In the following examples use the statutory and case law
In the following examples, use the statutory and case law presented in the hypothetical at the beginning of the chapter, that is, § 96-25-16 and Karl v. Herald. The client seeks redress for the other party's refusal to issue dividends. In each example, determine if Karl v. Herald is on point.
Example 1
Client and his sister, Janice, are shareholders in a corporation. Janice is the majority shareholder, the sole member of the board of directors, and the manager of the corporation. For the past five years, she has paid herself a lucrative salary, twice that paid to managers of similar corporations. The corporation has a $400,000 cash surplus that Janice claims is necessary for emergencies. No emergency has occurred in the past five years that would require expenditure of more than $50,000.
Example 2
Client and Claire own a fabric store. The business is a corporation, and Claire holds 80 percent of the stock and makes all the business decisions. Client, an employee of the business, owns 20 percent of the stock. The business has a large cash surplus, but Claire has never issued dividends. Claire's salary is three times Client's. When Client asks that dividends be issued, Claire responds, "Your dividend from this corporation is your job."
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