NO Plaguarism

@ UNIT THnaE leusiness ond Employment ffi to, Review I What sleps are lnt,olved rn bringing a corporation rnto existence? '1. ln what clrcumstances might a court disregard the corporate enrity (pierce the corporate veil) and hold the sharehoiders personally liable? :i, What are the duties of corporare directors and officers? .:, Directors are expected to use their best.ludgment in managing the corporation. What must directors do to avoid liability for honest mistakes of .ludgmenr and poor business decisions? i. What is a voting proxy? What is cumulatir,e voting? ,6:uestions and clse Probt,ems ( lS*1. Pleincorporation. Cummings, Okawa, and Taft are recenl \---lollege graduates *ho want to lorm a corporal ion [o manu- facture and sell personal computers. Pererson tells them he will set in motion the formation of their corporation. First, Peterson makes a contract with Owens for the purchase of a piece ol land for $20,000. Ou,ens does not know, o[ the prospective corporate formatron at the time the contract is signed. Second, Peterson makes a contract wlth Babcock to build a small plant on the property being purchased Babcock's contract is conditional on the corporations formation. Peterson secures all necessarl. subscription agreements and capiralization, and he files the artrcles ol incorporation. Discuss u,,hether the newl1. lormed corpo- ration, Peterson. or both are liable on the conlracts lr,rth Construction Co. lor the renovation ol'the Oxy corporate headquarters. Wick, the owner of thc Wick Conslrucrron Co., is also one ol the five members ol Oxys board ol directors. The contract terms are standard lor this type of contract. Wick has previousll, informed two o[ the other directors of hrs interest in the constructron company. Ox1.s board approves the contract by a three-to-two vote, rv-rth Wick r-oting uith the nrajoritv Discuss u,hether thrs con- tracl li binding on the corp..,r'aLron. :5-.5. Fiduciary Duty of Officers. Desrgner Surlaces, Inc., supplied countertops to homeou,ners s'ho shopped at stores such as Lo'"r'es and Costco. The homeori ners paid the store, which then conrracred u,ith Designer ro labricare and insrall the countertops. Designer bought materials from Arizona Tile, LLC, on an open account. Designers onll- knori n corp(rrlte officers were Hou'ard Be rger and John McCarthv Desiqne r became insoh'ent and could noi pay Arizona Tile lor all the materials it had purchasecl, inclucling materials for rvhich Designer had alreadl' recerved payment lrom the retail stores. Arizona Tile sued Designer and rvon a delauh judg- ment, but the companl, had no lunds. Arizona Tile then sued Berger and N{cCarth1. personally ior dn,erting com- panl'funds thai Designer had received in trust for paymenr /_ ,..n1 is morr errdible and rvhy? lAriTona TiIe , LLC t. Btrger, a \z; ariz +aI,22+ p3d 9BB (Ariz App 2010)l [ :- . /iercing the Co]potate Veil. Smith Services, 1nc., rvas a cor- \-./poration soleiv owned bv Tony Smith. Bear, lnc., owned to Arizona Tile. Anzona Tile argued that rhe use of the funds lor other purposes w,as a breach ol fiduciary duty Berger and McCarthy argued that corporate lalv imposed nerther a ficluciarl' duty on corporate ol'ficers nor personal liability for breach ol a duty to suppliers ol n'raterials. Which argu, and operated Laker Express, a fuellng srarion in Kentucky Smith charged fuel to an account at Laker Express and owed approxrmately $35,000. There was no written agreement indlcating lvho r','as hable on the account in the event of default, but all rnvoices had been issued [o Smith Servrces. Smith later dissolved Srnith Sen,ices and contlnued to run his business as a sole proprietorship. When Laker Express sried Snritl'r Sen ice s r.r collect on the deht, there were no assets rn the corporation. Laker Express suecl TonY Smrth personallv and asked the court to prerce ihe corporate veil, claiming that Smith was engaged in fraud and w,as using the corporate form onl1, to prorecr himself. The trial court ?i*3. j{.& Case Problem wi$ Sample Answer. Rights of iHj sharetrolders. stanka woods r.r,as the manager and sole member of Hair Ventures, LLC, which owned 3 million shares of stock in Biolustre, Inc. For several years. Woods and other Biolustre shareholders did nor rercrle notices ol sl'rareholclers meertngs or financral reports. \evertheless. \bocls learnecl thaL Biolr-rsrre planned to LSSue mrrre srr).k. and her boylriend. Danrel Davria, pro posed thar thev meer ll'irh orher shareholcle rs to discuss the compan)-s operations and oppose rhe rssue. To obtain information regarding what u,as going on at Biolustre, Woods, through Hair Ventures. senr Biolustr€ a demand ro examrne its books and records. Biolustr€ did not respond. On'ens and Babcock. Is the corporation automatically liable to Babcock on formatron? y Corp. is negotiating r,vith rhe Wick - unpaid curp.raie-dE6tl hr crr'hr ,rot? Or ..----- ?- r txpre,s harr he, n nr. r. -rrtl-rl u'hen deaiing h clieiG dismissed the case, and Laker Express appealed. thogld the coyrt pierce the corporare verl an1!9ld Jtq p.rtiioIlf