Zenith Steel Company operates a prosperous business. The board of directors voted to spend $20 million of

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Zenith Steel Company operates a prosperous business. The board of directors voted to spend $20 million of the company’s surplus funds to purchase a majority of the stock of two other companies—the Green Insurance Company and the Blue Trust Company. The Green Insurance Company is a thriving business whose stock is an excellent investment at the price at which it will be sold to Zenith Steel Company. The principal reasons for Zenith’s purchase of the Green Insurance stock are to invest surplus funds and to diversify its business. The Blue Trust Company owns a controlling interest in Zenith Steel Company. The Blue Trust Company is subject to special governmental controls. The main purpose for Zenith’s purchase of the Blue Trust Company stock is to enable the present management and directors of Zenith Steel Company to perpetuate their management of the company. Jones, a minority shareholder in Zenith Steel Company, brings an appropriate action to enjoin the purchase by Zenith Steel Company of the stock of either the Green Insurance Company or of the Blue Trust Company. What decision as to each purchase?


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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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