Business Law Homework 2

Business Law Homework
Robert and Howard were very angry that they had sold at such a low price. Could either of them bring any successful lawsuits to recover any compensation for having missed out on the increase in the price of TNA shares after they had sold their stock? Explain.
Unless stated otherwise in the Articles of Organization, all members have an equal right to participate in management. They make decisions by majority vote. However unless the Articles of Organization or the Operating Agreement provide otherwise the members vote in accordance with their right to receive profits. Are Robert and Howard justified in seeking to have a share of the profits made after the increase in price of TNA shares?
First we must examine if indeed Robert and Webb participated in management when the decision to fight the takeover was made. Management of TNA was under the board in which Johnson was the CEO. As a member of the board, Johnson met with Hawke, the wallstreet financier where they discussed about the likelihood of TNA becoming profitable in the long-run. Hawke proposed a friendly takeover of the company and if not, he would launch a hostile tender offer. Johnson promised Hawke he would contact him after meeting with the board. In the board meeting, Johnson urged the members to oppose the take-over, of which they obliged.
Did both Robert and Howard know of these board decisions? The answer is no. The board meeting and the meeting between Hawke and Johnson were held in secret. By doing so, Johnson violated the alter ego (other self) principal of the corporation (TNA) thus the corporate veil was pierced. A corporation must be an alter ego of the controlling person. By meeting both the wallstreet financier and the board in secret, he did not inform other shareholders of the same.
On this basis, the rights of Robert and Howard were violated and they were justified in asking for compensation from TNA.
The SEC during an investigation learned of the purchases of TNA stock made by Larry and Leo. Could it successfully bring a lawsuit requiring either of them to pay any damages in connection with their purchase of TNA shares? Explain.
Promoters are persons who bring a corporation into existence – they have the idea to start it. They pay the attorney to draft the articl...