Fact Pattern 41-4
Diversified Corporation's articles of incorporation prohibit a sale of its assets without a vote of the board of directors. Diversified's officers sell some assets to Enterprise Company without notice to the board. The officers also fail to pay Diversified's taxes on time, and some Diversified funds are not accounted for.
-Refer to Fact Pattern 41-4. In these circumstances, the appropriate remedy is most likely
A) a sale of the rest of Diversified's assets to its directors and shareholders.
B) Diversified's consolidation or merger with Enterprise.
C) Diversified's dissolution.
D) payment of damages to Diversified's officers.

Question

Fact Pattern 41-4​
Diversified Corporation's articles of incorporation prohibit a sale of its assets without a vote of the board of directors. Diversified's officers sell some assets to Enterprise Company without notice to the board. The officers also fail to pay Diversified's taxes on time, and some Diversified funds are not accounted for.
-Refer to Fact Pattern 41-4. In these circumstances, the appropriate remedy is most likely​
A) ​a sale of the rest of Diversified's assets to its directors and shareholders.
B) ​Diversified's consolidation or merger with Enterprise.
C) ​Diversified's dissolution.
D) ​payment of damages to Diversified's officers.

Quizplus · Accepted Answer

Diversified Corporation's officers have acted in violation of the articles of incorporation, and have also failed to pay taxes and account for funds. As a result, the appropriate remedy in these circumstances is likely to be dissolution of the corporation. This will allow for the equitable distribution of remaining assets, including any potential damages owed to the corporation. The sale of the rest of Diversified's assets to its directors and shareholders (A) or consolidation with Enterprise (B) may not address the underlying issue of officer misconduct, while payment of damages to the officers (D) would not be an appropriate remedy for their breach of fiduciary duty.

Fact Pattern 41-4​ Diversified Corporation's Articles of Incorporation Prohibit a Sale of Its

Fact Pattern 41-4 Diversified Corporation's Articles of Incorporation Prohibit a Sale of Its