44.The Suds Corporation has just suffered significant losses of revenue for three quarters in a row,...

44.The Suds Corporation has just suffered significant losses of revenue for three quarters in a row, and the shareholders are furious. Much of the loss can be attributed to the board's decision to change from their traditional lager beer to a lighter and smoother brew. Unfortunately, the new recipe alienated current customers and failed to bring in new customers. Although Suds has announced that it will return to its original product, the shareholders are claiming the board violated its fiduciary duty of care, and they are suing the directors personally for their significant losses. What must the shareholders prove to win their lawsuit? What defense is available to the directors, and what must they prove to prevail?

Expert Solution

Answer :

Board of Director's fiduciary duty of care:

In a company, board of directors owe fiduciary duties to its shareholders. As shareholder's are the actual owners of company, and board of director's are acting on their behalf.
Duty of care require that director's keep themselves reasonably informed ,when making decisions on behalf of company.
Directors must act with a level of care and act with prudence, while making any crucial decisions regarding company's operations and affairs.

Present case :

in reveiwing whether directors have satisfied the duty of care, courts look into the information avalable to directors and process followed by them in making decision.

Requirement for shareholder's to win the present case:

In present case , Shareholder's should prove that director's have not taken a well informed decision.
and that the decision of directors to change from their traditional product to new product was taken without due thinking and care .

Requirement for Directors to defend their case:

Director's must prove that they have made the decision on basis of adequate information and market research .
that they have applied prudence on their part , and taken due care at the time of making decision , as any person would have use in similar circumstances.

~~~ Please upvote. Thankyou.

ekkarill92 answered 2 years ago

4. In recent years, Telco Corporation has incurred significant financial losses. Because of its poor financial...

4. In recent years, Telco Corporation has incurred significant financial losses. Because of its poor financial condition, the company’s capacity to maintain operations is uncertain. The company prepares financial statements under generally accepted accounting principles. Discuss the use of GAAP under these conditions

Assume that the economy has just suffered a recessionary gap due to a dramatic drop in...

Assume that the economy has just suffered a recessionary gap due to a dramatic drop in consumer confidence as new of trade negotiations with China deteriorate. Charting the decline the consumer purchases and business investment, the aggregate demand curve has shifted to the left by $700 billion dollars. As a newly hired economist and assistant to the Chairman of the Federal Reserve Bank, you are tasked with the responsibility to present an action plan using the tools of monetary policy....

Multiple Choice 1. You have a lamb that has just suffered a laceration and is bleeding....

Multiple Choice 1. You have a lamb that has just suffered a laceration and is bleeding. From a physiological standpoint, what needs to happen to stop the bleeding? a. Apotransferrin and Transferrin protein are activated and platelets form the plug b. Constriction of the injured vessel, Formation of platelet plug to occlude the opening and clot formation c. Constriction of the injured vessel recruitment of eosinophils, basophils and neutrophils and clot formation d. Formation of platelet plug, inflammation and increase...

Joplin Laminating Corporation reported income before income taxes during the first three quarters

Joplin Laminating Corporation reported income before income taxes during the first three quarters, and management’s estimates of the annual effective tax rate at the end of each quarter as shown below: Required:Determine the income tax expense to be reported in the income statement in each of the three quarterly reports.

What are three significant changes to the current Internal Revenue Code from the Tax Cuts and...

What are three significant changes to the current Internal Revenue Code from the Tax Cuts and Jobs Act of 2017? please explain these changes in your own words. Please state how these changes will affect taxable income and whether or not you think these changes are an improvement to the tax code.

A basketball player with a 65% shooting percentage has just made 6 shots in a row....

A basketball player with a 65% shooting percentage has just made 6 shots in a row. The announcer says this player “is hot tonight! She's in the zone!” Assume the player takes about 10 shots per game. Is it unusual for her to make 6 or more shots in a row during a game? Model each component using equally likely random digits. Run ten trials *I'm aware that I'll be using 10 two-digit numbers of 00-64 (indicates the player made...

One number has three significant figures and another number has four significant figures. If these numbers...

One number has three significant figures and another number has four significant figures. If these numbers are added, subtracted, multiplied, or divided, which operation can produce the greatest number of significant figures? The answer given is ADDITION. But why? How? Please explain and give examples. Thanks.

The Robinson Corporation has $44 million of bonds outstanding that were issued at a coupon rate...

The Robinson Corporation has $44 million of bonds outstanding that were issued at a coupon rate of 12.650 percent seven years ago. Interest rates have fallen to 11.750 percent. Mr. Brooks, the Vice-President of Finance, does not expect rates to fall any further. The bonds have 17 years left to maturity, and Mr. Brooks would like to refund the bonds with a new issue of equal amount also having 17 years to maturity. The Robinson Corporation has a tax rate...

The Sunbelt Corporation has $44 million of bonds outstanding that were issued at a coupon rate...

The Sunbelt Corporation has $44 million of bonds outstanding that were issued at a coupon rate of 12.175 percent seven years ago. Interest rates have fallen to 11.50 percent. Mr. Heath, the Vice-President of Finance, does not expect rates to fall any further. The bonds have 18 years left to maturity, and Mr. Heath would like to refund the bonds with a new issue of equal amount also having 18 years to maturity. The Sunbelt Corporation has a tax rate...

Mrs. Sweet is a 44 year old women who has just been diagnosed with type 2...

Mrs. Sweet is a 44 year old women who has just been diagnosed with type 2 diabetes mellitus. She is 50lb overweight and is hypertensive, for which she takes metorolol (Lopressor). She is prescribed to take metformin (Glucophage) twice daily and aloglitpin (Nesina) once daily. She asks why she isn't prescribed insulin like her granmother, who also had "sugar." 1. What will you tell her about insulin therapy and why it isn't necessary for her at this time? 2. What...

Question