Duties of Majority Shareholders. Atlas Food Systems & Services, Inc, based in South Carolina, was a food vending service that provided refreshments to factories and other businesses. Atlas was a closely held corporation. John Kiriakides was a minority
shareholder of Atlas. Alex Kiriakides was the majority shareholder. Throughout most of Atlas's history, Alex was the chairman of the board, which included John as a director. In 1995, while John was the president of the firm, the board and shareholders decided to convert Atlas to an S corporation. A few months later, however, Alex, without calling a vote, decided that the firm would not convert. In 1996, a dispute arose over Atlas's contract to buy certain property. John and others decided not to buy it. Without consulting anyone, Alex elected to go through with the sale. Within a few days, Alex refused to allow John to stay on as president. Two months later, Atlas offered to buy John's interest in the firm for almost $2 million. John refused, believing the offer was too low. John filed a suit in a South Carolina state court against Atlas and Alex, seeking, among other things, to force a buyout of John's shares. On what basis might the court grant John's request? Discuss.
Duties of majority shareholders
The court found that Alex had engaged in fraud and Atlas had engaged in conduct that was fraudulent, oppressive, and unfairly prejudicial toward John. Among other relief, a buy-out was ordered. On appeal, a state intermediate appellate affirmed this result. On further appeal, the South Carolina Supreme Court upheld this decision, finding that "this case presents a classic example of a majority ‘freeze-out,' and that * * * Atlas had engaged in conduct which was fraudulent, oppressive and unfairly prejudicial." The court remanded the case for a determination of the value of the shares, and any other damages. The court explained that a minority shareholder in a close corporation "[f]aces a potential danger the shareholder of a public corporation generally avoids—the possibility of harm to the fair value of the shareholder's investment. At its extreme, this harm manifests itself as the classic freeze out where the minority shareholder faces a trapped investment and an indefinite exclusion from participation in business returns. * * * Common freeze out techniques include the termination of a minority shareholder's employment * * * [and] the removal of a minority shareholder * * * In a public corporation, the minority shareholder can escape such abuses by selling his shares; there is no such market, however, for the stock of a close corporation."
You might also like to view...
The ______________________________ is an interacting structure of people, equipment, activities, and controls that is designed to accomplish the handling of repetitive work routines of the AP department and the cashier, support their decision needs, and assist in the preparation of internal and external reports
Fill in the blank(s) with correct word
Wally, Inc issued 500 shares of $10 par preferred stock at $83 a share. Each share had a warrant attached that allowed the holder to purchase one share of $5 par common stock for $15. Soon after the preferred stock was issued, the preferred stock was selling ex-rights for $64 a share, and the warrants were selling for $16 each. The entry to record the issuance of the preferred stock would include
a A) debit to Retained Earnings for $8,300. B) credit to Additional Paid-in Capital on Preferred Stock for $28,200. C) debit to Common Stock Warrants for $8,300. D) credit to Additional Paid-in Capital on Common Stock for $8,300.
The process of identifying the required competencies for a job is called the ______.
a. talent profile b. job description c. job analysis d. job assessment
Which of the following accounts would appear on an adjusted trial balance but probably would not appear on a trial balance?
A) Supplies Expense B) Accounts Payable C) Service Revenue D) Cash