Exam 20: Directors, Officers, and Controlling Shareholders

A controlling shareholder has a duty not to transfer the power of management to a purchaser that he knows or has reason to believe will use that power to the detriment of the corporation.

What is a no-shop agreement?

In the context of executive compensation,______ stock usually means stock subject to vesting restrictions.

Fact Pattern 20-1 Tonya is the president of Big Corporation. Big Corporation is looking for land on which to build a new facility. Tonya locates suitable land, but purchases it for herself with plans to sell it at a profit at a later date. Rick, the majority shareholder of Big Corporation hears about Tonya's purchase and complains to her about it. She tells Rick that she viewed and purchased the land on her own time and that she did not breach any duties owed to the corporation. Rick tells her that she should reconsider and that he plans to discuss the matter with the rest of the board. -Refer to fact pattern 20-1. Which of the following is a right of the corporation if it is determined that an officer wrongfully takes an opportunity belonging to the corporation?

The duty of care includes the duty to make informed decisions.

A person must own a majority of shares in a corporation in order to be considered a controlling shareholder.

Breakup fees are liquidated damages for a terminated proxy fight.

In certain cases,the duty of good faith may be subsumed within the duty of loyalty.

Companies listed on the New York Stock Exchange must have compensation committees composed entirely of independent directors.

Define and explain the purpose of the business judgment rule.Under what circumstances would the rule apply? When would the protection not apply? Discuss fully.

What are the seven key factors that directors should consider in deciding whether to sell a company?

What is meant by the business judgment rule?

Which of the following is true regarding hostile takeovers in the European Union?

The Delaware Corporation Code allows the certificate of incorporation to include a provision limiting or eliminating the personal liability of directors to the corporation or to its shareholders for monetary damages for breach of the duty of loyalty.

Brice is on the board of ABC Corporation. XYZ Corporation has made a move to acquire ABC. Tina,the president of ABC advises the board that the offer made by XYZ is a good one that should be accepted. She did not disclose,however,that XYZ had offered her a generous bonus if she could convince the board members of ABC to take XYZ's offer. Brice tells the other board members that they should simply rely on Tina because she is probably right,and under the business judgment rule they are protected even if she is wrong. Which of the following is true regarding Brice's advice?

Which of the following is true regarding state rules of corporate governance?

Controlling shareholders,but not officers or directors,of a corporation may use the corporation's confidential information for personal gain.

Which of the following was the result in the case in the text involving a no-hand pill under Delaware law?

Termination fees are sometimes characterized as liquidated damages.

To comply with their duty of loyalty,directors and managers must subordinate their own interests to those of the corporation.