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USA Corporations Law - Case Study Example

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USA Corporations Law

In dealing with this case, the court will be applying the review of the Securities Litigation Uniform Standards Act of 1998 (Pillegi, 2007). The court will be more concerned on the breach of the fiduciary duty of disclosure.

The court is likely to rule against the Barnes family (Marciano v. Nakash). The loan that the Ewing family made to the Ewing Corporation was valid and enforceable. The duty of disclosure requires that the directors disclose all the details that pertain to the transaction that is been carried out (Alexander, 2008). The disclosure is made to the board of directors and to the shareholders. Since the Ewing family did full disclosure of the material facts that involved the loan, including the terms of the loan and the deed of trust, it will be hard for the Barnes to prove that the fiduciary duty was breached (Pillegi, 2007). Furthermore, the shareholders approved the loan. This is despite the fact that the voting was done along family lines. It is beyond doubt that the voting of the directors and the shareholders was done in good faith.

The burden of proof will be different for both parties of the dispute. The Barnes is required to prove that the Ewing directors breached the fiduciary duty in approving that loan. ...
Despite this knowledge, the Ewing directors went ahead and approved the loan to the company (Greenberg & Kagan, 2009).

On the other hand, the Ewing directors will be required to prove to the court that their action was based on good intentions to the company. This will be easy to prove since there is already prove that the company tried to obtain funding from external sources without any success. They will have to prove to the court that they did not try to take advantage of the financial troubles of the company to benefit themselves. The Ewing directors will also be required to prove to the courts that they were honest with their dealings with Ewing Oil Inc. this honesty will have to be proved by the fact that they did disclose the material details surrounding the transaction to the shareholders (Dunn et al, 2009).

The shareholders went ahead and approved the loan, albeit along family lines. But the court will not be interested on the background of the shareholders. The important thing was that they did approve the loan. There is no proof that the shareholders were misinformed on anything or misled. The Ewing directors will also have to prove that they did not omit anything that was importance when they were doing the disclosure. The omission, if proved that it did exist, will show that the Ewing directors were acting on bad faith. The omission that they might have made was for example the one pertaining to the period within which they were supposed to foreclose on their loan. If the omission is proved to have influenced the direction that the shareholders took in voting, the Barnes family would have achieved the fete of proving that a fiduciary duty was breached.

b. The ...Show more

Summary

The Delaware corporations' law states that the directors of a company should not benefit themselves from the operations of the company. They owe a fiduciary duty to the shareholders to act in good faith and in honesty as far as self-dealings with the company are concerned…
Author : delmer26
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