protection”-Under Art 32, right to apply-Right of shareholders....
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...of hundreds of metrics structured in a manner that can only produce yes, no or not disclosed answers. In this way we have attempted to eliminate a large degree of subjectivity to answer these metrics from official company filings with securities regulators and stock exchanges. The GMI research process starts with a review of all pertinent public data, including regulatory filings, company websites, news services and other specialized websites. All data collected by GMI are entered into a relational database. Once the research template answers have been compiled and have been subjected to various quality control checks, data entry reports are sent to each company in our universe for a final accuracy check. After any company adjustments are made the data are locked and GMI runs a scoring model that calculates and assigns ratings to each company. Companies are scored on a scale of 1.0 (lowest) to 10.0 (highest) and are always scored relative to the other companies in our research universe. Companies are assigned 14 ratings in all. The first are GMI global ratings. Global ratings are designed to demonstrate how each company's governance profile compares to all others in the GMI universe. Global ratings include an...
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...was established for the purpose of ‘laying out and maintaining an Ornamental Park within the Township of Rusholme, Charlton-upon Medlock and Moss Side, in the country of Lancaster’. The capital of the company was to be $500,000, divided into 5,000 shares of $100 each. It was to be controlled by five shareholders. The first directors were Thomas Harbottle, Joseph Adshead, Henry Byrom, John Westhead and Richard Bealey. It was provided that three directors should constitute a board and that the acts of three or more should be as effectual as if done by the five. To sum up the feature of the case, two shareholders in the company, Richard Foss and Edward Turton, brought an action against the company’s directors, on behalf of themselves and the other shareholders except the defendants. The defendants were the five directors, a shareholder, who was not a director, the company’s solicitor and its architect. The plaintiffs alleged that the defendants had affected various fraudulent and illegal transactions which the property of the company had been misused. In respect of the base rule in corporate law, a corporation has a legal existence separate from its shareholders. Thus, a shareholder cannot be sued for the...
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..." a means of breathing underwater by chewing a special kind of gum. Aquaman knows a great product when he hears it. He delays announcing the invention to the public so that he can buy all the stock he can get his hands on. He buys 50,000 shares of Underwater Leagues, at $10 apiece. After the announcement, the share price skyrockets to $50 per share. Issue If the shareholders bring a derivative action against Aquaman, what federal law should they accuse Aquaman of having violated? Did he violate this statute? What remedy would the shareholders be able to seek (i.e. how much money would Aquaman be liable for)? Rule The Security Exchange Act of 1934, and more specifically, 17 C.F.R. 240. 10b-5 (15 U.S.C. 78j(b)) regarding manipulative and deceptive devices, prohibit the “purchase or sale of a security of any issuer, on the basis of material nonpublic information about that security or issuer, in breach of a duty of trust or confidence that is owed directly, indirectly, or derivatively, to the issuer of that security or the shareholders of that issuer, or to any other person who is the source of the material nonpublic information.” Additionally, under the Security Exchange Act of 1934 15 U.S.C. § 78p(b); 17 C.F.R. 240. 16(b), a corporation or security holder of that corporation may bring suit against the officers, directors, and certain beneficial owners of the corporation who realize any profits from the purchase and sale, or sale and purchase, of the corporation's securities within...
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...right to refer to shareholders as owners and employers? Isn’t it odd to refer to corporate expenditures as “taxing and spending?” What do you think of Friedman's "democracy argument" against corporate social responsibility? Instrumental managing for stakeholders means treating them, as the word implies, as “instruments” or “tools” to accomplish the genuine task of corporations: shareholder profits. As tools, managers need to take care of them for them to work well, as a carpenter knows that she must take good care of her hammer, saw, etc. in order for them to work well. The reason why, however, is not because care for the tools themselves has intrinsic value. Instead, the tools are a mere means to an end. Freeman frequently invokes instrumental reasons for managing for stakeholders. He also, at times, clearly supports the normative managing for stakeholders approach. For example, the idea that in managing for stakeholders managers should avoid tradeoffs is clearly not simply about shareholder profits. Friedman, Freeman, and Boatright all defend their particular view on the moral responsibility of managers by reference to what they believe is central to the functioning of capitalist economies. Do they fundamentally disagree about the nature of capitalism? Most interestingly (and controversially) Boatright argues that managing for shareholders is the best way to serve the interests of stakeholders, including employees. How can managing for shareholders best serve other...
