Asked by eunice morel on Jun 08, 2024
Verified
Long ago, your friend Harry became wealthy through the tremendous success of a gadget he designed that allowed microchips to be produced without being touched by humans. Ever since, he has been invited to sit on the board of directors of different corporations, and has now decided it is time to accept. He is aware of the increasing number of cases finding directors personally liable. He does not want to be connected with a corporation involved with any wrong-doing. He has hired you to prepare in-depth reports on five corporations. Your reports reveal the following. In which of these is there no legal wrong?
A) 123456 Canada Ltd.: In a closely held corporation with four members, each owning 25% of the outstanding shares, the two members who served as directors voted to issue more shares, which they sold directly to themselves to give them voting control of the corporation, despite a provision providing for pre-emptive rights in a shareholders agreement.
B) 167354 Canada Ltd.: A director who learned of a business opportunity while serving on the board of directors intercepted the opportunity for himself before the company could act on it.
C) 1999872 Canada Ltd.: A minority shareholder joined with a group that protested the corporation's involvement in a logging operation and tried to prevent the planned logging.
D) 3721956 Canada Ltd.: The majority of the directors voted on a measure that was not in the best interest of the corporation, but that would financially weaken the position of a shareholder whom they personally disliked.
E) 12376252 Canada Ltd.: In this broadly held computer software corporation, a director, without the knowledge or consent of the board of directors, started a competing business that he ran from his home.
Pre-emptive Rights
The right of existing shareholders in a company to have the first opportunity to purchase new shares issued by the company, to maintain their proportionate ownership.
Logging Operation
The process of cutting down trees, removing them from the forest, and transporting the logs to be processed into lumber or other wood products.
Shareholders Agreement
A contract among the shareholders of a company detailing their rights, obligations, and the management of the company.
- Examine the legal securities afforded to shareholders and directors in manifold scenarios, including their liabilities, responsibilities, and the principle of lifting the veil of incorporation.
Verified Answer
RS
Rachel StollaJun 15, 2024
Final Answer :
C
Explanation :
In the case of 1999872 Canada Ltd., a minority shareholder protesting the corporation's involvement in a logging operation and trying to prevent the planned logging does not constitute a legal wrong. This action represents the exercise of personal or collective rights to protest and does not involve any breach of legal duties by the corporation or its directors.
Learning Objectives
- Examine the legal securities afforded to shareholders and directors in manifold scenarios, including their liabilities, responsibilities, and the principle of lifting the veil of incorporation.