Neese, trustee in bankruptcy for First Trust Company, brings a suit against the directors of the company

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Neese, trustee in bankruptcy for First Trust Company, brings a suit against the directors of the company for losses the company sustained as a result of the directors’ failure to use due care and diligence in the discharge of their duties. The specific acts of negligence alleged are (a) Failure to give as much time and attention to the affairs of the company as its business interests required; (b) Abdication of their control of the corporation by turning its management entirely over to its president, Brown; (c) Failure to keep informed as to the affairs, condition, and management of the corporation; (d) Taking no action to direct or control the corporation’s affairs; (e) Permitting large, open, unsecured loans to affiliated but financially unsound companies that were owned and controlled by Brown; (f) Failure to examine financial reports that would have shown illegal diversions and waste of the corporation’s funds; and (g) Failure to supervise properly the corporation’s officers and directors. 

Which, if any, of these allegations can constitute a breach of the duty of diligence?


Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Smith and Roberson Business Law

ISBN: 978-0538473637

15th Edition

Authors: Richard A. Mann, Barry S. Roberts

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