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...tier of its tender offer on receiving more than one-half of the Arcelor voting stock. However, the second tier offer would be at a slightly lower price than offered in the first tier. This was done to encourage Arcelor shareholders to participate in the first tier offering. If Mittal could gain a majority of voting shares it would be able to acquire the remaining shares through a backend merger. Moreover, Mittal sued to test the legality of Arcelor’s moving its recently acquired Dofasco operations into a trust to prevent Mittal from selling the operation to help finance the takeover. Mittal also attempted to rally large shareholder support against what were portrayed as Arcelor management’s self-serving maneuvers. Finally, Mittal continued efforts to appeal to shareholders by raising its bid from its initial 22 percent premium to the then current Arcelor share price to what amounted to a 93 percent premium and agreeing to eliminate its super-voting stock which had given the Mittal family shares that had ten times the voting rights of other shareholders. 2. Identify the takeover defenses employed by Arcelor? Explain why each was used. Answer: Initially, Guy Dolle attempted to gain support among local politicians and the press to come out against the proposed takeover by emphasizing potential...
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...second tier of its tender offer on receiving more than one-half of the Arcelor voting stock. However, the second tier offer would be at a slightly lower price than offered in the first tier. This was done to encourage Arcelor shareholders to participate in the first tier offering. If Mittal could gain a majority of voting shares it would be able to acquire the remaining shares through a backend merger. Moreover, Mittal sued to test the legality of Arcelor’s moving its recently acquired Dofasco operations into a trust to prevent Mittal from selling the operation to help finance the takeover. Mittal also attempted to rally large shareholder support against what were portrayed as Arcelor management’s self-serving maneuvers. Finally, Mittal continued efforts to appeal to shareholders by raising its bid from its initial 22 percent premium to the then current Arcelor share price to what amounted to a 93 percent premium and agreeing to eliminate its super-voting stock which had given the Mittal family shares that had ten times the voting rights of other shareholders. 2. Identify the takeover defenses employed by Arcelor? Explain why each was used. Answer: Initially, Guy Dolle attempted to gain support among local politicians and the press to come out against the proposed takeover by emphasizing potential job losses and...
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...2.4- What is meant by business sustainability? To be a sustainable business, an entity should meet current needs without compromising the ability of future generations to meet future needs. The key drivers of sustainability are competition for resources, climate change, economic globalisation and connectivity and communication. 2.6- What are the three pillars of sustainability? The three pillars of sustainability are Social Economic and Environmental. 2.10-What are the four key responsibilities of business? Do you than an entity should consider discretionary responsibilities? Why? Corporate Social Responsibility, Shareholder Value, Stakeholder Theory, Stewardship Theory. Yes, I believe entities should consider discretionary responsibilities as I think it would benefit the company’s image within the community and it would also make for a happy place to work for its employees, as they would know they were working for a socially responsible entity. 2.17- Outline activities that accountants could take to help corporations discharge their social obligations? Transparency: The Company provides timely disclosure of information about its products and services and activities thus permitting stakeholders to make informed decisions. 2.22- List some of the reasons given to explain why business act in socially responsible manner. Competition for resources- natural resources are finite and must be preserved to ensure there will be enough for future generations Climate change- Due...
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...events is the valuation of an asset (the stock) that already has an observable market price. The pre-existence of an active market in the identical item being valued distinguishes takeover attempts from other types of bids, such as for oil-drilling rights and paintings. These other assets trade infrequently and no two of them are identical. This means that the seller must make his own independent valuation. There is symmetry between the bidder and the seller in the necessity for valuation. In takeover attempts, the target firm shareholder may still conduct a valuation, but it has a lower bound, the current market price. The bidder knows for certain that the shareholder will not sell below that; thus when the valuation turns out to be below the market price, no offer is made Theory predicts that the winning bid is an accurate assessment of value. In takeovers, however, if the initial bid (by the market) wins the auction, we throw away the observation. If all bidders accounted properly for the "winner's curse," there would be no particular bias associated with discarding bids won by the market; but if bidders are infected by hubris, the standard bidding theory conclusion would not be valid Unless there is something curative about the public nature of corporate takeover auctions, we should at least consider the possibility that the same phenomenon exists in them. The hubris hypothesis is consistent with strong-form...
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...proprietors to allocate profits from the company. C. Able to control all aspect of their business, from the company's location and financials to sales and marketing. D. Not required to file taxes, passing the company's profits and losses to their personal income tax return. E. Not required to file dissolution documents with the state in order to dissolve the company. F. Solely owned and proprietors and do not share profits from their businesses. Profit retention allows sole proprietors to use their money as they please. G. An Unlimited Liability because if it fails, creditors can go after both their personal and business assets. They can also be held personally liable for any injuries or property damage incurred by a customer while on their premises. 2) A General Partnership is: A. Liable for all of the partnership debts. B. Is easy to create, allowing partners to start a business quickly. C. Flexible as the partners govern the business in whatever manner they see fit. D. Less expensive to maintain than a corporation. E. Tax friendly as partnerships are not subject to federal income tax on the income earned. F. A financial liability as partners can make investments from their personal finances and the investment is then owned by all partners. 3) A Limited Partnership Is: A. Able to take the profits and losses and flow them through the business to the partners, all of whom are taxed on their personal income tax returns. B....
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