David was president of Music, Inc. He owned 53 percent of the common stock. Davi

Question

David was president of Music, Inc. He owned 53 percent of the common stock. David received a salary of $10,000 per year and bonuses of $7,000 per year. The corporation had a net worth of $100,000 and sales of $245,000. The net profit of the company had been under $2,000 each year, and dividends were either small or nonexistent. Minority shareholders brought suit to compel dissolution of the corporation on the ground of waste, alleging that the waste occurred in the payment of bonuses to David. Should the company be dissolved? Why or why not?

Explanation / Answer

No the company can not be dissolved with only minority share holders, as a majority of shareholders consensus is required to bring about any such major change.

As the minority shareholders are not getting any profit, they can sell of their common stocks and liquidate their holding but until the shareholders with consolidated holding over 51% take a decision it can not be forced, more so when a opposition is presented from majority holder.

Hence the company can not be dissolved.

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.