5. Flanders Corporation (Flanders) attempted to take over Belgique Corporation (
ID: 451640 • Letter: 5
Question
5. Flanders Corporation (Flanders) attempted to take over Belgique Corporation (Belgique) using a tender offer. The tender offer price was fifty percent more than the market price for Belgique shares. Belgique management opposed this takeover, which resulted in the failure of the takeover. Shareholders of Belgique who had hoped to sell their shares at a large profit want to sue the management of Belgique for spoiling the takeover. If they sue Belgique's management, will the shareholders succeed?
A. No, the business judgment rule protects management in all cases of resisting a takeover
B. No, even if the shareholders can show that management resisted the takeover in their own self-interest.
C. Yes, if they can show that they would have been much better off accepting the tender offer
D. Yes, if they can show that Belgique's management did not carefully study the Flanders tender offer
6. Delphi LLC wished to acquire Olympic Co. In conjunction with its plan of acquisition, Large hired Randolph, a CPA, to audit the financial statements of Profit. Based on the audited financial statements and Randolph's unqualified opinion, Large acquired Profit. Within six months, it was discovered that the inventory of Profit had been overstated by $500,000. Large commenced an action against Randolph. Large believes that Randolph failed to exercise the knowledge, skill, and judgment commonly possessed by CPAs in the locality, but is unable to prove that Randolph either intentionally deceived Large or showed a reckless disregard for the truth. Large is also unable to prove that Randolph had any knowledge that the inventory was overstated. Which of the following would provide Large with a proper basis for prevailing in a lawsuit against Randolph?
A. Negligence and breach of contract
B. Gross negligence and fraud
C. Gross negligence and breach of contract
D. Negligence and fraud
E. Any of the above
Explanation / Answer
5. Flanders Corporation (Flanders) attempted to take over Belgique Corporation (Belgique) using a tender offer. The tender offer price was fifty percent more than the market price for Belgique shares. Belgique management opposed this takeover, which resulted in the failure of the takeover. Shareholders of Belgique who had hoped to sell their shares at a large profit want to sue the management of Belgique for spoiling the takeover. If they sue Belgique's management, will the shareholders succeed?
A. No, the business judgment rule protects management in all cases of resisting a takeover
B. No, even if the shareholders can show that management resisted the takeover in their own self-interest.
C. Yes, if they can show that they would have been much better off accepting the tender offer
D. Yes, if they can show that Belgique's management did not carefully study the Flanders tender offer
The is very much related to the rights and powers vested with the management and with the shareholders. As per my understanding though all reasons may be valid under specific assumptions but my choice is A, as management is supposed to resist the takeover and futher the proposal may be put up to the shareholders for consent of all stakeholders including the financial institutions and other investors as per the Memorandum of Understanding and Schedule of Delegation of Power.
6. Delphi LLC wished to acquire Olympic Co. In conjunction with its plan of acquisition, Large hired Randolph, a CPA, to audit the financial statements of Profit. Based on the audited financial statements and Randolph's unqualified opinion, Large acquired Profit. Within six months, it was discovered that the inventory of Profit had been overstated by $500,000. Large commenced an action against Randolph. Large believes that Randolph failed to exercise the knowledge, skill, and judgment commonly possessed by CPAs in the locality, but is unable to prove that Randolph either intentionally deceived Large or showed a reckless disregard for the truth. Large is also unable to prove that Randolph had any knowledge that the inventory was overstated. Which of the following would provide Large with a proper basis for prevailing in a lawsuit against Randolph?
A. Negligence and breach of contract
B. Gross negligence and fraud
C. Gross negligence and breach of contract
D. Negligence and fraud
E. Any of the above
As stated above Large have no evidence about the fraudulent intention, it may be lack of application of knowledge and skills of CPA and or mistake, if any, on the part of Randolph, therefore the best choice is A. Negligence and breach of contract as per my understanding.
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