Nelson is Organic Coffee Company's majority shareholder. Nelson decides to sell his Organic Coffee stock. The sale will be an effective transfer of the control of the company. Does Nelson owe a duty to Organic Coffee or its minority shareholders in this situation?


Yes. A single shareholder—or a few share¬hold¬ers acting together—who owns enough stock to exer¬cise de facto control over a cor-poration owes the cor¬poration and its minority share¬holders a fidu¬ciary duty when transfer¬ring those shares. A breach of this fiduciary duty by those who control a close corporation can constitute what is known as oppressive conduct. A breach of this duty may also occur if a majority shareholder attempts to exclude minority shareholders from receiving certain benefits from participating in the firm. Thus, for example, refusing to perform a valuation of the company, or denying the minority shareholders access to corporate information to which they would otherwise entitled, would constitute a violation of this duty.

Business

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Interest expense is not included in the selling and administrative budget because a company cannot estimate interest expense until it prepares the cash budget and makes borrowing projections.

Answer the following statement true (T) or false (F)

Business

Reduction of the risk of understated payables can be accomplished by focusing on which assertion?

a. Existence. b. Rights. c. Presentation and disclosure. d. Completeness.

Business

The accounting concept that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the:

A. Revenue recognition principle. B. Going-concern assumption. C. Time-period assumption. D. Business entity assumption. E. Measurement (Cost) principle.

Business

Transferred-in cost represents the cost from

a. the last department only. b. the last production cycle. c. all prior departments. d. the current period only.

Business